NPA: Pharmacy network unsustainable under current financial framework

NPA: Pharmacy network unsustainable under current financial framework

September 4, 2020

Community pharmacy funding is insufficient to maintain the network at its current scale, according to an in-depth report published by the National Pharmacy Association (NPA).

The Impacts of current funding, policy and economic environment on independent pharmacy in England report suggests that, as things stand, around three-quarters of pharmacies could be in deficit by 2024, with between 28% and 38% already estimated to be in deficit as of 2019.

Analysis of data from independent pharmacy owners, academic literature and stakeholder interviews concludes that it is important for pharmacy to have the capacity to deal with increasing demand – such as that seen every winter and during the COVID-19 outbreak – but that the current funding arrangements risk constraining service provision.

Upon examining the financial position of community pharmacies and undertaking projections of the future financial performance of the network, researchers Ernst & Young LLP found that, whilst the NHS wants an expanded role for pharmacy, financial pressures are undermining this strategy. In particular, it noted that mismatched incentives and pricing methodologies inconsistent with other parts of the health system are a barrier to investment in pharmacy services.

The report recommends that NHSE&I should:

  • Understand any contraction in the community pharmacy network limits the health system’s overall ability to deal with crises and other spikes in demand such as winter pressures;
  • Consider the current funding quantum insufficient to sustain the network;
  • Set prices and funding at a level that supports stated strategic priorities and puts the right incentives in the system; and
  • With DHSC, consider either adopting the principles the government has set out regarding good economic regulation with regards to the community pharmacy network, or establish an independent financial regulator for the system.

Read the report: Impacts of current funding, policy and economic environment on independent pharmacy in England

PSNC Chief Executive Simon Dukes said:

“The financial pressures on community pharmacy contractors are increasingly treacherous: we know that contractors are failing to cover the costs of their capital and replace worn-out assets; others are taking short-term measures such as reducing services to patients and charging for services; and we are seeing increasing mergers and branch closures in the larger chains.

PSNC therefore welcomes any attempts to dig further into the detail of the finances of pharmacies, and EY (Ernst & Young) have done a considerable amount of work on this. We concur with their finding that the position of the NHS as a monopsony purchaser is dangerous for community pharmacy: the sector has been feeling the consequences of only having one customer for the past decade. We also agree that community pharmacies are in an incredibly difficult financial situation now, with many of them already making a loss and the situation set to worsen in the next few years. This is in line with PSNC’s recent letter to HM Government arguing for an uplift to the Community Pharmacy Contractual Framework (CPCF): this is critical to ensure that pharmacies can continue to deliver what the NHS needs them to both through the pandemic and in the post-COVID world.”

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