A recent report on the economic viability of pharmacies being part of the new neighbourhood health service has provided “yet more evidence of the extraordinary pressures that community pharmacies are facing”, Community Pharmacy England (CPE) has said.
The report, commissioned by drugmaker Sandoz and published earlier this month, explored whether “the current funding and pricing model” can “sustain community pharmacy in delivering the expanded role” outlined in the government’s NHS 10-year plan.
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And it concluded that “if community pharmacy is expected to play a central role in delivering neighbourhood-based care, its economic foundations will need to be strengthened”.
CPE CEO Janet Morrison said the report is “more confirmation that community pharmacy is on a knife edge”, adding that pharmacies “urgently need investment and a roadmap for the future”.
“We share the report authors’ concerns about the long-term viability of community pharmacies, and their calls for economic reform to address the financial instability in the sector,” she added.
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The government’s 10-year plan for the NHS, unveiled last July, included plans to “bring the NHS closer to home” by launching “neighbourhood health services” that will see pharmacists and other healthcare professionals provide more care in the community.
The first 27 neighbourhood health hubs began rolling out last month, and are set to be “open by 2027”.
Closures despite higher demand
The report also said the decline in the number of community pharmacies in England is “one of the clearest signs of pressure on the sector”.
It found that independent pharmacies are hit the hardest, with many operating as “zombie businesses”, which remain open despite “being economically non-viable”.
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These businesses are “increasingly constrained by high exit costs” such as “redundancy, lease commitments” and “loss of a pension-supporting asset”, it said.
At the same time, the report noted, demand “continues to rise”, with prescription volumes increasing by 14% since 2015/16.
This means that “fewer pharmacies are dispensing more items and absorbing additional workload without equivalent increases in funding or staffing”, it added.
Funding
The report also noted that “structural pressures are intensified by years of constrained funding” and that “the total pot for funding community pharmacy has remained effectively frozen for several years”.
The effects of “cumulative inflation of more than 40% over the last ten years, alongside continued workload growth” mean that “pharmacy funding has not kept pace”, it said.
And it added that “overall funding still falls short of reflecting the scale of work pharmacies now undertake”.
Category M Margins
Another concern raised in the report was the “effect of the Category M retained margin on generic pricing”, which “caps the total profit pharmacies can earn from dispensing individual generics”.
“This incentivises pharmacies to buy medicines at the lowest possible prices,” it added, “but when this behaviour occurs at scale”, the government “reduces the Drug Tariff reimbursement prices to keep overall reimbursement within the cap”.
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It said this system “drives significant effort from pharmacies for minimal benefit” and “sustains downward pressure on generic medicine prices to historically low levels, increasing the risk of shortages, price concessions and cash flow pressures - overall damaging the market”.
And with “only a minority” of pharmacies now reporting profits, “the mechanism appears increasingly out of step with economic reality”, it added.
Pharmacy First
When it comes to Pharmacy First, the report found that the service “still delivers only modest income for most contractors” while “workload has increased”.
It said the “higher thresholds” required to “unlock the fixed monthly payments” mean that “many pharmacies fall short” and “receive only the per-consultation fee, missing out on a substantial share of potential funding”.
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It comes after an Independent Pharmacies Association survey earlier this month revealed that 56% of pharmacies would “consider limiting services” if a “sufficient funding agreement” is not delivered.
It also found that 32% of pharmacies “would consider closing their pharmacy altogether”.
