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Lloydspharmacy closures not enough to prevent 19% profit drop

McKesson: Reimbursement cuts in England were greater than we planned for
McKesson: Reimbursement cuts in England were greater than we planned for

Divesting around 200 Lloydspharmacies "only partially mitigated" the funding cuts, its parent company has said, as it reveals a 19% European profit drop.

McKesson announced that adjusted operating profits for its European pharmaceutical solutions division – which includes Lloydspharmacy and wholesaler AAH – was $69 million (£53m) for October-December 2018, a 19% drop compared with the same period last year.

Revenue for the division was down 1% to $6.9 billion (£5.3bn), McKesson said it its latest financial results published yesterday (January 31).

However, on a constant currency basis, revenue for the division increased 2%, “driven by strong performance outside of the UK”, McKesson chief financial officer Britt Vitalone told journalists after the results were published.

Pharmacy closures and sales

Lloydspharmacy has ceased trading in around 200 “commercially unviable” pharmacies in England since October 2017. C+D has identified 78 of these Lloydspharmacies that have closed, and another 104 that have been sold.

The division’s revenue increase (on a constant currency basis) in the three months to December was “partially offset by the previously disclosed reduction in owned retail pharmacies…and a challenging operating environment in the UK”, Mr Vitalone explained yesterday.

“We now anticipate full year revenue for the [division] will be flat, compared to fiscal [year] 2018,” he added.

Expanding on his comments, McKesson president and chief operating officer Brian Tyler said: “While most of Europe continues to perform well and grow, the UK business does face challenges.

“The reimbursement cuts in the UK were in excess of historical levels and greater than we had planned for,” he said. “The actions we took last year to rationalise our store footprint and streamline our back-office operations only partially mitigated the UK government cuts.”

The team in the UK is looking at “government dynamics” and the pharmacy operating environment, as well as “making further changes intended to return the business to growth”, Mr Tyler explained.

“Moderately encouraged” by NHS long-term plan

McKesson is “modestly encouraged” by the NHS long-term plan – published last month – which recognises the “important role of pharmacy” and proposes a “general increase in healthcare funding”, Mr Tyler said.

However, it is too early to suggest that the long-term plan will help Lloydspharmacy return to growth, “given the generally weak retail environment and the uncertainties of Brexit”, he added.

Not yet a reimbursement “victory”

McKesson CEO John Hammergren said the NHS plan for the next 10 years and yesterday’s announcement of a multi-billion pound GP contract – which promises thousands of roles for “clinical” pharmacists to support GPs over the next five years – “continues to reinforce [NHS England’s] view of the importance of community provision of health and addressing the cost challenges of the NHS”.

While both are encouraging, “I would not want to ever declare a victory in the reimbursement front, given recent experience”, Mr Hammergren said.

“But we would like to think that we’ve probably gone through the most significant of [the reimbursement cuts].”

McKesson’s results come two months after Boots UK announced a 35% drop in its adjusted operating income for September to November.

7 Comments
Question: 
How is your pharmacy coping with the funding pressures?

Lucky Ex-Locum, Superintendent Pharmacist

Realistically, does anyone care that one of the more hideous multiples is getting hit in the pocket? It's their staff I feel for who will be worked like dogs to get the last bit of blood, sorry, MONEY out of them.

Graham Turner, Non Pharmacist Branch Manager

With their business principles or lack thereof, I'm sure many ex-staff would like to see their situation get even worse. I do feel for their current staff who can't see a way our of their employment with this company.

Chris Locum, Locum pharmacist

If they were not making anything, an announcement of insolvency would be coming. It is the human capital which will be cut and decimated, and the 'services'.
 

Z Z, Pharmacy Asistant/ Medicine Counter Assistant

Closures continuing...

Ex-sainsburys's Lloyds in Crystal Peaks is closing in February.

Honest Pharmacist, Community pharmacist

That used to be a really good store when it was Sainsbury’s ... such a shame :(

Honest Pharmacist, Community pharmacist

Maybe if they went back to basics and actually cared about their staff then the colleagues would be happier and thus their customers. They are losing customers due to poor delivery of basic customer services ie. dispensing prescriptions. The staff are pushed to breaking point and that will never end well.

 

Graham Turner, Non Pharmacist Branch Manager

They see their staff as replaceable. They focus on every penny in income that they can get, over everything else. If you behave like that it can only be a matter of time before things hit the fan, surprised it has taken this long tbh.

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