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Contractors face 17p-per-item price drop on top of cat M clawback

PSNC: New item prices reflect reduction in manufacturers’ sales prices
PSNC: New item prices reflect reduction in manufacturers’ sales prices

Pharmacy owners in England will face an additional 17p-per-item price drop in July on top of the ongoing category M clawback, the negotiator has announced.

The “approximate” 17p-per-item reduction across all category M items from July reflects a reduction in manufacturers’ sales prices from January to March, the Pharmaceutical Services Negotiating Committee (PSNC) announced on Friday (June 29).

“The [drop] in July is…mostly associated with price concession lines and is not due to planned management of retained margin,” PSNC explained.

The 17p-per-item cut is on top of the ongoing category M clawback – which already represents an average drop of around 17-18p-per-item – which is due to end on July 31, PSNC confirmed to C+D this afternoon.

PSNC is continuning to work with the Department of Health and Social Care on the upcoming margins survey for 2017-18, PSNC said.

“At this point, it is unclear what will happen to the August drug tariff,” it stressed.

“Final straw for many pharmacies”

Reacting to the announcement on Twitter, Wicker Pharmacy chairman Martin Bennett said: “This is by far the worst financial situation I’ve seen since I started in community pharmacy in 1973.”

The “additional cashflow problems” that the 17p drop will bring “will be the final straw for many pharmacies”, Mr Bennett predicted.

39 Comments
Question: 
How is your pharmacy coping with the funding cuts?

Bunny Boiler, Community pharmacist

Firstly, stop the free services. These services (in a roundabout way) ARE being funded by the DHSC by normal revenue streams. If you can offer free services then there is the capacity to stop these services that the government is essentially paying for. It gives the impression that there is more money to be clawed back.

Secondly, don’t ignore or put your head in the sand. The figure touted initially was 3000 closures if I remember correctly. This is but a drop in the ocean compared to what is about to come. In the DHSC’s own words ... they would prefer a mix of online and bricks and mortar. This means further cuts to encourage online pharmacy.

Thirdly, are you a healthcare professional or a retailer? If you are a retailer then a funding mechanism that relies on 90% of income that is reliant on dispensing volume isn’t the most stable considering the further attrition that is about to come. For the first time ever, pharmacy owners are having to compete like high street retailers without a guaranteed income source from the government that will ensure their survival. Better start adapting and developing new service revenue streams rather than naively believing that the situation will change.

MB Patel, Community pharmacist

All this going on and the chairman of the organisation who is supposed to lead and represent us is busy talking about his wholesale links in Pharmacy media 
 

david williams, Community pharmacist

The real problem here, is the polarised views of either side of the fence. One side not happy that their efforts and commitment to running a business are being eroded and that the financial security is no longer there. The other, quite happy that the pharmacy owners are not "making a killing out of the NHS" (rather an inappropriate phrase in healthcare) anymore. The problem is, that if running a business does not give rewards and / or security, we will eventually end up like the GP's, where no one wants to own the practice, with all the problems that entails.

It would seem sensible to have a very grown up discussion, so the sector does not become decimated and fails. However, I believe some colleagues and many in government (fortunately not here in Wales) would like to see the sector fail, as it does not value it as a source of good prudent healthcare, They may have a point!!

There are many challenges facing us that we must evolve to meet and I agree we must change and become more clinically focused. However, 2 attitudes that I will not accept are ( and some others might not agree)

1 Governments-community pharmacy is not what we want, let "Amazon" or similar deliver-that is a race to the bottom and does not serve the public well (or the HMRC, both in corporate revenue and income tax for employees.)

2 Disgruntled colleagues- envious of my lifestyle for borrowing money, working for 30 years as an owner often for 60 hours a week, with no breaks and few holidays. I don't drive a Porche, my Landcruiser is 14 years old and done 162,000 miles, but I still have a good lifestyle now, which I believe I have earned..

Stop all the arguing from within, the real challenge is from outside. Envy has no place, good reasoned arguements that invoke change for the better do

                  

 

Alexander The Great, Community pharmacist

Our main job is dispensing scripts.... you cannot move from this. If you want to evolve and develop into a more clinical role... pay us more to do so. You cannot cut money from our main role and then force us to go down a more clinical path with no extra funding whilst still having huge dispensing volumes.
 

Another Pharmacist, Hospital pharmacist

Think I’ve stumbled on the exact thought process of doh, as the ex head of Nhs e said 18 months ago: Pharmacy is just dolling our pills. So doh think: we’re paying them to put sticky labels on boxes? Can’t robots do that now?  I think there are a lot of valid points - people are seeing massive decreases in income definitely. But when you wanna sell you make the books look good to get the Gucci sale price - who wouldn’t?! Doh does not care and can bode its time as the community pharmacy market shrinks and allows for the gradual growth of online. Remove the requirement for an RP and allow remote supervision...it’s all a slow burn ladies and gents and doh can afford to wait it out!

