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72% of English pharmacies will be in deficit by 2024, report predicts

It may not be “financially viable” for pharmacies to provide services, the report said
It may not be “financially viable” for pharmacies to provide services, the report said

Under current funding, nearly three quarters of community pharmacies in England will be in deficit by 2024, a report by accountancy firm Ernst & Young (EY) has forecast.

The EY report, published today (September 4) and commissioned by the National Pharmacy Association (NPA) found that the community pharmacy network in England is “unsustainable under the current financial framework”.

EY projected that by 2024, there will be a “network-wide £497 million deficit”, with the average pharmacy facing a shortfall of £43,000. “No industry is likely to be sustainable with so many operators in deficit,” the report said.

The predictions were made using data that predates the COVID-19 pandemic, with EY expecting that 72% of community pharmacies will be in deficit by 2024. This figure could, however, range from 64% to 85%, the report said.

“Although the long-term effects cannot be ascertained as yet,” the pandemic is “likely” to have “further weakened the network”, the report added.

“Such poor financial performance would place the financial sustainability of the network at risk, with significant implications for patients’ ability to access local healthcare services and NHS England’s ambition for community pharmacy,” the report explained.

Service provision unviable

Under the current funding model, which was agreed by the Department of Health and Social Care (DH) and the Pharmaceutical Services Negotiating Committee (PSNC) last year, the provision of services may also be financially unviable, the report said.

Pharmacies providing a “greater proportion” of services, to reduce pressure on other parts of the NHS, are “more likely to be in a financial deficit,” according to the report. “Benchmarking the fees paid for services carried out by pharmacies against analogous services in other settings reveals they are several times lower,” EY said.

The report advised NHS England to “consider the current funding quantum insufficient to sustain the network”. “Without intervention from NHS England, only the financially strongest pharmacies will survive”, it added.

 “Policymakers [should] put in place public interest-focused safeguards against the English community pharmacy network collapsing as an unintended consequence of short-term cost saving”, the report said.

NPA: “Very real threat” threat of pharmacy closures

NPA chair Andrew Lane said the EY report “shows the precarious situation facing pharmacies up and down the country.”.

He warned that there is a “very real threat” that pharmacies could close, unless ministers “act now”.

Mr Lane called on health secretary Matt Hancock to “urgently” back the sector with further investment, to “underpin viability, change and improvement in our sector”.

The NPA will hold a meeting with its board members on September 7 and 8 to “give detailed consideration to EY’s findings”.

APPG: Pharmacies must be a “forefront” of NHS

Chair of the All-Party Pharmacy Group (APPG) Jackie Doyle-Price said the COVD-19 pandemic has “highlighted what a pivotal role” pharmacies “played and continue to play in delivering frontline care when many doctor surgeries were closed”.

“Going forward, if the NHS is to deliver a truly 24-hour seven day a week service, then pharmacies must be at the forefront of that,” she added.

EY health economics director George Agathangelou said the firm’s research “shows that many more pharmacies will become loss-making over the coming years if the current funding arrangements in England continue”.

“This is clearly unsustainable and requires urgent attention to help pharmacies maintain and develop vital services,” he added.

30 Comments
Question: 
What do you make of the Ernst & Young report?

Cod Fillet, Community pharmacist

It ready does feel that only through fraud some pharmacies can continue running. Claiming for items that the patient didn't want to receive is now seen as normal procedure.

Freelance Chemist, Pre-reg Pharmacist

This is rampant eveywhere in the profession. 
 

thankfully I've never had to do it myself. 

Meera Sharma, Pharmacy owner/ Proprietor

This research must have cost a lot of money to carry out and then state the obvious and say what we have been saying for months, only to fall on deaf ears. Guess where the money to fund this has come from? yep, our pockets. The incompentence of some of our so called representatives is just mind blowing!!!

Reeyah H, Community pharmacist

I'm not sure why this is new news. Every contractor in the country is losing. They are just dipping into their own pockets waiting for a miracle to save them. The non-contractors think we are making it up! 

Freelance Chemist, Pre-reg Pharmacist

Why on earth would anybody throw good money after bad?  
 

I have friends that do 3k items a month and they don't complain!!

