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'No one can properly run a pharmacy business like this'

"Pharmacy’s business model is so wide of the mark as to be laughable"

John D’Arcy argues that community pharmacy's funding model is too opaque to operate effectively

Pharmacies in the UK are paid on the basis of a global sum. This results in the same amount of money being available irrespective of numbers of community pharmacies. In England, the number has grown in the last 10 years by around 2,000.

During the same period, the global sum hasn’t kept pace. Far from it: over 2016-17 the government imposed a unilateral cut of £170 million.

The expression “more for less” has never been more relevant. It is perhaps unsurprising that pharmacy’s global sum may be further raided. But the real problem with the global sum is that it places pharmacy at the heart of a ‘financial model’ so opaque it is almost incomprehensible.

Any management consultant will tell you that in order to be able to run a business properly, you need to know where you stand financially. Most businesses follow a fairly straightforward process whereby you sell a product or service, submit an invoice and then, hopefully, get paid on time.

It is interesting to analyse the funding model for pharmacy alongside this “normal” business model. Pharmacy’s version of this process is so wide of the mark as to be laughable.

Getting hold of the products needed to fill the growing volume of prescriptions at the right price is fraught with difficulty. To calculate the prices of medicines in-store, pharmacists use the manufacturer list prices and the drug tariff – at first sight, a relatively straightforward equation. The reality is anything but. In addition, manufacturer-imposed quotas are hampering the sourcing of branded products.

Meanwhile, getting hold of generics is becoming increasingly difficult. Even if you can source products, getting them at the right price is a lottery with lengthening odds. The number of price hikes seems to be on the increase. It is true that there is a system for dealing with this – the concessionary pricing mechanism – but this is too slow and unreliable to deliver the certainty that a pharmacy business needs.

The invoicing part of the business equation is perhaps the most bizarre of all. Pharmacists do not actually send anyone an invoice. Rather, the prescription item acts as a ‘de facto’ invoice, with no copy being retained in the pharmacy. The thousands of monthly invoices are packaged in a brown box and sent to a remote pricing bureau for payment. And when it comes to pricing accuracy, we put our trust in the hands of the government.

It is hard to imagine a system of payment so unwieldy, complicated and opaque. All in all, there is simply no way of knowing with sufficient accuracy where any pharmacy business sits financially: it is nigh on impossible to make accurate business-planning decisions.

The whole system flows from the global sum arrangement and so relies on some law of averages. By definition, around 50% of contractors should be performing below the average. The key question for contractors is “which half do I sit in?”

The typical response to concerns raised by contractors from negotiators and government about the vagaries of the current system is that it’s “swings and roundabouts”. This seems to me to be no different to saying: “Sit tight and hope for the best”. No-one can properly run a business like this.

The whole system is not fit for purpose and in need of complete overhaul.

John D'Arcy is managing director of pharmacy support services provider Numark

4 Comments

Tien On, Community pharmacist

Must be managing a different pharmacy model /operation in a different universe to still believe after a thousand NHS cuts that there exist excess profits .

Dave Downham, Manager

If you could just vote down your posts going forward yourself, that would save us valuable time for us to count our excess profits, Ms Morein.

S Morein, Pharmacy Area manager/ Operations Manager

Thank you for the post Mr Downham and I am pleased that you agree with me.

S Morein, Pharmacy Area manager/ Operations Manager

John is totally correct in the his reasoning that the whole system needs an overhaul. Far too much excess profit still remains in contractors hands instead of being spent wisely on services the tax paying patient deserves. The contract is antiquated as is the whole so called network which will remain moribund until the ridiculous control of entry rules are abandoned.

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