Community Pharmacy Northern Ireland’s energies are focused too much on lower profit margins of the multiples, says Terry Maguire…

In August, a Community Pharmacy Northern Ireland (CPNI) delegation visited the new health minister and his mandarins. They got lots of warm praise and slaps on the back.

Pharmacy is so important to the health service and key to the transformation agenda, the minister confirmed, but then his mandarins told CPNI sharply ‘no more money this year.’

Apart from some winter pressures funding, nothing more can be expected and our representatives were reminded of the increase in funding received at the beginning of 2024, bringing investment into pharmacy up to £147 million for this financial year.

But CPNI are of the opinion that Northern Ireland has particular and unique challenges when delivering pharmacy services and this needs to be reflected in the funding.

They are of the view that a separate and distinct drug tariff, even a new pharmacy contract, is required.

They left the meeting ‘to reflect,’ not so much on the discussions, but what they were being told. Contractors would be kept informed of any actions CPNI felt necessary.

So, the war continues, as it always has. It seems almost treasonous to suggest anything other than current funding is putting all pharmacies on the brink of bankruptcy.  We have certainly talked ourselves into this state of mind.  

No two pharmacy contracts are the same. Some return gross profits in the mid-20 per cent, some return gross profits of over 30 per cent. The mix of retail versus health service is important, as Robert Gordon, the managing director of Gordan’s Chemists, wrote in a letter to the health minister last year.

Gordon insisted his business is more resilient in the current financial environment as his pharmacies have comparably more counter sales.

A commitment to delivering services also plays a part; more services bring higher gross profits, but that might reflect more staff which impacts net profit.

Efficient buying of medicines is also key but, of course, this has got more and more difficult and is at the core of CPNI’s war with the Department of Health.

While all contractors are aware of the reduced opportunity for profit margin, some contractors have become obsessed to the point that this is now part of the medicine supply problem.

With wholesalers listing drug tariff prices on screen, some contractors are blocking medicines that costs a penny more than what they will be reimbursed at that point in time. This is not how it is supposed to work, certainly if patients are to get the service they need and deserve. 

Apixaban is a prime example. Last year, contractors made a significant profit from apixaban for about three months when the drug tariff price was much higher than wholesale prices.

The margin survey, of course, unmasked this, the drug tariff was altered and a clawback was introduced, which made January 2024 a poor month.    In September 2024, the drug tariff price for apixaban was much lower than what wholesalers were charging, if stock can be found.

This is how our crazy contract works. To smooth out the volatility in the medicines market, the Department of Health uses various, admittedly blunt, instruments; the Drug Tariff price, clawbacks, concessionary pricing and the margin surveys.

Ultimately, all things being equal, each contractor should end up at the end of a financial year getting paid in full for the medicines supplied while being allowed to hold on to some retained purchase profit as agreed.

For independent contractors in particular, this is a very statistically complex method of reimbursement and much too complicated to fully understand or, more importantly, trust.

So, when we are making on a profit on a molecule, we feel joy and say nothing; when we are losing, we feel anger and shout loudly. Over the last 20 years, CPNI has only had this one focus.

As the Strategic Planning and Performance Group (the old health board) and Department of Health have got much more accurate in delivering the contract as stated, it has been much less easy for any contractor to make money on molecules.

This has especially hit the high dispensing pharmacies who have seen their percentage gross profit fall. Historically, the multiples have owed a greater percentage of high prescription volume pharmacies.

Average sized independents, focused on services, can still deliver reasonable gross profits. We would certainly benefit from more Department of Health investment into services – an issue CPNI should be more focused on.

It just seems that CPNI’s energies are focused too much on lower profit margins of the multiples.

When industrial action is called, as is likely to happen following the recent meeting with minister, independents should think carefully if the actions suggested are in their real interests or if they are the useful idiots of the multiples.

Terry Maguire is a leading community pharmacist in Northern Ireland.