Pitching for help with cashflow

Delivering that public service can only happen when there are pharmacists, and an accessible community pharmacy, available to do so. It’s the same argument as that deployed in the NHS more generally; just because there is an entrepreneurial element to a community pharmacy does not mean that clinically-trained staff should be taken for granted. “Community pharmacy is a private investment by a pharmacy owner to provide a public service,” says Mr Patel.

Financial help from the Government could help the sector to continue to deliver, and to deliver well too. “[Financial pressures] are having an impact on the health of pharmacists,” Mr Patel explains. “We’ve got pharmacists focusing upon financial challenges, rather than doing their job as a clinician. It’s a distraction that is affecting the quality of work and quality of life.”

Upfront investment

Contractors invest upfront to be ready to dispense as and when a patient presents a prescription, but they won’t always know precisely what the reimbursement rate under the Drug Tariff will be. It will depend upon what the prescription is for and what the market price was when it was purchased, which can mean dispensing at a loss. Hemant Patel describes this as “driving blind.” 

Cashflow can be affected too when there are supply shortages. A Statista survey of pharmacies – including community pharmacies in the UK – conducted from November 2021 to January 2022 across 27 countries found that more than 96 per cent experienced financial loss due to the time invested in mitigating shortages. 

That’s not all; losses came from operational changes such as minimum stock keeping and import fees as well as having to pay higher prices. With anecdotal evidence mounting that the system is breaking down further in the UK, it’s clear that supply shortages hurt the bottom line. It’s true that other businesses have to invest upfront and can find it hard to source materials, but they typically won’t have the Government determining how much they will be paid against materials they supply.

It’s the nature of the product and services being delivered here that are important; these are medicines and clinical services, not just widgets. And unlike many other small businesses, community pharmacy owners can’t staff their pharmacies with just anyone. Pharmacists are needed in store; other staff have a high degree of skill and, increasingly, formal qualifications. 

Competition for pharmacists has increased, in part due to increased pharmacist roles in primary care. Filling temporary gaps is more expensive too; some locum pharmacist earnings doubled between 2020 and 2021. Businesses that cannot fill shifts with locums may even have to close. “Some pharmacies have to shut for the odd half day here and there. Yet when the doors aren’t open, the overheads are still incurred,” Mr Patel says. 

Taking a longer view 

There is an argument – not strictly applicable only to community pharmacy – that the Government’s role is not to think short term. 

Day-to-day cannot be good enough, given the public service community pharmacies deliver and even more so when the Government wants the long-term future to be an accessible, clinically-driven model for community pharmacy. A little short-term help could mean that there will be more pharmacies surviving to make that shift and meet patients’ needs in the community.

To help with cashflow issues, there is a private market for accessing loans. Lenders are still willing to lend to community pharmacies. “Lenders still love pharmacies. They are always going to have NHS income,” explains Mr McPherson. So much so, he says, that there are more lenders interested in the sector now than there have been in the past.

From the perspective of His Majesty’s Treasury (HMT), any case for the Government to step in to help with money management needs more than the argument that times are tough. HMT will also expect that any contractor will have done all they can by themselves to manage cashflow issues. That means not only good business acumen and commercial financing, but also making the most of the available revenue-generating opportunities. 

“The big thing that contractors can do is to offer additional services,” Mr McPherson points out. Pharmacists have a unique selling point too: “People don’t need to make an appointment to see them.”  

Some contractors are taking up financing to enable them to expand services. Shaun Watts, finance director at Christie & Co, explains: “We offer unsecured business loans – we are seeing many operators utilising these funds to expand or redevelop their site to include consultation rooms, with a real drive for the offer of additional services.” Christie & Co has seen an increase in lending to the pharmacy market. “Lending is up from £3 million in 2021 to more than £12m in 2022,” says Mr Watts.

There’s a virtuous circle too; Mr McPherson says those who are making the most of their ability to offer new services are those who are most attractive to lenders. “Lenders will look at the financials and key metrics like the balance of provision of prescriptions and additional services as well as OTCs,” he says. 

Think like HMT

Warm words are cheap, so loosening the Government’s purse strings needs a compelling case. The sector needs to think like HMT to pre-empt its reasons not to provide more help. Asking for government-backed loans is an especially big ask when the private market is still offering financing. 

It’s a more complicated case to make, but arguably a more promising route might be to argue for an approach that targets Government help where it is needed most: such as in locations where no pharmacy can otherwise be sustained. 

That’s harder for the sector, since it means winners and losers, but it might be one that is the best for patients and one they can also get behind. Let’s not forget, they’re also voters.