Bad growth is just bad business for pharmacy

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One of our local multiples has just been taken over by a new independent owner – and it is causing chaos.

Over the last few years, the branch has seen a revolving door of contractors: open, closed, locums, a regular pharmacist, no pharmacist. Patients understandably went elsewhere and things settled down. Then the contract changed hands for the fifth time in three years. At last, I thought, some stability. Pharmacies in the area had always coexisted peacefully. Until now.

Nomination wars

The new contractor is young and this is his first pharmacy. Since he took it on, the branch has become ultra-aggressive. Come within 500m and a patient’s nomination will be changed to them – after a blood pressure check, flu jab, and enrolment on their weight loss and smoking cessation services, even if they don’t smoke and aren’t overweight!

I have no problem with fair competition. We are used to it and have done well from it, building a strong local reputation for services. But when competition goes too far, patients are pulled from pillar to post. Undercutting rivals to below the cost of providing a service is no way to survive.

Not all about growth

It should go without saying that pursuing growth should not be the sole purpose of pharmacy ownership, old or new. It should be good growth – but what is the difference?

Piling up new MDS patients may feel good for five minutes, but the work is so disruptive and labour-intensive that the costs will eventually overwhelm you. It may seem an easy route to bigger volumes and the fabled land of profitability, but it is a mirage in the desert.

It is bad news for the rest of us, too. We pushed back hard against MDS because the workload was breaking the system, gradually retraining patients and practices to understand that it is not the answer. It is more costly and less safe for patients.

Our unified message and consistent approach to charging those who want the service have gone up in smoke. Now we feel obliged to provide it again and are starting to waive charges to retain our patients.

Sums don’t add up

I understand the pressure on new owners. Some bought ‘cheap’ pharmacies and soon found out why this was so – high rents and high staffing costs. Pharmacists are not growing on trees where we are. In a health centre pharmacy with an annual rent of £80,000, plus salaries, rates, utilities and financing costs, you need around 10,000–12,000 items a month to break even.

A pharmacy dispensing between 3,000–7,000 items a month is a long way off that. How long can an owner subsidise losses of £5,000–£10,000 a month? I don’t think that business is viable. Other pharmacies in the locality are well established and have lower costs because they are not paying extortionate health centre rents.

I feel sorry for the owner, but people here do not like high-pressure sales tactics.

Bad business

It would not take much to swing today’s sellers’ market, which favours providers, into a buyers’ market, which favours customers. That may sound good for patients receiving free deliveries and blood pressure checks, but not in the long run. There is not enough funding to sustain the pharmacies we have, let alone throw in extras for free. It will only hasten closures. The new owner might not realise it yet, but this is bad business.

We have also seen people game the market entry regulations to win a contract by offering to open for an hour on a Sunday. Opening hours could well become the next wave of disruption.

Letterbox pharmacy won’t cut it

National distance-selling pharmacies (DSPs) are also active, although growth has slowed. The biggest DSP has seen dispensing volumes remain flat for 12 months. Patients tell me it is easier to cancel satellite TV than to leave a DSP, which is saying something. Is that within the spirit of patient choice? I did not realise that choice was a one-way street.

Posting medicines through a letterbox is not a pharmaceutical service. Where is the advice? Where is the support? How can DSPs intervene if there is an obvious problem? They can’t, and we should never let politicians think the two models of pharmacy are equal.

Is local competition between pharmacies useful or harmful? Email pm@1530.com

*Alexander Humphries is the pen name of a practising community pharmacist. The views in this article are not necessarily those of Pharmacy Magazine.