Contractors will always shout how poor they are!!

you guys that are complaining clearly don't no how to run a businesses. 
 

my advice get out and sell to somebody else

Reeyah H, Community pharmacist

You should go and buy one then! 

J RP, Community pharmacist

Sell your shop if the situation is that desperate? Clearly isnt as your net margins are likely triple the national average salary.

Freelance Chemist, Pre-reg Pharmacist

I don't have the money, they are expensive.  If they are about to go bust they should be cheap!

A.S. Singh, Community pharmacist

If you feel you want to make more than you do and if you feel like they make money, buy one. If your an experienced pharmacist and have a decent credit history, some banks were offering 100% loans not too long ago (harder now as banks are hesistant to lend on failing buisnesses). Most people who are already contractors know its extremely difficult to make money on NHS services.  

Axed Locum, Locum pharmacist

...or pay reverse premiums, as they did in the early 90's. The contract is too good to give up!!!, and hence the premiums and a queue of buyers.

Freelance Chemist, Pre-reg Pharmacist

penny has finally dropped........

 

Pharamcies have continued to make a profit becuase they [email protected] staff on pay!!

 

Freelance Chemist, Pre-reg Pharmacist

FAKEEEEEE NEWS!!!!!!!!!

Alexander The Great, Community pharmacist

Are you the GP pharmacist?!??!?! lol you love trolling us

Freelance Chemist, Pre-reg Pharmacist

Im not. I just don't like people complaining  about fake issues

J RP, Community pharmacist

You're bang on the money. Banks dont lend to failing businesses and contractors mostly have enough spare capital to invest elsewhere if there really are better options.

Axed Locum, Locum pharmacist

Fake News...Visit Christies for a true picture of the profits the pharmacies are raking in!!

C A, Community pharmacist

"EY projected that by 2024, there will be a network-wide £497 million deficit, with the average pharmacy facing a shortfall of £43,000. No industry is likely to be sustainable with so many operators in deficit, the report said."

No wonder why multiples want to get rid of pharmacists...

Mr Anon, Community pharmacist

Welcome to the beginning of the end 

Leon The Apothecary, Student

The report by Ernst & Young is not likely to have shocked many contractors who have been feeling the financial squeeze for months, exacerbated by the pandemic and subsequent panic bulk ordering many pharmacies saw in March and now seeing a reduced footfall in successive months.

There are two realistic outcomes here, in my humble opinion. The number of pharmacies is massively reduced, pushing patients into the remaining facilities, increasing their numbers exponentially. Pharmacies are, in my experience, poor at scaling a business in both technology and staffing levels. This will be seen in stress levels and quality of life issues.

The other route sees saving measures across the pharmacy network by reducing staffing levels, delivery services, stock levels, wages, and turnaround times for prescriptions - passing on the deficit expenses partially to patients. We may even see an even bigger push for remote supervision.

In both scenarios, we open up the pharmacy sector to big corp, those who have the money, knowledge, and infrastructure to deliver pharmacy, even in a loss-leading method. Aka. The Amazonisation of Pharmacy.

This is just my two cents on the subject. There is definitely a reckoning about to happen. How it happens, is anyone's guess!

J RP, Community pharmacist

.

Sunil Patel, Pharmacy owner/ Proprietor

We knew this already! Almost every article in pharmacy media is about how pharmacy contractors are at risk of going out of business, so why is this new? The question is why has nothing been done about it earlier NPA? So many pharmacy owers are so stressed because they are struggling to cover their costs and we have been saying this for months and months. Clearly you have not be listening.  

J RP, Community pharmacist

I wonder sunil, your pharmacy that turns over £800k, is it losing money or in fact generating a post tax profit over 100k?

Pharm Druggist, Community pharmacist

I'm guessing Sunil is an independant owner, J RP you seriously think that he would be able to achieve 12.5% post tax profit? Can't take you seriously for much else if that's really what you believe  

J RP, Community pharmacist

Sure as he is owner operator and can do and plan all the buying himself he should get gross profit margins of at least 37%. That's 296k. Then he has 4 support staff each paid 20k (which is likely excessive given 800k turnover so I added a bit extra to account for locums he may use to cover himself for time off), delivery driver 10k, motor lease and fuel 6k, rent and rates 30k, all other costs 25k. 145k leftover paying himself a directors cut of about 20k. 125k. 19% corporation tax and he gets just a little over 100k. Are the figures so absurd now? And tell me even if you want to contest the 100k part where in your version of calculations is he about to go bankrupt or have to close the shop?

