While all contractors are awaiting a new NHS Contract, community pharmacy are continuing to experience tremendous financial pressure – with overheads higher than ever pharmacies are all operating under increasingly tighter margins.
The Department of Health and the NHS is telling pharmacy owners that they must innovate in order to deliver the medicines and services at a cost acceptable to the government. We live in a digital world where each and every transaction generates data, and that data is the foundation of any business operation, including the pharmacy industry. This data helps the owners to see how the business is performing, giving them insights to aid business decisions, to prevent losses from potential risks and maximising profits by capturing all available opportunities.
The team at RWA Pharmacy identified 5 areas of major risks and opportunities that pharmacy group owners should action to maximise their profit under the current contract:
Some of the major margin risks include drug tariff movements be it reimbursement pricing or category movements, the new discounts seem to have a mixed impact on pharmacies overall. Closely monitoring the movements in the categories and the dispensing of brand over generics is a must. The ordering trends of your pharmacies will also have a significant impact on your margin if not managed well. Use of cascades & buying groups may help with transparency here but you should also monitor products being ordered outside of your cascade or controlled ordering system.
Lack of live stock in pharmacies, keeping an eye on the stock movements is very difficult, yet it’s critical to have visibility for stock and fraud detection. Being able to see the dispensing and ordering patterns of medicines will make sure you have time to move product around your group before they go out of date and avoid overstocking.
Other small things like reconciling your levy’s to your retail sales can have an impact on overall margin. While there is still no direct connection to EPOS & PMR’s a quick check at the end of each claim month that the number of non-exempt scripts claimed & the levy’s in your till stack up is a must.
Maximising the retail end of your pharmacy is sure to become a bigger part of the daily life within community pharmacies. Anecdotally the % of retail sales is generally less than 10% in 2024. To drive more income in this area you should assess the use of your space. Sometimes less is more in terms of range. Having open space in the front of your pharmacy is not a bad thing. Walk in patients feel more comfortable in open spaces especially since Covid. Next step I would recommend is to identify your top 100 products and ensure these are always in stock. Sounds easy enough!!.
On your top products educate your teams on upselling from the prescriptions to help improve outcomes and overall general health. Promote preventative supplements to your patients or upsell OTC & Pmeds to help with known side affects of every day conditions. There is more margin opportunity in the retail side of your pharmacy as no one dictates your price!
There are other ways to look at your data and identify areas where you can generate extra profit. These include maximising your potential in National & local commissioned services and private services. In the national service area, there’s a huge opportunity to maximise revenue within the NMS alone (industry is currently at 46-50%). Other services such as hypertension, contraception, Pharmacy First and completing flu and Covid vaccination will also contribute largely to driving your business forward.
We only cover a small part of the opportunities and risks analysis in this blog, for more details email hello@rwapharmacy.com.
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