How High?, Community pharmacist

Yep times are hard. Local branch's net profit "down" to only £350k. Net profit mind, not gross, and this is a branch that has lost around 10% of it's dispensing volume. MDs and owners still driving round in Porsches and Range Rovers. Still I'm sure the newly qualified guys who have spent 5 years studying will be really pleased to "earn" £17 per hour for a 10 shift of non-stop checking and service whipping because times are "hard" and yet still no prospect of actually ever being able to afford a home, let alone a business.

Alexander The Great, Community pharmacist

And how have you managed to access this figure of net profit?? I can assure you thats impossible for any pharmacy.

Watto 59, Pharmacy owner/ Proprietor

I am thoroughly sick of the PSNC's passive response to everything that continues to be imposed on pharmacy contractors.  They are about the only body who could coordinate some kind of action to wake up the DoH and Government.  The NPA and Society could and should be involved too but they too seem to be a waste of space especially the latter.  When I have voiced concerns to the PSNC in previous times of the apparent lack of effort and/or progress I have been fobbed off with suggestions that matters are being discussed behind closed doors which will resolve in successful outcomes.  In other words it is no use complaning and acting publicly about how unfair everything is because our wise and undemonstrative representitives are professional statesmenlike quasi senior civil servants who exert their  influence successfully in an effective  and dignified manner.  Well that is (and always was) a myth.  It seems to me that attitude plays right into the hands of the DoH who can rely on a professional considered and rational response which results in no more than mild criticism of their utterly unreasonable position.  I am not suggesting that something in the mould of Arthur Scargill and the NUM is necessarily the answer either but a move in that direction could hardly be less successful.    Some kind of direct action needs to be organised and agreed with the majority of contractors.  If the PSNC cannot come up with anything then I should think contractors coud offer some suggestions.   Collective action and agreement from a very large majority of contractors though would be essential.         

Brian AUSTEN, Administration & Support

A form of work to rule is required. Abide by the rule of law (regulations) but no more. The first thing should be for all pharmacies to revert to their core hours. That would reduce their costs and influence the public. It would show how serious the situation is. Follow that with an end to ALL free private services including delivery and MDS. This sort of attrition would soon make people sit up and notice.

How High?, Community pharmacist

100%. But who has the nerve eh? Not the big boys watching each other and certainly not the local independent who is forced to copy the big boys at every turn........

Alexander The Great, Community pharmacist

PSNC is a bloody joke. They have failed pharmacy on a MASSIVE scale. Not only are we losing income from the dispensing job that is the hub of our profession, but they have burdened us with huge amounts of paperwork that we have not time to do and wont cover the loss from dispensing.

Patients want their medicines dispensed quickly and safely, along with easy access to a pharmacist with a broad knowledge of medicines and general health NOT extra services!!! Further cuts will lead to less staff and increased waiting times for everything. Our local surgery has gone fully EPS with Repeat Dispensing, burdening us with printing/sorting out and managing all repeats and then scanning every script for submission to the PPA. We dont get reimbursed for time spent sorting out hundreds of scripts coming through, filing repeats, using massive amounts of toners and scanning scripts for submission.

Then we have 50 + NSCO that we may or may not get reimbursed for at the end of the month. increased living wages we have to pay every April and October and increased pension contributions.

I've yet to hear how Asda and Tescos are coping with their low dispensing volumes.

voice of treason, Manager

PSNC has become a ‘best endeavours’ organisation, which ultimately means they ask for very little, and achieve nothing, but console themselves that at least they tried.

 

*This comment has been edited to comply with C+D's community principles*

voice of treason, Manager

Comment edited so I will rephrase.... 

I was simply wondering the worth of the PSNC Funding Director given the quality of information provided throughout the last 18 months; coupled with questionable negotiating skills.  

S Morein, Pharmacy Area manager/ Operations Manager

And yet Pharmacies continue to sell for vast goodwill values based on the extraordinary (often outrageous) profits shown in their pre-sale accounts. Even the alleged "non-viable" Lloyds Branches have overwhemingly been sold rapidly for substantial considerations. Once again contractors plead poverty when the evidence clearly and comprehensively shows to opposite to be the fact.

Sue Per, Locum pharmacist

Spot on Mr Morien, The proof is all there, Very few closurers, and no purchasers are doing it for the love of serving the public, but make huge profits.

And for a mediocre volume led - assembly line pharmacies, where there is no time for meaningful clinical input.

