Contractors will face continued threats from online competitors and NHS cutbacks in the coming years, business experts have warned in response to predictions that the pharmacy market will grow by 10 per cent by 2018.

Despite estimates by market analyst Key Note that the UK retail pharmacy sector will be worth £15.8 billion in four years' time, pharmacy business experts Umesh Modi and Scott Hayton told C+D that contractors will continue to work in a "competitive environment" that could undermine their business.

Key Note predicted that an ageing population coupled with the government's plans to expand community pharmacy services means the market is likely to increase by 10.1 per cent by 2018, in a report published earlier this month (June 6).

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	The year-on-year rate of market growth for pharmaceutical, medical, cosmetic and toiletry goods would also increase, from 2 per cent this year to 2.8 per cent in 2018, it said. Key Note said the predicted increases in the number of people aged 65 and over would "drive demand for pharmaceutical products and services".

The expectation for people to increasingly manage their own health would also provide "extra opportunity for pharmacists to use their resources", it added.

But Mr Hayton, pharmacy consultant at Hutchings Consultants, said the increase in population size and age would also increase the burden on the "already-strained NHS".

"Despite the consistent growth in [prescription] item numbers, turnovers have declined generally as a result of lower NHS reimbursements and clawbacks," he told C+D.

Umesh Modi, partner at accountancy firm Silver Levene, agreed the NHS is "under huge pressure to reduce expenditure", but said this could ultimately benefit the sector, since hospitals and doctors would pass more work to pharmacists.

However, contractors still risk losing business to online competitors if they did not make use of social media and IT tools, he added.

Growth of retail sales of pharmaceutical, medical, cosmetic and toiletry goods "slowed markedly" in 2011, from a 5.4 per cent increase in 2010 to just 0.1 per cent the following year. It had risen to 1.6 per cent growth by 2013, Key Note said.

Sales of over-the-counter medicines decreased "moderately" – by 1.3 per cent – in 2011, but the sector had "rebounded" by 2013, with growth of 3.6 per cent, the market analyst added.

NO Scott Hayton, pharmacy consultant, Hutchings Consultants

"While the figures in the report look positive, one needs to look closer at the real effect on pharmacy businesses. The majority of people we are in touch with are reporting a much more competitive environment, requiring more time input and workload for the same returns, or less.

"Technological and habitual changes mean that, overall, we are still seeing a decline in over-the-counter trade as people switch to online and supermarket formats, where they can buy these products cheaper.

"Profitability has been maintained in some circumstances, [but] not without a lot of effort on the pharmacist's part. There are still issues with drug supply and a shortage of generics that is making life very difficult for some pharmacists. However, there are opportunities for the entrepreneurial and for those who are prepared to work hard to provide services and introduce new, more efficient technologies."

YES Umesh Modi, partner, Silver Levene

"Community pharmacists have every reason to be optimistic, provided they embrace change and look at the bigger picture of what is happening in the marketplace.

"Pharmacists must interact with the CCGs and local authorities and start providing services to local communities. In my opinion, this will be the area of growth, as the amount earned from dispensing will go down even though volumes are going up.

"In order to mitigate the growing threat from online pharmacy companies, community pharmacists will have to use technology, social media and other IT tools to ensure they continue growing their customer base.

"If they don't, they will start to lose business."

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