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Going private to survive


Going private to survive

Could your pharmacy be more profitable by providing private services? As community pharmacy faces unprecedented cost pressures and flat NHS funding, Atif Butt looks at some of the options for increasing revenue in these challenging times…

The five-year pharmacy contract, agreed in 2019 for pharmacies in England, fixed funding levels until 2024. It also set out a clear vision for community pharmacy to become increasingly clinically focused, with less emphasis on dispensing and more on providing services in a community setting.

However, since then many in the sector feel the government has been too slow to put its plans in action, leaving pharmacies with insufficient revenue from providing NHS services.

Pharmacy representative bodies like the Pharmaceutical Services Negotiating Committee has been calling on the government to provide more funding for the sector. They have also been advising pharmacy contractors to consider providing more private services to make up the revenue shortfall.

Last year, the PSNC also called on pharmacies to look into charging for non-contracted services they are currently doing for free, such as deliveries, repeat prescriptions and blood pressure readings.

The current climate has led many independents to consider new income streams and develop their own private clinical services to supplement their NHS revenue and boost profits. In April 2021, market research firm LaingBuisson predicted a 10–15 per cent growth in the private healthcare market in the next three years.

Some of the private services pharmacies are now offering include travel clinics, vaccinations for conditions like flu or Covid, weight loss clinics, private health checks, blood and genetic testing, and beauty treatments.

Since 2006 UK pharmacists have also been able to train to become independent prescribers and offer private prescriptions. In recent years this has become an increasingly profitable area for pharmacies as patients struggle to get GP appointments or want to walk in and be seen at their convenience.

So let’s run through the key factors you need to consider when deciding on what private services to offer.

Profitability - the first thing to look at is how profitable any new service is likely to be. This is usually looked at in terms of the gross profit margin, which is calculated by dividing the gross profit by the total income from the service.

To work this out you will need to calculate the revenues you are likely to gain from a service against the extra costs you will incur, such as drug costs and staff time.

Generally speaking, income from private services should have a significantly higher gross profit margin than NHS dispensing services to make them worthwhile.

Training and resources - one of the main barriers to providing more services reported by pharmacies is the additional training required.

For any service you want to provide, you will need to work out if your staff have the right skills and qualifications, or if further training is needed. You also need to consider if there is the capacity to provide the service without taking on more staff.

You will also need to think about whether you will need any more equipment or other resources, and if you will need to bear other additional costs such as marketing.

Local demand - different areas will have differing demands for services, so it is important to understand the health needs of your surrounding area and community.

For example, it’s likely that there will be higher demand for services like travel clinics or aesthetic treatments in more affluent areas. Areas with elderly populations are likely to have more uptake for flu vaccinations. Start by looking at the pharmaceutical needs assessment for your area and talk to the local primary care network to see what targets aren’t being met.

It can also be worth thinking about what type of work you prefer doing and would like to add to your service offering. For example, you may prefer to provide smoking cessation services to aesthetic treatments.

It may seem daunting when you look at the extra skills, training and resources needed to provide a new service, but you could consider working with a service partner to help with all this. There are a number of companies operating within the sector that provide training, equipment, marketing and logistical support to pharmacies that are rolling out new services.

The obvious advantage of partnering with an external company is that you get to benefit from their expertise and should be able to access all the resources and support you need in one place. However this is likely to reduce your profit from the service due to the extra costs involved.

There has been a lot of discussion about the pharmacy of the future and what it will look like. Recently, pharmacy group Alitam announced plans to build 500 ‘super pharmacies’ offering private services like dental care, cosmetic treatments and even maternity services alongside traditional dispensing services.

The development of digital and online technology also has the potential to transform the landscape of pharmacy services as more people can opt for online consultations.

While no one knows how long it will take, there is no doubt that the sector is changing, and pharmacies will need to keep pace and adapt to guarantee a rewarding long-term future.

Atif Butt is a senior accountant at Hutchings Accountants.


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