Time for a radicle change to the pharmacy contract which incentivises clinical - led services

 

 

Alexander The Great, Community pharmacist

Did you not read the Cn D article that over 260 pharmacies have closed since 2016???? I guarantee you there will be more to follow. After this cut, I will struggle to make a monthly profit dispensing 11000 items a month. Sainsbuys sell up to Lloyds because its loss making. Lloyds sells up/closes tons of pharmacies even though they own the wholesale chain!! Thats is a massive statement and they have the foresight to do so. I feel sorry for Well pharmacy who have purchased Co-op before establishment payments got axed, bet they regret it. I think all these others snapping up shops from Lloyds havent really thought it through, and are probably air heads like you that dont actually know their numbers and still think we are making lots of money.

Watto 59, Pharmacy owner/ Proprietor

What do you mean by huge ? .  Please define and/or provide recent examples. Profit pays your locum fees and love of serving the public will not pay anyone's mortgage. I  have no problem  taking on clinical led services provided they are adequately remunerated and just as importantly there were not a hundred and one hoops to jump through first.  Critically though this should be extra to, and not at the expense of  reasonable professional fees and payments needed for providing an adequate pharmaceutical service. I agree with you that the contract is not (and never was) fit for purpose but I voted against it when it was originally proposed in I think 2005.   

 

 

 

Sue Per, Locum pharmacist

Exacty what i mean, No  one is doing it for the love of it. All proprietors are in business to make profits, and all the evidence points towards very healthy profits, otherwise there would be fire sales and closures. We have witnessed that with the likes of House of Frasers, Mothercare, Poundland, Maplins, Toys "R" us., New Look, with many others in intensive care. Where are similar closures in Pharmacy. NONE, except for consolidation to maximise profits through efficiency and reduction of overheads. 

 

Brian AUSTEN, Administration & Support

All the retail businesses have shareholders that have exit plans before they get 'burnt', that is why Lloyds publicly and Boots less publicy are selling or deserting contracts. Independents only have themselves to answer to. 

Dave Downham, Manager

I'd love to see this evidence you are so keen to purport.

Watto 59, Pharmacy owner/ Proprietor

To S Morein. I wonder what evidence or criteria you are using to decide what is "outrageous" or  "vast".  Similarly how do you know what Lloyd's unviable branches actually have actually sold for and what the terms and conditions of the sale contracts were regarding any future profitability ?  If you are correct and the branches were making such large profits what on earth were Lloyd's offloading them for in the first place?  I would be very surprised if any recent accounts within the last two years of any pharmacy business has not shown a distinct and very significant fall in net profit  given a similar volume of NHS and retail trade.  If as you say that pharmacies continue to sell for vast goodwill prices I would suggest that you are wrong but even if you are correct then to those purchasors who have paid "vast goodwill values" I say "caveat emptor", you may will soon discover that your apparent optimism for retail pharmacy to be unfounded if as seems likley the present situation continues or deteriorates further.

Alexander The Great, Community pharmacist

My pharmacy income has dropped by around 50% dispensing 11000 items

Reeyah H, Community pharmacist

That’s abs correct. Ours has dropped by around the same figure. There are no profits left. We are just ticking along hoping for something to happen! 

Sue Per, Locum pharmacist

Alex post your balance sheet, and we could have a meaningful discussion, and discover where the 50% drop in profits have disappeared. It has probably dropped from a very high level to still a comfortable level.

The DOH is coming off the snooze!!, but only slowly, still has a fair way to go.

Alexander The Great, Community pharmacist

I am commenting here with my actual drop in income. If you dont believe me you can easily find income from pharmacies looking at companies house tax returns of your local independent pharmacy.

I would love to pay my hard working staff more, employ another member of staff, or pay for a refurb. No chance. Staff xmas do? Was at a nice restaurant last year, maybe have to suffice with McDonalds.

 

Watto 59, Pharmacy owner/ Proprietor

Sue Per instead of Alex printing his balance sheet(or more usefully a P & L account) why don't you give us an idea of what you think an average pharnacy say doing 5000 items a month 85% NHS should reasonably make in net profit

Alexander The Great, Community pharmacist

I think they should earn enough to cover all costs (training, SAFE LEVELS of staffing, rent, council rates, indemnity insurance, delivery expenses, blister packs costs, printer, stationery, uniforms) and then another 30k on top.... can be used for emergency repairs, new computer systems, refurb.

Sue Per, Locum pharmacist

Deliveries and blister packs (MDS) are not part of the NHS contract, therefore entirely up to you if you wish to provide it for free. Besides MDS scripts are for seven days, and usually four are prepared at once, quadrupling the fees at a stroke.

30K on annual costs??? LOL you have covered everything, what else??What planet are you on???

 

 

 

Ben Merriman, Community pharmacist

Post your real name and we could have a meaningful discussion...

Dave Downham, Manager

So a pharmacy with 7,000 items stands to lose a further £1,200 this month with no idea what will happen in August let alone the rest of the year once they get around to having another contract reduction imposed. Any insolvency practices out there looking at this will be rubbing their hands.

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