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Independents could face £2,400 profit loss in wake of Brexit

Pharmacies could face import levies and delays – which could lead to drug shortages

The double impact of the falling value of pound sterling on the cost of drugs, and a potential rise in importing fees could cost pharmacies around £2,400 a year, Sigma Pharmaceuticals has warned.

Over-the-counter (OTC) medicines manufacturers have already raised their prices since the UK voted to leave the European Union (EU) in June, said Sigma sales and marketing director Rajiv Shah, who predicted manufacturers of generics and other medicines will follow suit.

Food manufacturer Unilever made headlines this month after it increased the wholesale costs of its products – including Marmite – in the wake of the pound’s steep decline in value.

Mr Shah said the situation for pharmacy “is probably not going to be that different”.

Speaking at the Avicenna conference at the Celtic Manor resort in Wales earlier this month (October 15-16), Mr Shah said Sigma is “quite confident” that the impact of the Brexit vote would lead to worsening drug shortages “over the next year or so”, partly because of the “crazy near-20% decline in the pound against the euro”.

“At Sigma recently, we’ve already had OTC manufacturers come to us and impose price rises [and] we’ve had to absorb that,” he told delegates. 

“Looking at the increasing cost of manufacturing outside the UK – and that impact on generic drugs manufacturers and OTC suppliers – when you have raw material prices going up, but you have already tended a price to the UK, sometimes it then becomes unviable to make a product – which is why we get a shortage.”

Impact on imports

While Britain is in the EU and the single market, free movement of goods means drugs can be imported “fairly quickly”, Mr Shah said. But it’s not yet clear if drugs arriving in the UK once it exits the EU would be subject to import levies or quarantines – as currently applies to medicines imported from outside Europe.

This could result in a “lengthier process to bring stock in from the EU”, Mr Shah warned. “If so, this will mean fewer imports of goods, which also contributes to shortages and an increase in prices.”

Sigma estimates that Brexit’s impact on imports could cost independent pharmacies in the UK an average of £2,400 in profit a year (see below). “That’s going to affect a lot of our customers,” Mr Shah told delegates.

However, he added: “Independents are fairly insular, but tend to ride the tough times better than big multinational corporations.”

Read more from the Avicenna conference, including discussions on the cuts and the "radical thinking" required by the sector, here

Crunching the numbers: how leaving the EU could affect your pharmacy

Drug shortages could affect contractors by reducing the number of parallel import drugs that are profitable to procure or dispense by around 40%, according to Rajiv Shah, sales and marketing director at Sigma Pharmaceuticals.

Mr Shah said the British Association of European Pharmaceutical Distributors estimates the UK medicines market is worth around £462 million. He calculates that this drop in imports would reduce the market’s worth to around £280m.

Divided across the more than 14,000 community pharmacies in the UK, this would mean a drop in annual profit of around £2,400 a year, he estimated.

12 Comments
Question: 
How much do you expect Brexit to cost your pharmacy?

Han Solo MPharm The coolest pharmacist in the galaxy , Locum pharmacist

A complete lie. A Brexit will favour all private and independent business. Currently all laws in the EU are set up for big pharma and multiples. It is deliberately designed to squash any new guys and entrepreneurs.  The EU is thus against independents.

Best to leave, don’t believe this rubbish.

Jonny Johal, Pharmacy Area manager/ Operations Manager

Oh dear, are we still into Project Fear territory? I say Brexit will trigger an extinction event in pharmacy. Lol

Paul Miyagi, Information Technology

Oh, I see the Brexiteers have marked you down.  Easy to see how pharmacists don't stick together - a major flaw.

John Dow, Advertising

Hahahaha   Yeaah . Looks like Brexit is the new adversary of Russia. Everything's gonna be their fault.  

Jupo Patel, Production & Technical

Maybe it's the end of the world as we know it.

Jupo Patel, Production & Technical

More Brexit scare stories. zzzzz...........

Chris Mckendrick, Community pharmacist

Surely once we leave the EU there will be no PIs. The only reason we have PIs is because of the Treaty of Rome which allows free movement of goods, services and people between member states.  This is why we don't have PIs from Canada/USA/India or any other country outside the EU. Once we are outside the EU, Big Pharma PLC will finally see all their dreams come true and put a stop to the trade with no EU legislation to get in their way. It's Obvs as my mate Shackattack would say

 

Ben Merriman, Community pharmacist

Pardon my ignorance here (I'm all calculated out trying to see whether I'll have a job next year) - community pharmacy purchase profit is set at £800m.  If we make more than that, our fees are reduced to counteract this (practice payment usually).  If we make less than £800m (due to changes in price because of Brexit, raw ingredient shortages, the price of cheese fluctuating, whatever), surely our fees will increase?  The whole point of the £800m guaranteed margin is it's guaranteed!

Mr Pharmacist!, Pharmaceutical Adviser

What utter crap.  Most manufacturers and distributers have forward hedged currency!!! This is the Shah's at it again to soften their customers up for a wholesale price hike.  I'd suggest people start looking away from Sigma, but deals to be had!  I really hate the patronising line: "Independents are fairly insular, but tend to ride the tough times better than big multinational corporations.” - Well Mr Shah, how do you figure that one out!!  Is it because independents make more margin on drugs than the vertically integrated multiples...me think not... and me think you taking the monkey out of us all

Stephen Eggleston, Community pharmacist

Agree - there is too much unnecessary prescribing on the NHS. However, while it may make the NHS budget go further, it won't increase how much of it comes to Pharmacy. It would be a forlorn hope that the clawback rates, which take PI's in to account, will be adjusted. What I can see is a lot less of the "I only have Teva/Bristol/Almus (sic) brand" being accommodated

Leon The Apothecary, Student

The BNF could do with a trimming down and removal of a number of items with duplicated medicinal affect at a lower value, and those with limited effectual benefit to patients, and more controversially products that are easy to obtain OTC for example aspirin, paracetamol, and GF Foods to name a few.

A fundementally change like that would make the NHS budget stretch all the more further, which could negate the affect of voting to leave the EU.

Valentine Trodd, Community pharmacist

Good idea. It's always puzzled me why the NHS don't come up with a formulary. No need for the 101 different types of moisturiser that are currently prescribed.

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