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Pharmacies struggle to pay suppliers after 20% funding drop

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C.J. Patel: "We were expecting a £3,000 loss per month, per pharmacy, but it's more like £6,000"
C.J. Patel: "We were expecting a £3,000 loss per month, per pharmacy, but it's more like £6,000"

Contractors are struggling to pay wholesalers and staff as a result of an unexplained 20% drop in payments from the government, C+D has learned.

Last Friday, C+D exclusively revealed that the Pharmaceutical Services Negotiating Committee (PSNC) is investigating "concerns" from contractors experiencing a drop in payments since December 2016 that are "closer to 20%" , rather than the 12% the negotiator predicted last year.

Speaking to C+D today (June 5), C.J. Patel – who owns five pharmacies in Croydon, London – said the drop in funding “is nowhere near the 12% I was led to believe”.

“We were expecting a £3,000 loss a month, per pharmacy, but it is more like [an average of] £6,000,” he explained.

“Now I might be being a bit simplistic by just looking at the amount of money in my bank account each month, but that is the money I use to pay my suppliers and my staff. If that has gone down, then obviously that impacts my ability to pay these people.”

Mr Patel – who is also chair of Croydon local pharmaceutical committee (LPC) – said his colleagues across London are reporting similar issues.

“One said he couldn’t pay his main supplier with the amount of money he had received,” he said.

Pharmacists took to Twitter over the weekend to share their experiences of the unexpected funding drop.

A "widely reported" problem

Pharmacy London CEO Rekha Shah told C+D the issue has been “widely reported” across the capital.

Commenting on the C+D website, locum pharmacist John Munday said “a 20% cut could easily kill a small vulnerable business”.

“Good businesses trade successfully on the basis that, as far as they can predict, they can anticipate fluctuations in cashflow. They gear their borrowing to cover the leaner times and plan capital expenses according to what they predict they can afford. So where does this leave everyone?” he added.

Numark “aware” of issue

Numark’s managing director John D’Arcy said the group “has been aware of contractors facing funding cuts close to and even exceeding 20%” over the last four months.

“The reason for this is that in real terms, contractors [are] being impacted by...12 months of cuts phased into a four-month period, as well as the introduction of a single activity fee and the impact on [the] establishment fee,” said Mr D'Arcy.

Asked for his own theory for the unexplained funding drop, Mr Patel said: “I’m not sure whether PSNC was misled by the government about the effect of the funding cuts, or whether [the government] has implemented greater cuts than they originally announced.”

Concerns raised on Twitter
26 Comments
Question: 
Are you experiencing steeper funding cuts than expected?

Brian Austen, Senior Management

What do the 'specialist' accountants say about this? Part of their job is to be a trusted business adviser and to explain to their clients what is happening in their accounts and why. They should be proactive in looking after their pharmacy clients! Also Agents need to be able to help purchasers/sellers understand the values of pharmacies and how they are being achieved. Too many 'professionals' are not doing enough to help their clients and justify their fees. They and the representative of community pharmacy should be on top of this immediately.

S Gulsin, Superintendent Pharmacist

We are a small chain of four pharmacies and have had a drop of over 21%. It was a shock.

Sue Per, Locum pharmacist

Time to offload some of the units, if you cant stand the heat., There is a queue of buyers ready to ourchase at reasonable prices.!!

Caring Pharmacist, Community pharmacist

The reimbursement drug prices for Pregabalin is Lyrica Brand price which is at least 30 times more than generic price.Same goes for ciprofibrate tablets.So profit in dispensing is good or bad.??

Dave Downham, Manager

That's one product - what about the rest?

Sue Per, Locum pharmacist

Same applies to majority of the products. It would be easier for you to list products which are under-reimbuirsed by the DOH.. Probably none. It is well known in the quarters, that in some instances the purchase profits exceeds the Fee income!!. What a difference that makes to the bottom Line!!.

S Morein, Pharmacy Area manager/ Operations Manager

In January this year C&D ran a story about a contractor, Chauhan pharmacy in Clerkenwell, going to close in 6 months "unless something changes". Well now apparently there are these savage cuts so the only changes obviously are allegedly far worse. Perhaps we can have update on the position of this contractor? I do hope he manged to thrive!

Ilove Pharmacy, Non Pharmacist Branch Manager

I suspect Chauhan phamacy is doing just fine. But i'll stand corrected if someone can prove otherwise......

L H, Community pharmacist

My take on the cuts are that:

1) Pharmacy is still profitable with either scale or offshore tax havens (often mutually inclusive).

2) It is now significantly less profitable for the traditional small local pharmacy owner/manager, who is most likely to call it a day and sell up (as it is THEY who often work for hours after the staff go home rather than cut staff).  The down side is that these are the people who are most likely to inhibit the rot of locum wages as they can appreciate a decent locum and you're not "just a number".  As they sell out to the muliples (who can outbid easily) the percentage of independents decrease...to the detriment of both the pharmacy profession and patients (although Keith Ridge would differ)

So, find another career, or a unique niche in pharmacy and hope to survive.  The same is happening in many countries with similar healthcare systems.  Can't see a way out so lift your glass and toast to developing new (non-pharmacy related) skills.

Good luck all.

