NHS England (NHSE) lost £15.7m in advance payments made to community pharmacies that then closed down between April 2020 and March 2022, it has revealed.

The advance payments were made on the decision and direction of the Department of Health and Social Care, NHSE said in its annual report.

The £15.7m that could not be recovered due to pharmacy closures was included a breakdown of cash losses for the period 1 April 2021 to 31 March 2022.

The payments aimed to ease ‘significant and unexpected cash flow pressures’ experienced by community pharmacies at the start of the Covid-19 pandemic, caused by issues including a sharp increase in prescription items in March and April 2020, higher drug prices, delayed payments for the Pharmacy Quality Scheme and extra Covid-19 related costs, according to the report from the NHS Commissioning Board.

The report stated that: ‘The government decided and agreed to provide an urgent uplift to the normal advance payments to support pharmacies with their cash flow pressures and to help them stay open to continue to provide vital NHS pharmaceutical services.

‘The cash advances were made on the basis that payments would be recovered from pharmacies in 2021/22, however a significant number of pharmacy contractors closed down between April 2020 and March 2022 making recovery of the advanced sum infeasible.’

According to figures from the NHS Business Services Authority, there were 11,537 community pharmacy contractors in operation in April 2020, compared to 11,145 in March 2022 – equalling nearly 400 closures over the two-year period.

A loss of £15.7m would average at around £40,000 per pharmacy closure.

The National Pharmacy Association’s director of corporate Affairs, Gareth Jones, said that while the particular circumstances of NHSE needing to reclaim Covid loans was ‘unique’ the situation was ‘illustrative of the problem of unfair and unhelpful retrospective funding “clawbacks” by NHSE – taking money from businesses that are operating at a loss – that put an obstacle in the way of investment and careful planning by contractors’.

He added: ‘Every pharmacy closure is a signal to NHSE about loss of provision and shrinking capacity at a time when healthcare needs are growing and community-based provision needs to increase. It underlines why the chronic underfunding of community pharmacy – the primary cause of permanent closures - must be reversed.’