Layer 1

Department of Health vow to double small business spending 'vital'

Business Independent Pharmacy Federation says commitment to spend 18 per cent of health budget on small and medium-sized businesses is vital for contractors, but finance experts worry about its implementation

The Department of Health's (DH) commitment to spend more on small businesses is vital to help contractors survive, the Independent Pharmacy Federation (IPF) has said.


The IPF welcomed last week's (January 8) renewal of the DH's promise to double the proportion of its budget spent on small and medium-sized businesses (SMEs) from 9 per cent in 2011 to 18 per cent by 2015.


But finance experts Umesh Modi and Andy Harwood said the DH needed to do more to explain how the money would "filter down" to contractors.


Independent Pharmacy Federation chief Claire Ward said the Department of Health needed to put greater emphasis on the role of small businesses and do more to support them

More on independent contractors

LPCs call for research levy on contractors

Contractors welcome community views on applications

Independents blame supply deals for dispensing losses

IPF chief executive Claire Ward said the DH's announcement was "good news" for smaller pharmacy businesses and showed an understanding of the value that independent pharmacies could have in healthcare.


"Money coming into the system to support small businesses is absolutely vital for independents because that's the way they're going to survive in the marketplace," she told C+D last week (January 9).


However, the DH needed to put greater emphasis on the role of small businesses and do more to support them, Ms Ward added.


Umesh Modi, partner at accountancy firm Silver Levene, said the DH's money was more likely to benefit small wholesalers, short-line suppliers and procurement companies, rather than independent pharmacy contractors.


"In previous years, I haven't seen any independent contractors derive additional income from this spend," he told C+D.


Andy Harwood, director of business development at finance company Pharmacy Partners, said it was hard to predict if the extra money the DH spent would "filter down" to smaller pharmacies, which needed financial support the most.


Mr Harwood called on the DH to prove its commitment to smaller pharmacies by reducing the number of prescription items pharmacists were required to dispense before they received practice payments.


In 2011-12, the DH and its arm's-length bodies spent £1,061 million on third-party suppliers, of which only 9 per cent went to SMEs. In 2012, the DH promised to double this by 2015 as part of a wider government commitment that at least a quarter of the money spent on goods and services went to SMEs.


The DH said it was "fully committed" to supporting SMEs and the amount it spent on them had already increased to 13.6 per cent in March 2013.


In October 2012, prime minister David Cameron announced a government loan scheme to help pharmacy businesses cope while they waited for NHS prescription payments.



Is the DH doing enough to support independent contractors?

Comment below or email us at [email protected] You can also find C+D on Twitter, LinkedIn and Facebook

7 Comments

Small Pharm Owner, Other pharmacy staff

As an essential small pharmacy contractor I hope this filters down in the form of a renewal of the essential small pharmacy scheme which is due to expire in March 2015. The details of which must be agreed by September of this year, as pharmacies included in this scheme would have to be given 6 months notice in order to reapply for a standard pharmacy contract. For those who don't know much about the scheme it provides pharmacies who do not have high enough dispensing volumes to make them financially viable (through establishment & practice payments and purchase profits) but which are considered essential to the local community. Unfortunately the future of this scheme (which helps around 90 odd pharmacies I think) has been renewed on a rolling basis for a few years at a time. This makes any form of financial investment or medium to long term planning impossible due to the lack of certainty over our viability. For those who believe in competition and free markets please remember that without these bridging payments these often rural, deprived or seasonal locations would not be serviced at all.

We provide for a small rural community all year round offering the core and many enhanced services such as free blood pressure checks, free diabetes screening, EHC and smoking cessation whilst providing free deliveries to the housebound and sick. The fact we are small means we know our customers extremely well and are therefore in an excellent place to offer them the best advice be it on medicines or lifestyle. During the summer months we have a large influx of tourists which puts immense pressure on local services so we operate 7 days a week. The knowledge, services, advice and signposting we provide over the summer months for minor ailments dramatically reduces the pressure on the local GP surgeries and hospitals, which as we all know are overstretched as it is. When you consider the cost to the NHS of A&E and General Practice appointments the essential small pharmacy payments are more than justified.
Unfortunately our surgery prescribe on a 56 day basis despite attempts to highlight the efficiencies and cost savings of 28 day prescribing. If 28 day prescribing was consistent across the country I am sure the majority of essential small pharmacies would automatically come out of the scheme and be viable through benefiting from the additional practice payments and the establishment payment.

Life as a small pharmacy is far from easy....

