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'It's time for radical action on wholesalers' generics pricing'

"We are a care-based sector, we should be rewarded for providing care"

Dorset contractor Mike Hewitson says his call for radical action on wholesalers linked to increases in generics prices will make him public enemy number one

It's good that the National Audit Office (NAO) has looked at the issue of NHS spending on generic medicines in primary care, because I think many community pharmacists – myself included – have been alarmed about the current state of the medicines supply chain.

I was not at all surprised to see that the report “identified unexpected increases in wholesalers’ margins” in 2017-18. When I resigned from the National Pharmacy Association (NPA) in April, I made it clear that I thought that wholesalers were exploiting the situation. This report confirms that this is the case. Independent community pharmacy contractors have suffered the double whammy of increased costs and increased workload to obtain medicines through this period

However, what the report doesn’t consider is the impact of stock shortages on pharmacies, including those extra costs to source stock, and the dispensing at a loss which happens when a concession price is not granted. 

I can’t help but think that vertically integrated operators have used this situation to negate the impact of pharmacy funding cuts on their organisations. There is a fundamental tension which readers need to understand: pharmacies have an incentive to drive prices down to beat the average and make a profit, while wholesalers want to keep prices – and therefore profits – as high as possible.

[In England], pharmacy dispensing profits are capped and regulated at £800 million. This is not the case for wholesaler profits. Inside a vertically integrated operation there is a strategic imperative to make as much wholesale profit as possible, because it is not capped. This is why I believe it is time for us to consider radical action.

It may be unthinkable to consider breaking up the vertically integrated companies, but that might be in the taxpayer’s long-term interest. I struggle to see what public benefits vertical integration has delivered. The NAO's report says that concessions have cost the taxpayer around £315m in 2017-18.

It may be time for the Competition and Markets Authority (CMA) to launch a full market study into the wholesale sector. Saying this will make me public enemy number one with the wholesalers, because theirs is big business. The last thing multi-billion pound multinational corporations want is regulatory oversight.

I think we are at the point where it is sensible to consider ditching purchase profit as a mechanic to deliver funding to pharmacies. We are seeing more and more manipulation of this mechanic by clinical commissioning groups and now by wholesalers. It doesn’t lead to fair funding distribution.

We are a care-based sector, we should be rewarded for providing care.

5 Comments

Jonny Johal, Pharmacy Area manager/ Operations Manager

The best solution, to manage wholesalers within the NHS, is to outlaw vertical integration. Companies which owns wholesalers and retail outlets are conflicted in terms of financial interests. 

A.S. Singh, Community pharmacist

Bravo Mike, well said. Word is that the wholesalers want to claw back a further £80m from excess profits from price concessions. Makes absolutely no sense to me

Independent Dave, Community pharmacist

Mr Hewitson, you have my utter and utmost respect! The public and the government need to know the truth! Whether they’ll care enough or not is a different question, but at the moment people just do not know the TRUTH! Let this be the beggining, wholesalers need to know that we won’t stand for it anymore and it’s about what’s just. We should be there to benefit one another, not for them to get rich of our deathbeds. Mr Hewitson, in this moment you are my Hero!! Locums and contractors alike, please come together to spread the word!!!

SydBashford Sold&Retired&DeRegistered, Community pharmacist

You said it as it is and as what’s needed. You’re my No 1 public friend ! 

Emmanuel Chisadza, Community pharmacist

Rebates, loyalty bonuses and much more. We just need a level playing field with transparency and fair margins.

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