Cambrian Alliance has over 1300 independent members. How have they been affected now that the cuts have been confirmed?
There is no doubt that overall levels of gross profit have been reducing for some time now for many across independent pharmacy. The extent to which this is happening will very much depend on the size and scale of the pharmacy, longevity and age as well as business mix. There are a lot of variables, in particular how a pharmacy chooses to undertake its buying. Our job, is to support members in maximising purchase profits in order to insulate them from the cuts as much as possible. It is trust that we have had members close this year, which has never happened before. We understand just how much of a worrying time this is for contractors.
How many have closed?
We have seen 7 closures so far this year. These have been a mixture of distance selling operations as well as bricks and mortar on the high street. It is understandable that Department for Health wants and needs to create efficiency and create more value across both the secondary and primary sectors in England, but this punitive and frankly short-sighted approach is damaging for all involved, particularly for the patients who contractors are working so hard to support.
Are anymore in danger of closing?
Not that we are aware of. But there is no doubt that our members are finding it tough at the moment. I spend a lot of time out with our membership and some of the feedback has been very concerning. In particular we have heard about the use of personal wealth along with increasingly challenging borrowing capacity restrictions.
In terms of services for the ones that are still in business, are they having to scour-back a lot on services and reduce what they are able to offer to patients?
They have got to do both. Deliver the paid-for services to protect and improve their margins and keep their margins but being frank, where is the incentive for a contractor to deliver a service they are not being paid for. I sense all of our members are generally supportive of services-based contract, but until such time as this is realised, our members will need to remain focused on their key cost and revenue streams, this ultimately means focusing on how you buy medicine better.
Is it a worry though that your members, whose income is predominantly derived from dispensing, bearing in mind where the NHS is going in terms of increasing services and relying less on dispensing?
I think it’s a worry until such time when a new contract is in place. But I think that until that new contract is in place you have got to do all you can do make sure you are buying as well as you can.
In terms of what you do as an organisation, you can only do so much. You can offer the resources, the support but for those pharmacists who are really struggling with the cuts and the way the NHS is at the moment, how do you support them and guide these pharmacists through the tough times?
This is a key bit for us as a buying group, and it’s an important part of our approach going into next year, as a buying group have always been about saving our members time and money. That has very much been core to our business. We are owned by pharmacists and as a consequence everything we do is very much member-led. If it doesn’t save our members money or make them profits then typically speaking it’s not something we will look to do.
We know pharmacists are time poor, if we can save them time then they can provide more services and focus on their business.
Increasingly we believe contractors want and need more control and transparency with regards to their buying. We are now able to report on members profitability by day, by week, by product category, by supplier as well as use the reporting to benchmark against others to see where improvements can be made.
What are your thoughts on the Falsified Medicines Directive (FMD) regulation that will come into effect early next year and how it will affect pharmacists?
We are encouraging our members to prepare for FMD. We have arrangements in place with a preferred supplier on behalf of our membership. Our particular arrangement has a provision in the contracts for members to come out of contracts without a penalty should FMD not come into force in February next year.
How are escalating prices affecting Cambrian pharmacies? Are they struggling with the pricing issues?
There are a number of elements to this, supply, price, stability and the mechanism by the Department for Health endeavours to manage all 3 within the changing market. We have always been very clear that the current mechanism for managing concessions is not fit for purpose. Last year brought that fact in to stark contrast. We know contractors are having to dispense at a loss and that is simply not sustainable. Contractor need a degree of certainty and confidence within the market they operate, the current system does not provide that.
Interestingly, when you adjust the figures to reflect the pricing and supply issues that continued from Q4 into January this year, the average price point of generics has remained relatively flat. Of course, with reductions in funding and clawback it is easy to see why GP and cashflow is under so much pressure for contractors. we have actually seen the We are increasingly seeing our members having to dispense at a loss.
Our buying engine e-CASS, holds a lot of valuable data and we are looking ways in which analytics from this data can better support and inform members buying decisions. In addition, we have published a daily concession price grid that our members can review.
You wouldn’t expect any other healthcare to put up with this?
There is a willingness from all community pharmacies to work with government to improve health care. They’re trusted by their patients and most members of the community will have good access to community pharmacy. You’ve seen a number of initiatives that have worked very well, addressing the public health agenda, particularly preventative strategies as with weight management and smoking cessation.
The PSNC I think last September, described shortages as catastrophic.
There was a shortage last year. It’s as simple as that. What I would say is that there are lots of reasons why supply issues arise and that there are many reasons why wholesalers’ margins go up and down.
Much has been made of whether or not wholesalers ‘profiteered’ from the events in Q4 last year, I’ve read the NAO report and it is far from conclusive.
Do Cambrian members support unannounced inspection?
I think as with all regulators and all inspections, it depends on what you are seeking to do. My personal view is that there is probably more benefit in giving notice in order that the pharmacist and teams are available to give maximum effort and support to the process. I think the case has to be made with regards to how the change in approach will improve patient safety and contactor engagement and standards.
What are your thoughts on the publication of inspection reports online?
Again, the case has to be made for what improvement this brings about. The challenge to publishing any regulatory body report and findings is how easily accessible and easy to interpret it is for a number of different audiences.
What are Cambrian’s plans for the future?
Technology is key for us. We are focusing on giving our members as much control and transparency over their purchasing as we can. We remain as always, a unique and independent buying group for pharmacy, led by our members requirements.
This interview appears in print on Page 12-13 of the Pharmacy Business December/January 2019 edition.