Due to the lower volume of prescriptions we are disproportionately disadvantaged by the issues currently effecting the industry which makes the continuation of this scheme even more critical. Our size greatly reduces our purchasing power, we receive lower discounts and although we have accounts with the main wholesalers we have traditionally only been able to access agency lines. Over the last 5 years stock shortages have been such a problem we have had to succumb to surcharges (in some cases £300) and due to the frequency of the problem we now pay membership fees in order to be able to access drugs from other wholesalers when they are out of stock. This costs over £1000 a year. This allows us to order drugs, but again because of low dispensing volumes we don't then receive any discount. This is despite the PPD assuming we receive a discount so we end up being reimbursed less than it cost us or at a fraction of the purchase profit we should be making. To help combat stock shortages we have had to set up accounts with manufacturers directly in order to get the drugs we need, which takes time and sometimes incurs carriage charges we are unable to claim back, to patient's receive their medication in a timely fashion.

We have been approached by other pharmacies with the seduction of helping them export medicines by using our quotas and access to wholesalers to order medicines and sell them onto them for export. From a commercial perspective this would increase our spend so we were achieving the sort of discounts larger pharmacies enjoy and mean we didn't have to pay the membership fees. However this goes against all our ethical standards and quite frankly we would rather go bankrupt and start an oven cleaning business than add to the issues that are causing such harm and distress to patients.
Like all pharmacies we are suffering from Cat M clawbacks and increasingly dispensing drugs at a financial loss. Unlike our larger counterparts we don't have the volume of scripts to cover these losses.
Due to the seasonal influx of patients in our area who forget medication whilst on holiday, we often pay for a full box of drugs, which are sometimes expensive (although just under the £50 broken bulk threshold). We only get reimbursed for the few tablets we dispense whilst the remainder don't get used (due to differing regional formularies) and we are unable to get paid for the rest since the changes in broken bulk rules.

We adhere to the same premises standards, SOP's, IG and audits, to name but a few, as all other pharmacies just without the back office economies of scale that large multiples and supermarket pharmacies benefit from. We do not have the budget to bring in locums resulting in this being undertaken out of hours (which is difficult when you are working 7 days a week for 6 months of the year and a normal working week for the remainder ).
Essential pharmacies are often rural which means it is both harder and more expensive to hire locums. We often struggle to get one or two weeks holiday a year.

And of course like most small and medium size businesses we do not have a head office as a PO box in Luxembourg, so we pay our corporation tax.. As well as all those other expenses such as staff, PAYE, National Insurance, shop insurance, indemnity cover, premises fees, computer and software, rent, business rates, trade waste, recycling waste, phone lines, fire extinguisher maintenance, alarms, fridge thermometer calibration...and the list goes on!

Despite all of these financial issues we still plug on. The positive outcomes from the services and interventions we undertake let us know that we are an important and vital part of the community, as do the many Christmas cards giving thanks and letters of appreciation from holiday makers for problems overcome. We do still love pharmacy, we would just like pharmacy to love us back.

Dorothy Drury, Locum pharmacist

As usual nothing for pharmacy is ever worked out. There is a lack of common sense. You can have a pharmacy doing 3,000 items a month and an ESP doing 900 items a month. But which one has the biggest turnover? If you have scripts for 2 or 3 months at a time you can qualify for ESP while a pharmacy with 28 day scripts would not.

Small Pharm Owner, Other pharmacy staff

As I mentioned ESP do not qualify for establishment payments and would lose out on practice payments and item fees. Turnover would likely be similar but that is the point of the scheme, to make essential pharmacies in essentially deemed areas viable so they can serve the community. In my case I wish 28 day scripts were standard as they would lift us out of the scheme and give us the confidence to invest however I still believe there needs to be a safety net for those small pharmacies who would still not qualify for an establishment payment.

Dorothy Drury, Locum pharmacist

I had both an ESP and a normal contract pharmacy. With the ESP you should be able to do less hours and are you able to get business rate relief, I had a 50% reduction which also eased the running costs. I never saw the point of doing more the the minimum number of hours for as ESP. or if you do , do not count them in your contract so that when you are on holiday you only need to cover the minimum hours.

Small Pharm Owner, Other pharmacy staff

I accept these would be useful cost cutting strategies for some ESP's, but without going into a contractual coma it would not help us in our situation.
My original post highlighted the need for a decision on ESP's and my hope the scheme would continue however I also tried to show the pressure on all small pharmacies. As you mentioned you have also owned a standard hours pharmacy so I am sure you can appreciate the pressures small and medium independants face. Hopefully the DH's financial commitment comes good with meaningful and well placed policies to help us through these tough and uncertain times.

S S Locum, Locum pharmacist

we love you too. keep up the good wrk

Small Pharm Owner, Other pharmacy staff

Haha thanks SS at least I know one person has read my nights work!

Job of the week

Pharmacist Manager
Midlands, Cheshire & Dorset
Salary dependent upon experience