March 17, 2017
  • Rushport Advisory

Closures and Mergers of Pharmacies

Is it right that “Just 1,000 pharmacies could survive cuts” and are the merger Regulations worth the paper they are written on?

The lead story for the Chemist and Druggist on 17 March 2017 told us that “Just 1,000 pharmacies could survive cuts, APPG hears”. The question is whether headlines like this and the people who provide the quotes are really helping the cause of retail pharmacy or hindering it?

There are over 11,000 community pharmacies in England. If the headline is correct then over 90% of pharmacies are threatened with closure and will be replaced by Amazon style operators and you will be hard pressed to find a pharmacy on any high street.

Another side to this story was the following quote;

Mr Burdon [PSNC] argued that the current regulatory system around pharmacy mergers “has driven this glut of pharmacies, preventing [them] from merging where they should do so”.

“For years we’ve asked to be allowed to merge pharmacies where there’s two nearby. Until the end of 2016, if you closed one of the pharmacies, it would have created a need for a new one,” he said.

I really hope that these quotes were incorrect, because if they are true then this perfectly illustrates the problem with the current system. Those who negotiate on behalf of contractors do not actually understand the Regulations that govern the system. At no stage has there been any regulation that said if one pharmacy closed there was a need for another. In fact, the reality is that when a pharmacy closes the NHS very rarely allows another to open in its place unless it can be established that there is a genuine need for that pharmacy in the area. The NHS Litigation Authority website has lots of examples of applications being refused where they were made to replace a pharmacy that had closed.

Unfortunately, that isn’t the end of the problem with this comment. The quote suggests that, as of the end of 2016, the new regulations around mergers means that this problem has been dealt with. Sadly, that is not true. In fact, the so called Merger Regulations are in my opinion an almost total waste of time and could have been much more effective with just a few small changes.

The Regulations introduced last year actually refer to “consolidation”. The idea is that two pharmacies can consolidate into one site as long as this does not leave a gap in provision. To protect the contractors involved, a supplementary statement needs to be added to the PNA so that an application to open a new pharmacy cannot be approved.

The idea seems fine, but it’s not. The first problem is that a new PNA will have to be produced every few years and the statement may not find its way into the new version of the PNA, so the so called protection might be very short lived. However, given the small likelihood of a new contract being approved this probably doesn’t matter – even though it was the main purpose of introducing the amendment regulation in the first place!

The biggest problem with these Regulations is that they do not specify that a consolidated pharmacy can choose which or the original two pharmacies opening hours to adopt. If the DoH had done this it would have enabled underperforming “standard hours” pharmacies to be sold and consolidated with a 100 hour pharmacy elsewhere so that the 100 hour pharmacy effectively ceased to exist and we had one less pharmacy in the system. Given that the stated aim of government is to reduce pharmacy numbers it beggars belief that this obvious opportunity was not considered. Apparently when this was raised at the PSNC they said they had not considered this option.

There is another really simple step that the government could take to reduce pharmacy numbers (or at least stop them from growing) and that is to get rid of the distance selling pharmacy exemption.

On the face of it this might sound like a turkey voting for Christmas as Rushport represented clients in 50% of all distance selling appeals to the NHSLA last year, but I think that there is a far better option to consider. Why doesn’t the government remove the distance selling exemption and force new entrants to use one of the (supposedly) 10,000 pharmacy contracts that will be closing instead?

It may sound a bit far-fetched, but it really isn’t. A struggling pharmacy could be allowed to suspend and then sell its NHS contract to any party who agreed to only operate it as a distance selling pharmacy. Supply and demand would dictate prices for these contracts and a small amendment to the Regulations could allow the purchaser to open wherever they wanted in England as long as they operated in a true distance selling manner.

We all want the PSNC to do things that help the people they represent. So please Sue Sharpe and the PSNC, sort out the problem with the consolidation regulations. You provided input to the DoH when these were being drafted and must be able to raise the matter now and actually do something that (nearly) all contractors would support.