Join the DDA or

Branded prescribing mix crucial to financial profitability, EY finds

A three-point difference is enough to move financial surplus to deficit

September 9th 2020

Tagged: DM Zone news Pharmacy owners' news England

By Ailsa Colquhoun

A three percentage point difference in the branded-generic medicine prescribing mix is enough to move a pharmacy from financial surplus to deficit, expert accountants have concluded.

In a report looking at the Impacts of current funding, policy and economic environment on independent pharmacy in England, accountancy firm EY has found that dispensaries with a 44 per cent branded medicine prescribing mix are associated with financial deficit, whereas those in surplus are likely to have branded prescribing volumes of 41 per cent.

Blaming current funding mechanisms, EY concludes: “This flaw … creates winners and losers based on geographic location of a premise.”

The report, which was commissioned by the National Pharmacy Association, forecasts financial peril for the pharmacy network in England. It says that currently 28-38 per cent of the pharmacy network in England is in financial deficit, with 52 per cent of owners planning to sell their businesses. Isolated, single-business pharmacies, and those open 57 hours a week, are felt to be the most at risk. By 2024, the number of pharmacies in financial deficit is expected to rise to 64-85 per cent if current funding arrangements remain unchanged.

Community pharmacy funding in England amounts to £2.6 billion (2.3 per cent of total NHS England spend), which has already been reduced by approximately £200m since 2016. EY concludes: “Without intervention from NHS England, only the financially strongest pharmacies will survive – limiting access to essential health services in unprofitable areas.”

The report also noted contraction in the number of services being offered by community pharmacies, including home delivery services. Approximately, 11 per cent of respondents said they had stopped providing this service for vulnerable patients.

As part of the research, EY looked at hub and spoke dispensing to evaluate potential efficiencies. The introduction of this model to pharmacies and dispensing GPs is currently subject to legislative debate. However, EY researchers have been unable to identify published literature which evidences potential efficiencies of this model, and they highlight additional concern among independent pharmacies about handing over control of procurement to a potential competitor.