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No money left in dispensing

If the biggest dispenser in the UK can't earn enough margin, who can?

By Arthur Walsh

Many of us with an interest in a healthy, vibrant, bricks-and-mortar pharmacy network have taken the odd swipe at Pharmacy2U over the years, often with good reason. But there’s no denying that the UK’s biggest distance dispenser had a good pandemic, diversifying its scripts-based business and administering huge numbers of much-needed Covid vaccinations. It even had its first ever profitable years, to the surprise of many.

But the gravy train appears to have stalled after barely leaving the station. The company’s latest accounts, which cover the 2022-23 tax year, show it has returned to making a loss – as it did in every year up until 2020. Its latest £5.6 million losses come despite slashing distribution costs by £8m and wage costs by half a million – and despite making large strides in terms of market share and revenue, as it happens to do every year. The company says it is “trading strongly” and “positioned for further growth”, but it can’t seem to square the circle that underpins virtually its entire business model.

Like I say, Pharmacy2U has always had its detractors. But I imagine few community pharmacists will be crowing over its latest results. Instead, the figures provide another warning – if it were needed – that dispensing NHS prescriptions is not a viable path to profit. If the biggest player in the market can’t make it work, who can?

We spent most of 2023 poring over LloydsPharmacy’s dismal last days, so I’ll spare you a rehash. But it had huge ramifications, and all across the sector, the same pain is being felt as contractors grapple with a baffling reimbursement system and wholesale bills far in excess of what the NHS is paying them in return for their work.

The remaining chains like Boots are putting an undeniably valiant push behind Pharmacy First, and the branch nearest to P3pharmacy’s offices is festooned with brightly coloured signage announcing the service. However, it does seem that in recent years, there has been more investment pumped into flagship stores with inviting beauty halls than there has into your run-of-the-mill small town Boots branches, which have been closed or sold in their hundreds. Choices like these speak volumes about where we are headed. 

Pharmacy First appears to be the only conceivable way out of this, and the striking enthusiasm with which businesses have engaged with the service shows that they realise this. In the first three days of the service, we saw an impressive 3,000 consultations, according to health minister Nick Markham.   

However, by itself, Pharmacy First is unlikely to stop more pharmacies going to the wall. Contractors have told me that while the additional consultation income is welcome, it is unlikely to pay for additional staff members any time soon.

Community Pharmacy England chief executive Janet Morrison recently told MPs that the sector’s contractual arrangements need to be overhauled completely, with a particular emphasis on flexibility in the global sum to match rising activity and inflationary pressures. Ministers need to take these arguments seriously; it’s the least they can do.

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