The economic analysis of community pharmacy in England has been published by one of its authors Frontier Economics.

It estimated that the cost of community pharmacies providing NHS pharmaceutical services in England equated to £5.063 billion, which included:

  • £3.459 billion in pharmacy-level and centralised costs,
  • and £1.604 billion in other (hidden, structural and capital) costs

‘This estimate does not include any adjustment for future cost growth associated with expanding the role of community pharmacy in delivering NHS services,’ the report added.

And it suggested that current funding did not cover the full economic cost of providing NHS services for between 97.7-100.0% of pharmacies, and did not cover pharmacy-level and centralised costs for 45.5-96.6% of pharmacies.

'This suggests NHS pharmaceutical services (taken in total) are already not currently sustainable in the short-run for a large proportion of pharmacies and for a greater proportion when taking a long-run view. The likely consequences – absent intervention – include the risk of pharmacy closures or shorter opening hours, or pharmacies choosing to offer a reduced range of services,' the independent report said.

The analysis also found that:

  • Around 47% of pharmacies were not profitable in their last accounting year;
  • An increasing number of pharmacies are defaulting on Direct Debit payments for stock;
  • Between January 2021 and November 2024 there was a 7% net reduction in the number of pharmacies in England. While in the last year this was concentrated in the large pharmacy chains, the report suggested that 37% of pharmacies would be deterred from closing because of the costs incurred in doing so (such as redundancy costs, lease commitments, loss of asset intended to support pension).

The analysis is available to read on the Frontier Economics website.

It was also co-authored by IQVIA.

Sector responds to economic analysis of community pharmacy

Nick Kaye, chair of the National Pharmacy Association, said the report 'shows the sheer scale of the financial crisis in community pharmacy'.

He said the report 'lays bare this new government's dreadful inheritance and we recognise they have a mountain to climb if they are to begin to bridge the funding gap facing pharmacies and maintain services to patients'.

He added: 'This is a very serious situation for patients which we know Ministers will take extremely seriously and we hope the Government’s financial settlement can start to turn the tide for pharmacies that are on the brink.

'The report also points to the need for urgent reform and we stand ready to work closely with ministers to stabilise the pharmacy network and deliver change so that patients maintain access to medicines and improved health services.'

And Dr Leyla Hannbeck, chief executive of the Independent Pharmacies Association (IPA), said: 'The report paints a stark picture and confirms what IPA already knew and have widely aired in the media for nearly 2 years: community pharmacies are severely underfunded with 99% of pharmacies operating at a loss! The unsustainable pressures pharmacies face is putting vital patient services at risk.'

She added: 'We have been consistent in our plea to the Government that without a much-needed capital injection in addition to improved core funding after a flat funding for over 5 years, the number of pharmacy closures will only continue to grow, and with it the pressures on the NHS.'

Company Chemists’ Association (CCA) chief executive Malcolm Harrison said the economic analysis 'confirms what the CCA has warned of for many years – a decade of sustained underinvestment in the pharmacy network has had severe impacts and, without significant intervention, will continue to do so.'

'We hope that these stark findings will help to bring about lasting change to the direction of travel for pharmacies in England.

'A strong community pharmacy sector is vital for maintaining patient access to medicines and urgent care, and as such to wider national economic growth,' he added.

Community pharmacy funding negotiations now concluded

The final version of the economic analysis of community pharmacy report was shared with Community Pharmacy England (CPE) and other stakeholders, and informed the offer that was being negotiated.

In response to the publication of the analysis, CPE revealed that the funding negotiations have now concluded, with the deal set to be announced on Monday.

A spokesperson told The Pharmacist: 'We are pleased that the Government and NHS have published their Economic Analysis, which has informed CPCF negotiations and which they committed to being fully transparent about.

'The analysis underlines the critical pressures that pharmacies are under, as we have been warning for many years.

'Now that CPCF negotiations have concluded we are working urgently to share full news and details about the year ahead with the sector – timings are dictated by Government, but this is scheduled to happen on Monday.

'We are continuing to stress that this is an extremely anxious time for pharmacy owners.'

This is a breaking news story... stay tuned for our full analysis.