 

S Morein, Pharmacy Area manager/ Operations Manager

Sounds like more "Crying Wolf" from contractors. Every Cat M alteration since 2005, every small tweak to remuneration contractors bellow about imminent collapse of the so called network and pharmacies going bankrupt. But in reality goodwill prices and multiples are at an all time high, profits are at an all time high and margin is at an all time high. The facrts tell the story not the myths as portrayed by the vested interests of the poverty screaming contractors.

R Patel, Community pharmacist

Are you really an operations manager? I wonder what company has employed you as you clearly have no idea of the reality facing community pharmacies. Perhaps learn to interprete accounts before you make comments like these.

S Morein, Pharmacy Area manager/ Operations Manager

Thanks for the reply. A P&L is not rocket science to understand neither is a balance sheet. Shockingly, for the tax payer, contractors accounts show the vast net profits retained by the vast majority of contractors. Of course that is before we even look at the extraordinary goodwill values commanded by even the smallest of pharmacy. All there in the public domain for anyone to see.

Dave Downham, Manager

No they don't - shockingly, most independents will be classed as small companies and so will not file a profit and loss account that is all there in the public domain for anyone to see. I will willingly and humbly apologise if you are able to point us in the direction of 3 sets of accounts filed at Companies House that show a 15% net margin as quoted by the DH. As P&Ls and balance sheets are not rocket science, I'm sure that won't be too difficult for you.

Charles Whitfield Bott, Pharmacist Director

What makes you think that goodwill prices are at an all time high? or profits for that matter?

Ava Denuff, Locum pharmacist

I feel all your pain, and know it. As a locum, my rates have fallen by 20% over a short few years. My rates are now as low as they were in 2001..Many of the cuts along the way being imposed upon me and at short notice. I am however, expected to continue on and take it and still pay all my bills and expenses etc. I have to make economies in life..less time off = less family time, cutbacks in other areas to balance the books. And as Sue Per says, these are real time cutbacks having a direct effect on me personally.

Contractors are of course doing the same, cutting staff, trimming back dah de dah..but its always someone else who takes the hit.. the staff, the locum... rarely the directors or owners. I am sure there are some out there who take the hit in profits and protect staff etc. So why shouldnt the business owners/directors profits take a hit ? find a way to deal with it like we have. Perhaps take a cut in salary back to the levels of 2001 like us?

Of course, I am just venting off...but I await a barrage from sympathisers.    

Ilove Pharmacy, Non Pharmacist Branch Manager

Don't worry, we're all in it together.

Sue Per, Locum pharmacist

The pharmacist has been and will be the "Sacrificial Lamb" - as always, until he/she ceases to exist. The profession is undergoing a slow painful death, in its present form

Chris Locum, Locum pharmacist

The new standards will make pharmacists hold back the negative impact of wage cuts/branch cuts out of misplaced altruism.... for a while. If the stress and financial hardship don't get you, the GPHC will after battling through the day in the multiple McPharmacy sweat shop... and letting a serious error get through....You signed on so its your fault. Goodbye.

Sue Per, Locum pharmacist

Pales into insignifiance compared to real time drop in income of Employee Pharmacists and Locums, in the past decade and still continues. Welcome to the clubs, if the drops in payments are real and not a false alarm!!!. More likely the latter

Sue Per, Locum pharmacist

We eagarly await fire sales of pharmacies, with reverse premiums, and pigs to fly

Ilove Pharmacy, Non Pharmacist Branch Manager

Yes, Get you're money ready as goodwill prices fall through the floor....... I don't think so somehow.

Charles Whitfield Bott, Pharmacist Director

There wont be a fire sale. I know of 2 pharmacies in my area for sale that are possibly not viable in the long term and as such no one wants to buy them, they are just stagnating. You would expect a slow death of that type of shop, others that are better possisioned my well see an increase in their value.

If there continues to be a reduction in income, reduced job opertunities and oversupply of locums you will suffer, but that seems to be what you want? Turkeys and Xmas (or is it just stupid locums and funding cuts?)?

Ilove Pharmacy, Non Pharmacist Branch Manager

Only reason it won't sell is because it's overpriced. Everything sell if priced correctly. Community Pharmacy seems to think it operates in a parallel universe. There is a very good reason a shop sells for £1m despite the fake news peddled on here for the last 10 years. Most people will go with what their eyes tell them. A locum working in a shop sees the Rx done monthly and knows what goes through the till. They also see the nice shiney car driven by the owner who pops in once or twice a week to bank the cash. The locum also knows that in monetary terms they've been having paycuts for 10 years or so despite knowing the pharmacy has seen it's gross profits grow year on year in the same period.

Sue Per, Locum pharmacist

Quite simply, it is not worth the piece of paper it is written on.Its not rocket science and/or  neither does one need to be Einstein to figure that one out. Exit from the profession is overdue. Last person to exit, please switch off the lights.

Seal Patel, Community pharmacist

Sue Sharpe is sitting back, looking at her OBE. We all know why the people who be liked her. She has forced pharmacy into the corner and on the brink of closure, but the second before it happens she is due to quit. She reminds of my Darth Sidious, plays the cards right, then the power move, then make someone else the face of the diaster! 

Ilove Pharmacy, Non Pharmacist Branch Manager

At least Darth Sidious did it with a smile on his face.

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