Does the new contract encourage pharmacy mergers?


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By Costanza Pearce
Reporter

13 Aug 2019

As part of the new English community pharmacy funding deal, announced last month (22 July), the Department of Health and Social Care (DHSC) committed to making it easier for contractors to merge with other pharmacies.

But what does this really mean and how will it work in practice?

Here’s our run-down of what we know so far.

 

What are the plans?

The DHSC has said it wants to explore strengthening the legal protections offered to contractors who decide to merge with another pharmacy.

The document containing the community pharmacy contractual framework (CPCF) says: ‘To support contractors who may be considering [a merger], we want to strengthen the protections offered to pharmacies wishing to consolidate under Regulation 26A of the NHS (Pharmaceutical and Local Pharmaceutical) Regulations 2013, while maintaining fair and open competition and access to NHS pharmaceutical services.’

The protections in Regulation 26A prevent another pharmacy opening where a pharmacy has closed as part of a merger, on the condition that the consolidation does not result in unmet patient needs.

Contractors wishing to merge must demonstrate that they will still be meeting patients’ needs, including that their consolidated team and premises will be able to produce the same output as when they were separate businesses, the DHSC told The Pharmacist.

The Pharmacist has asked the DHSC for clarification on how pharmacies planning a merger can demonstrate this.

 

Why is the Government doing this?

In short, the Government believes there are too many pharmacies in England.

The CPCF document says: ‘It remains the case that the funding delivered through the [contract] is still supporting more pharmacies in some places than may be necessary to ensure good access to NHS pharmaceutical services.’

It adds: ‘It is recognised that some pharmacy contractors, particularly those with other branches of their own or a competitor’s pharmacy closely located, could consider it commercially beneficial to consolidate.’

Similar concerns were aired in 2017, when the ‘clustering’ of pharmacies was mentioned as part of the judicial review into the Government’s cuts to English community pharmacy funding.

 

What will mergers look like in practice?

There are many different models for mergers that can involve two or more pharmacies consolidating, the DHSC told The Pharmacist.

For example, where there are two pharmacies involved, both might close their original sites and move to a new site as one pharmacy or just one site might close while the other expands to accommodate the new staff and workload. Expansion could involve acquiring a neighbouring property or extending the existing pharmacy premises, but if one of the sites is large enough already, this may not be necessary, the DHSC added.

 

Does this mean the Government is trying to encourage more pharmacies to merge?

A DHSC spokesperson told The Pharmacist that the Government is ‘not looking to encourage contractors to merge’ but confirmed the plans in the CPCF would ‘support’ contractors who think a merger might be ‘commercially beneficial’.

They said: ‘We want local communities to have high street pharmacies which are best suited to their needs. While we are not looking to encourage contractors to merge pharmacies, we want to ensure those who choose to merge can do so with confidence that their commercial interests will be protected – we are in discussions with the sector on how we can do this.’

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