Pharmacy mergers could strengthen market interest in the sector, according to pharmacy real estate experts.
As part of the new English community pharmacy funding deal, the Department of Health and Social Care (DHSC) committed to making it easier for contractors to merge with other pharmacies.
The broker Christie & Co told The Pharmacist that while multiples will find it easier than independents to merge, making this scenario more likely, independents could still see increased turnover and profits as a result of a merger in their area.
Christie & Co director Jonathan Board said: ‘Where consolidations do take place – whether by independent contractors or multiples – this may not only strengthen the trading profile of the retained pharmacy, but also other pharmacies in the surrounding area as they pick up additional dispensing as a result.’
Merging pharmacies may see a reduction in their combined dispensing volumes as patients at the closing pharmacy premises may choose to move to a different pharmacy in the area, he added.
He said: ‘It is inevitable that where competition is reduced, this will present further opportunity to those that remain and as such may strengthen market interest.’
‘Limited’ take-up by independents
Mr Board said that mergers between independent contractors ‘remain challenging’ and are likely to be ‘limited’.
He said: ‘Despite the DHSC seeking to encourage consolidation in looking at additional protections, consolidations between independent contractors will remain challenging due to a number of commercial reasons, including each contractors’ respective view on the value of their pharmacy and agreeing a deal, timings, staffing considerations and potential legacy issues surrounding leasehold premises.
‘From speaking to various operators, while consolidation legislation may remove some future risks, we consider that the volume of ‘independent’ consolidations will remain relatively limited.’
He added that multiples are already taking advantage of existing protections and are likely to use any new legislation to further consolidate their pharmacy estates and increase their profits.
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