Pharmacies are facing ‘notable’ financial fragility, Ernst and Young report finds

The General Pharmaceutical Council-commissioned report revealed that 17 of the 33 pharmacies reviewed faced a deficit.

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Pharmacies are facing “a notable fragility” in their finances, a professional advisory report has said, after it found that more than half of the pharmacies it sampled to be facing a deficit.

The report, written by global financial advice firm Ernst and Young, was commissioned by the General Pharmaceutical Council (GPhC) and published on 7 January 2020 alongside proposals to increase pharmacy premises fees by £103 from October 2020.

To assess the impact of the fee increase, Ernst and Young reviewed the financial information of 33 pharmacies, including large chains with more than nine branches, medium-sized pharmacy chains with two to nine branches, single independent pharmacies and online pharmacies.

The report found that 17 of the 33 pharmacies reviewed faced a deficit.

“The sector is demonstrating a notable fragility, with 52% of organisations in deficit across our sample,” the report said.

It added that this was owing to “a challenging environment, which included changes to funding available to pharmacies in England and reductions in drug reimbursement”.

Ernst and Young therefore advised the GPhC that “care should be taken when considering the extent of fee rises” and suggested the regulator offer different fees for different pharmacies “based on their ability to absorb them”.

Overall, the report said the £103 increases “do not appear to have a significant impact on financial performance” as the fee represents less than 1% of the pharmacies’ average surplus or deficit.

However, it noted that single independent pharmacies classified as being “geographically isolated” were more likely to be in deficit “and, as such, future policy should consider the sustainability of services in areas served by a single pharmacy”.

Ernst and Young found seven out of the ten isolated single independent pharmacies to be in deficit, while all three of the online pharmacies reviewed also faced debts.

Leyla Hannbeck, chief executive officer of the Association of Independent Multiple Pharmacies, which represents pharmacies that have two or more branches, told The Pharmaceutical Journal that the association would be reviewing the paper at its board meeting in February 2020.

“But it’s not a secret that many community pharmacies are suffering financially,” she said.

However, she added that groups of pharmacies are “flexible in terms of pulling resources from various different areas and they have diversified”. 

The GPhC consultation on premises fee increases closes on 31 March 2020.

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The Pharmaceutical Journal, Pharmacies are facing 'notable' financial fragility, Ernst and Young report finds;Online:DOI:10.1211/PJ.2020.20207573

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