Some pharmacy NHS rents increase by more than 200%

A change in how rent is calculated for NHS pharmacy premises, from a charge per square metre to a charge based on the number of patients registered at the associated GP practice, has led to soaring rent prices.
loxford polyclinic

Rent increases on premises managed by the NHS’s property management arm in England have “affected many pharmacies of all sizes”, with some rises above 200%, a pharmacy representative body has said.

In a statement to The Pharmaceutical Journal, Leyla Hannbeck, chief executive of the Association of Independent Multiple Pharmacies (AIMp) said she was collecting signatures from affected contractors for a letter to NHS Property Services (NHSPS) highlighting the issue.

In addition, the National Pharmacy Association (NPA) said in a statement that it wrote to NHSPS in May 2022 to voice its concerns over the rising cost of rent for its members, with some reporting demands from NHSPS for a three-fold increase in rent.

One contractor, Gurdev Channa, director of Britannia Pharmacy — which has 31 branches in East London and Essex — said NHSPS had advised him that the annual rent for one of his premises, co-located with a GP practice in Loxford Polyclinic, Ilford, Essex, would increase by 220% from £25,038 to £80,126, following a lease renewal.

Channa said the increase followed a change in how NHSPS calculated the rent for the pharmacy premises from a charge per square metre to a charge based on the number of patients registered at the associated GP practice.

This falls in line with guidance issued by the Royal Institute of Chartered Surveyors in October 2010, which recommends determining rent costs based on “the likely number of ‘scripts’ (prescriptions) to be issued by the associated GP practice(s)”.

“In part, this is determined by the patient list size of the GPs and by the demographics of the practice list,” the guidance says.

In its letter to NHSPS, seen by The Pharmaceutical Journal, the AIMp said that health centre landlords, including NHSPS, are calculating “rental values using patient numbers of the co-located GP practice(s) multiplied by a value per patient”.

“Evidence shows the cost per patient ranges from around £1.74 up to as much as £5.00 in some cases. As a result, quoted rents are well above the going rate for a similar sized unit in a community setting sometimes opposite or very close to the health centre.

“In the past, pharmacy has seen co-location with GPs as a prime opportunity and therefore competition and rents for these locations has been high,” the letter says, adding that “several factors which cannot be ignored have forced a rethink of this policy”.

These include an increase in online appointments, resulting in a decrease in patients visiting health centres, as well as the increased use of online pharmacies, the letter said.

Channa added that NHSPS is also “failing to take into account the financial impact of the EPS [electronic prescription service] on co-located pharmacies”, with his pharmacy currently only dispensing 32% of the prescriptions generated by the health centre.

He said: “It is unfair that co-located pharmacy owners should be subjected to such huge rental uplifts which will make their pharmacies unviable.”

He added that if the rent increase is allowed to go ahead, he would have to relocate the pharmacy to “a place nearby, outside of the health centre”.

Raj Patel, board member of the NPA, described the rent charge increases as “alarming”.

“Health centre pharmacies are contending with the general financial pressure in the sector but, in addition, are dealing with lower footfall as practices change the way they engage with patients. Many of our members are facing significant financial pressures as a result,” he said.

“We have already been in dialogue with the leadership of NHSPS on this matter. While they have confirmed to us that they will work with tenants facing financial challenges in specific circumstances, we are asking them to go much further.

“We are asking all health centre landlords to recognise that rents are increasingly unaffordable. It is in the long-term interest of both the landlords and tenants that a realistic solution is found as a matter of urgency.”

A spokesperson for NHSPS said: “All rental valuations undertaken by NHSPS are in line with current guidance. When valuing a co-located pharmacy unit, we use standard valuation methodology where rent is determined on a rate per patient basis.

“We do make adjustments for levels of prescribing and capture rates and the rollout of the electronic prescription service is taken into consideration to ensure that rent valuations are fair and transparent.”

Last updated
The Pharmaceutical Journal, PJ, June 2022, Vol 308, No 7962;308(7962)::DOI:10.1211/PJ.2022.1.146298

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