A local pharmaceutical committee in London has predicted that under the current Community Pharmacy Contractual Framework most pharmacies in England will struggle to remain profitable in the next five years.
In a sample projection seen by Pharmacy Business, the LPC has calculated that a typical pharmacy which would earn a total income of £222,750 against £280,100 in expenses would lose £57,351 this financial year.
Even with expenses remaining constant, the same pharmacy would go on to incur a loss of £58,891 next year and £85,015 in all the subsequent years leading to the end of the five-year contract. With rising inflation which will result in increase of expenses, the loss would be even worse each year.
NEL LPC calculator
The north-east London local pharmaceutical committee (NEL LPC) has created a tool for pharmacies in England to calculate profit and loss in the coming years.
Pharmacy owners can use the calculator to find out how much they will make or lose in the next five years once they’ve input into the calculator figures from their NHS and OTC sales. The calculator also factors in other associated costs related to personnel – such as employee salary, locum costs and director’s wages – and overheads including rent, utilities, technology and insurance.
Hemant Patel, secretary of NEL LPC, said when he first had a look at the contract, he got a rather “uncomfortable feeling” which made him dig deeper into the details and come up with the tool.
Suitably named ‘profit and loss five-year predictor’, the calculator presents a grim outlook for pharmacy contractors with margins shown to be falling each year.
CPCF is not just about services
The LPC shared the tool with more than 40 pharmacists in north-east London and one pharmacy owner found out that they would run out of money before 2021.
“Everyone I know is scared. We are caught in a spiral in which we are so scared of losing our jobs, or our savings, or our pharmacies, that fear overtakes our brains. That makes it impossible to concentrate on anything but saving our skin,” Patel said.
He argues that for a community pharmacist the new contract amounts to a loss of dispensing related income by £15,000 from establishment payment and £ 11,200 from providing MURs each year. Both these services are being phased out.
“As the expenses will remain the same this will come out from the bottom line of the profit and loss account. It is clear that pharmacies with less than £26,200 profit will immediately be in financial difficulties,” Patel explained: “So, whilst the global sum remains fixed in monetary value, the individual pharmacy owners will suffer financially and their staff will suffer physically, mentally and emotionally.”
Patel said in order to recoup the lost money, pharmacies “will have to provide a whole host of new services at as yet undisclosed remuneration rate, undisclosed margin, undisclosed training requirements and undisclosed estimate of time.”
Imran Jan, vice-chair of the LPC, went a step further and said that the “new CPCF is not just about services but more about closures.”
“PSNC or Department of Health or the NHS, no one had given us a way to individualise the information. So, we did the best we could and incorporated any advice given to us. It is a very useful tool to get an idea about survival.”
Pharmacy closures and consolidations
Pharmacy Business asked PSNC if it agreed with the projection. Mike Dent, PSNC Director of Pharmacy Funding, responded by saying that “the next five years are going to involve significant changes for all community pharmacies”.
Changes will mean making dispensing more efficient and rolling out new services that NHS wants from pharmacies.
He added: “For all businesses this will involve difficult conversations and decisions – including the possibility of branch closures for larger businesses or consolidations for some smaller businesses – but there are opportunities for those who are able to adapt, as the new services will give the sector the expanded clinical role it has been seeking for many years and will help to put pharmacies at the heart of primary care.”
PSNC intends to publish indicative income tables for contractors once all the funding details have been finalised.
Dent explained that these tables are being designed to help contractors to predict what their income is likely to be over the next financial year, but this is all highly dependent on dispensing and product mixes, and factors such as local services will also play a part.
What our readers make of the tool?
Pharmacy Business took the calculator to a couple of busy pharmacists who were alarmed at the result but were thankful that they now knew where they stood.
A superintendent pharmacist in West London found the tool “quite comprehensive and very useful for contractors”.
He said: “It’s a useful tool for contractors to do a cashflow forecast over the next few years, which will be dependent on factors such as new services and income related to these. We don’t have the details of some of these, however, as they are in future years.”
Another senior pharmacist based in south-west England said: “The tool helps to bring into sharp focus the challenges faced by contractors, especially the independents. With limited scope to improve efficiency, the funding cuts have already seen many of us addressing that previously, we are having to rethink urgently how we continue to provide viable, person-centred care in the face of increases in operating costs not matched by increased funding.
“Now more than ever before do we have to look at how we run our practices to harness all the NHS is offering and also increase private income streams. Collaboration and support across the sector will be required.”
The pharmacist was particularly concerned about “the increasing mental and physical toll on colleagues” as they juggle all of these under enormous personal strain.
Hemant Patel concluded: “I am all for new clinical and public health services being delivered from community pharmacy but let us create an environment for facilitated change instead of undermining the economic base which diverts the attention to fighting for survival. If the change includes mergers and closures let us take charge and make it happen instead of bleeding pharmacies to death by stealth and financial attrition.”