Pharm Druggist, Community pharmacist

Haha minimum 37% GP actually made me laugh out loud, for all your appearing to know about the numbers, how is this a logical estimate? Maybe you could single handedly save the industry by sharing your incredible buying knowledge. Regional multiples can't regularly achieve this margin with their massive buying power, but an independant can .. okay ... whatever you say. If he can consistently achieve 30% GP he's already working magic. With your numbers, 30% GP his starting point is already 56k worse off.

Factor in bank loans or did he rub a magic lamp to get the pharmacy? 

Not worth my time.

J RP, Community pharmacist

Also I have relatives who are contractors. A quick look at their books shows 40% gross margins. I suppose next you will tell me they have purposely made their numbers look better to try and show off, even though its detrimental to how much tax they have to pay. Face it you want to do no work for 6 figure income. Typical pharmacist mentality.

J RP, Community pharmacist

Sure you can achieve 37% with smart buying. The average gross profit margin of a pharmacy would be 35% so yes as owner operator you should be paying attention to buying yourself to get at least 37%. I see you want to check boxes and be paid 100k salary as if it's some universal right which offers nothing to the government or public. Keep dreaming the situation will change in that case.

Did he rub a magic lamp lol sunil bought/opened his pharmacy 40 years ago and is upset he no longer makes 150k a year instead of 100k. He had minimal costs from back then.

Pharm Druggist, Community pharmacist

Buy as smart as you want you're not getting 40% with independant-tier buying power. But there is no convincing you on this matter.

I personally don't want to check boxes forever and be paid 100k, but i believe if a contractor is happy to do so, that sounds like a fair minimum amount to me. "Offers nothing to the public" - i despair at this remark.  The community pharmacist's current role is unquestionable, it's a supply function and contractors have skin in the game, therefore have an incentive to make this supply function as safe and effective as possible to the public in order to secure business. Through the current supply model, contractors buy medicines in a method that has been incredibly successful in keeping drug prices for the NHS extremely low. Second lowest drug prices in the world if i am rememebering correctly. This in turn saves the NHS more money to be invested elsewhere - is this not value to the government and public? The supply function itself - community pharmacies stayed open throughout the pandemic, busting a gut to maintain supply chain to patients. Pharmacies were one of the few constants in our communities. Argue the reasons however you like, but what matters is that they stayed open - is this not value? Additionally contractors employ a workforce, invest in premises, take on bank loans (often using their own homes as collateral), pay corporate tax - probably paying more tax than the likes of google - they take on all this risk for the hope of fair reward - is this not value to society?

If you really see no value at all in community pharmacy then do yourself a favour and quit. 

I'm sure made-up contractor relatives who you respect so much and showed you their books would be really impressed you're badmouthing their contributions to society.

 

J RP, Community pharmacist

30% margins are laughable as you are suggesting. Pharmacies go for sale onna regular basis on sites like christie and hutchings, for obscene goodwill values which always get sold. The reason for those obscene values? Because the margins are well into 30% and the EBITDA justifies the cost. If it didnt justify the cost them forget about my supposedly made up relatives, banks would not even lend to support failing business models! What are you exactly? A contractor? Community pharmacist? Locum pharmacist?? My suggestion to any contractor who is upset with their intake, either rethink your business model or just sell your shop to someone who is willing to put the work into making it work. My relative has a 3k item shop with reasonable rent and rates. Given he and his wife both work in the shop non stop, staff costs are minimal, given it's just 3k items he can capitalise on buying whenever generally low prices appear. Now I've seen his books and know he is making more than a salaried GP, for FAR less work and stress. I made a mistake earlier. You want 100k for checking boxes OR just buying and supplying medicines. This profession is a joke. Plenty of money being thrown for work any one with 1 year of training could do and then the people still crying they arent making 6 figures a year because they feel stressed.

Benie I, Locum pharmacist

Accountancy is a very interesting profession...

 

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