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'Legal changes for hub-and-spoke and mergers will impact pharmacies'

"Community pharmacy must adapt to meet the challenges the changes will bring"

The new contract intends to expedite pharmacy closures by encouraging the merging of branches, and to save money through hub-and-spoke dispensing, says legal expert David Reissner

In its five-year pharmacy funding agreement, the Department of Health and Social Care (DH) said it would make two changes to the law. The first will “allow all pharmacies to benefit from more efficient hub-and-spoke dispensing”. The second is intended to accelerate a reduction in pharmacy numbers by encouraging pharmacies to close and merge branches.

The DH believes that automated hub-and-spoke dispensing will enable pharmacies to recoup through savings some of the money that has been taken away.

The Medicines Act 1968 currently allows anyone owning more than one pharmacy to dispense from a pharmacy ‘hub’ and supply from a branch, the ‘spoke’. There doesn’t seem to be any logic for restricting hub-and-spoke dispensing to multiples, so levelling the playing field for independents is a no-brainer. The real question is whether the economics stack up.

The DH doesn’t seem to have any idea about the financial implications of hub-and-spoke dispensing. No sums were included in the impact assessment used to justify the funding cuts in 2016. Before any contractors can take up hub-and-spoke dispensing, they will need to know what savings they can make and how much it will cost. Pharmacies will still have the cost of a pharmacist, and they will have to take into account redundancy payments for any dispensing staff laid off.

There appears to be grudging acceptance in community pharmacy circles that there isn’t enough money to support the approximately 11,600 pharmacies in England. Planned closures would be preferable to the risk that attrition results in closures where people are left without access to a pharmacy.

In 2016, the DH introduced a regulation designed to allow pharmacies to merge nearby branches and close one of them. However, many owners have been reluctant to use this regulation because of fears that someone else will apply for a new pharmacy contract, arguing that the closure would cause a gap in services.

The DH now says it will look to strengthen the “protections” for pharmacies that want to consolidate. This might involve preventing new applications within a specified distance from a pharmacy that has closed after a merger. It might also enable the closure of some 100-hour pharmacies, which are usually found in what the DH calls a “cluster”.

These issues have been controversial, but the tide can no longer be held back. Community pharmacy is going to have to adapt to meet the challenges the changes will bring.

David Reissner is chair of the Pharmacy Law and Ethics Association

4 Comments

Richard MacLeavy, Non Pharmacist Branch Manager

There have been a few examples of pharmacies merging only for a new contract to be granted in the place that the closure took place. I remember a high profile one last year in the same building lloyds had closed through the merger process so there is an argument for further protections. I think the biggest reason for not merging though is the cost of doing so. If you have 2 pharmacies both dispensing say 7000 items, both have a value of £650,000 for arguments sake. If you merge and close one pharmacy the remaining pharmacy would be dispensing 14,000 items and have a value of say circa £900,000. In effect you have lost £400,000 from the process of merging as 2 pharmaies are still worth more than 1 even though the business size is the same overall and despite that having 1 pharmacy rather than 2 to dispense the same number of items is more profitable. You can see this happening in practice. If you take Rowlands for example they have sold 50 or so pharmacies to so say focus on a smaller number of branches yet there are many locations in which they have 2 or more branches in very close proximity to each other in which a merger would appear to make sense (college street Cheltenham and whitney are 2 examples I can think of). I think the reason Rowlands haven't used the merger process is due to the impact it would have on their balance sheet. 

Jenny Etches, Community pharmacist

Who is the RP in a hub and spoke system? The one at the hub or the one at the end of the spoke who receives the meds already packaged up?

Concerned pharmacist, Community pharmacist

We have recently introduced hub and spoke dispensing in our multiple business.

Takes more time, is more logistically complicated and reduces flexibility.
Altogether less efficient and less safe. We need to challenge the assumptions of the DH.

Reeyah H, Community pharmacist

 

What a load of....! Surely the fact that they want closures, is enough to suggest that they won’t allow any more pharmacies?! Stop calling it protection. Most contractors don’t want to merge as they don’t necessarily have branches near each other! 

 

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