LloydsPharmacy parent company says funding cuts and low prescriptions hit profits

McKesson says NHS underfunding has led to a fall in profits, but hopes its financial situation will improve later in the year.

LloydsPharmacy shop front

LloydsPharmacy’s parent company has cited NHS funding cuts and low prescription volumes in the UK as the main reasons for a 53% fall in profits across its European business.

McKesson’s adjusted operating profit for its European arm in the three months to June 2019 was US$35m (£28.9m), down 53% on the same period in 2018.

In its 2020 first quarter (United States) results, published on 31 July 2019, McKesson attributed the losses to “the weak retail pharmacy environment in the UK”.

Expanding on these findings in a conference call to investors, Brian Taylor, president and chief executive of McKesson, said its UK retail business performance “was impacted primarily by temporary wide NHS underfunding — which we believe should improve in the second half — and to a lesser extent volume weakness”.

Tyler said McKesson was “pleased” by the announcement in July 2019 that Category M prices would be increased by £15m from August 2019. He added that it expected “further upward revisions in tariffs later in the year, which should make up partially for any underfunding”.

He added that the new five-year pharmacy contractual framework — published on 22 July 2019 jointly by the Department of Health and Social Care, NHS England and the Pharmaceutical Services Negotiating Committee — “brings greater clarity and long-term certainty by maintaining funding for community pharmacies for the next five years” and was “an incrementally positive development for our European business”.

McKesson is making “solid progress to further rationalising our store footprint, and streamlining our back office functions”.

“We continue to evaluate our cost structure as we do in all our businesses,” said Tyler.

In October 2017, LloydsPharmacy announced plans to close nearly 200 pharmacies because clawbacks and changes to government policy on reimbursement had made them “commercially unviable”.

In May 2019, announcing its 2018/2019 results, McKesson warned of potential “further closures” to its pharmacies as part of the continued “restructuring” in the company’s European business.

Last updated
The Pharmaceutical Journal, LloydsPharmacy parent company says funding cuts and low prescriptions hit profits;Online:DOI:10.1211/PJ.2019.20206915

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