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Pharmacies should review operations following Pharmacy2U sale rumours

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Scott Hayton: Ensure you listen to customers’ needs and review your operations accordingly

Bricks-and-mortar pharmacies should ensure they respond to patients’ needs, as rumours suggest Pharmacy2U is looking at “strategic options” for the business, a broker has said.

Sky News reported last month (March 9) that Pharmacy2U has hired financial advisors at global firm Lazard to explore “strategic options for the business”, which include a possible sale to a new private equity backer.

A Pharmacy2U spokesperson told C+D today (April 12) the company has “nothing to add to the story” and Lazard also declined to comment.

“Further alarm calls”

Hutchings Consultants director Scott Hayton told C+D that this Sky News report, along with the news of Amazon Pharmacy obtaining a UK trademark, are “further alarm calls for traditional bricks-and-mortar pharmacies to absolutely ensure that they are engaging with their customers, listening to their needs and wants and taking a proactive approach to fulfilling those”.

Despite Pharmacy2U being the largest provider of NHS repeat prescriptions in England, the online pharmacy is “yet to demonstrate profitability”, which means it will need to adapt its business model to “make it viable”, Mr Hayton added.

“Acquisition by a company such as Amazon, with significant resources and existing infrastructure on the delivery side to boot, could create synergies that enable a successful operation to be realised,” Mr Hayton suggested.

Mr Hayton said that when Amazon “tried to disrupt the UK groceries market”, existing grocery chains were quick to adapt by offering their customers services they were looking for, so they would not feel the need to buy groceries from Amazon.

“Bricks-and-mortar pharmacy operators should review their operations in the same way,” Mr Hayton added.

C+D asked Amazon if it was planning to acquire Pharmacy2U. A spokesperson said the company “will decline to comment”.

In respect to the trademark application, the company added that Amazon has applied for pharmacy trademarks in different countries. The spokesperson pointed at the differences in the healthcare systems around the world, specifying that the service it currently operates in the US has been tailored to “serve the needs of customers in that specific market”.

Previous P2U investors

In 2018, healthcare private equity firm G Square became the “majority shareholder” of Pharmacy2U following a £40 million investment to support the growth of the online pharmacy’s NHS repeat prescription service.

Prior to that investment, Pharmacy2U attracted a £10m injection from independent investment company the Business Growth Fund (BGF), which stepped in to support the company’s merger with Chemist Direct in 2016. In May 2017, BGF put forward a further £7m – in combination with “other shareholders” – to also support Pharmacy2U’s NHS repeat prescription service.

Pharmacy2U reported a £16m loss in 2018-19, despite adding 330,000 new NHS patients, according to documents filed with Companies House in January 2020.

According to accounts it submitted to Companies House in December 2020, the group made a loss of £3.8m for the year ended March 31, 2020. However, Pharmacy2U said it had witnessed an acceleration in patients nominated to its service in the six-month period to September 2020, “with 553,000 patients nominated at the end of September 2020”.

13 Comments
Question: 
What is your pharmacy's strategy to compete with online competitors?

DavidJ J, Pharmacy owner/ Proprietor

Oh so now Hutchins are jumping on this topic and to advise us on how to run our pharmacies. They have that big NPA logo on their ads and similar to the NPA are out of touch with the needs of the independents. 

C A, Community pharmacist

Strategic options -

1a) Grow business to a relevant size 

1b) Do not worry about profit during this stage

2) Make business appealing to investors

3) Sell business

4) Retire on the profits

V K P, Community pharmacist

The bricks & mortar have to clear up the mess created by the online boys when they fail to serve the patients. Those patients that decide to go to P2U can chase them up for their meds and advice.

David Moore, Locum pharmacist

"Mr Hayton said that when Amazon “tried to disrupt the UK groceries market”, existing grocery chains were quick to adapt by offering their customers services they were looking for, so they would not feel the need to buy groceries from Amazon."

Could we have an example? or two?

Mr Smith, Pharmaceutical Adviser

Dissapointing article. You would have thought Hutchings would be championing the independent and why they have nothing to fear from online. This just further fans the flames for those already concerend by the potential of online Pharmacy. The reality however is online will never rival what community pharmacy offer as the sector continues to evolve to a full service offering.

mark straughton, Pharmaceutical Adviser

The polypatients of the future are you're now 40/50yo with an Amazon prime account and  smart phone with face recognition. Not your average 80yo Dot who's happy to spend hours on the phone and popping the surgery/pharmacy every other day. 

There will always be the need for a high street type service but this will have a greatly reduced marketshare, However, the point is that the government won't continue to maintain the Global Sum at current levels to reimburse this. Importantly the voting public won't want this when the perception is that this lines the pockets of Amazon.

Benie Locum, Locum pharmacist

Sell !! Mortimer, sell !!

Bob Dunkley, Locum pharmacist

No no no, you've all got it wrong, the service we should provide the patient with , that the on line boys could never do, is to actually take the tablets for the patient ourselves. God knows we do everything else for them!!

Archibald Coker, Pharmacy owner/ Proprietor

Spot on!

N O, Pharmaceutical Adviser

"further alarm calls for traditional bricks-and-mortar pharmacies to absolutely ensure that they are engaging with their customers, listening to their needs and wants and taking a proactive approach to fulfilling those”.

Free next day delivery, free advice any time of the day just walk in, free mds trays, the list is long of what a community pharmacy already does. Many of these you don't get from P2U. Can the broker do an analysis and suggest at least one thing that we should adapt to challenge P2U. This article is just scare monger and an attempt to boost loss making business get sold to some investor, just like how P2U has increased its adverts on telly taking full advantage of the Pandemic.

cardiff pharmacist, Superintendent Pharmacist

NOT one of which we are reimbursed for..so the paid for services end up with amazon..and we get paid...nothing

Greatly Pedantic and Highly Clueless, Senior Management

Private equity is the gift that just keeps on giving. I'm trying to think of an example where private equity has gone into a business and invested for the long term and improved customer service and employee working conditions. 

 

A.S. Singh, Community pharmacist

further alarm calls for traditional bricks-and-mortar pharmacies to absolutely ensure that they are engaging with their customers, listening to their needs and wants and taking a proactive approach to fulfilling those”.

 

They make it sound as if pharmacy has an infinite budget. May I remind you that pharmacy is a government service contract, there's not that much money you can play around with.

 

Many years ago my pre-reg tutor told me 'no one understands pharmacy, except for if you work in pharmacy'. These potential purchasers who are P.E. better locum on a Saturday.

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