Clinical contract points: are the last 100 worth the effort?
Opening and running your own pharmacy is a viable and lucrative proposition for a surprisingly large number of GPs, says Dr David Roberts, who has just published a book on the subject
Depressed at the thought of chasing all those quality points? Put off by visions of the PCO heavy mob trampling over your 'independent' practice twice a year? Then put all that behind you and give some serious thought to opening your own pharmacy. Far more of you can do that than you imagine, and the future shows signs of being golden.
The NHS Plan promised to shatter the old strictures that slowed down care. It promised that extra investment would fund 500 new one-stop primary care centres and that 'up to 3000 family doctor premisesKwould benefit from a 1 billion investment programme by 2004'.
Then along came the Office of Fair Trading report of 2003 that demanded the complete abandonment of the pharmacy entry regulations. The pharmacists objected, so the Government slightly modified the report by suggesting there should be complete deregulation in three circumstances. These were:
- In shopping developments of more than 15,000 square metres
- In pharmacies where opening hours were more than 100 hours a week
- In pharmacies in one-stop health centres.
Obviously it is the last of these that is of main interest. If you have or can create room for a dentist, optician, health visitor and social worker, even if only on a part-time basis, then add a pharmacy too. It will be profitable and you will become a Government flagship one-stop health care centre.
Despite further protests from pharmacists, the Government is remaining firm almost. Satisfy the one-stop provision and the PCO must grant permission for a pharmacy when this rule is passed, although there is now some talk of 'necessary or desirable', but remember that one-stop health care centres are Government policy. So the modified Office of Fair Trading (OFT) recommendations will make pharmacy ownership simpler. But even under present rules a great many practices should consider it.
Doctors cannot apply, so a separate company is needed to make the application under current NHS Pharmaceutical Services Regulations 1992 number 662, or under modified OFT rules. No pharmacist is needed at this stage, simply a 'body corporate'. Guidance on Procedures HSG(92)13 explains it all. Both are available from the PCO.
'Necessary or desirable'
Companies House (0870 333 3636) will supply an advice pack and all the necessary forms to establish your company. It will cost around 50 or so. You will need to appoint a board of directors.
To succeed under current regulations, the application must satisfy the PCO that the pharmacy is 'necessary or desirable'. If there is a pharmacy nearby the application may fail. But not necessarily. The perceived convenience of an in-house pharmacy may tip the balance. Your solicitor should note that the regulations say 'necessary or desirable' not 'necessary and desirable'. An important point. You will need a solicitor.
Only when the application is granted is it essential to find a pharmacist to run the business.
Under the modified OFT regulations all that is likely to be required is a simple notification to the PCO of your company's intentions, proof of the adequate existence of the other services, and a promise that your pharmacy will operate according to regulations. It matters not whether the company is owned by doctors or anybody else.
Will the business be profitable or very profitable? The difference is whether it will be a simple dispensing chemist or will retail other goods to increase profitability. The choice is yours. It can be taken for granted that an in-house pharmacy will benefit from all the prescribing generated by the general practice, together with a high proportion of over-the-counter (OTC) sales.
But it is not all profit because, as with dispensing doctors, there is a discount clawback scale (see 'The Drug Tariff') based on the total basic cost of the drugs dispensed. The NHS takes a proportion of the discount assumed to have been received in the purchase of the drugs. A pharmacy submitting a claim for 150,000 per month or more basic drug costs will have 12.52 per cent deducted. Here is a rough calculation from figures available to every practice:
Dispensing income/month = (basic price of drugs/month, from PACT figures, minus discount deduction of 12.52 per cent maximum/month) x 20 per cent approximate profit level depending on purchasing skill.
Plus an average figure for professional fees, as listed in the drug tariff of at least 1 per prescription item, minimum. These fees are many, various and increasing in number.
Other income may be generated from such activities as retail and OTC sales, private and NHS diagnostic services, and, through the NHS, disease, medicine and repeat prescribing management. There are expenses, and obvious one-off costs include:
- Setting up the business
- Planning and planning permission
- Building modifications
- Professional equipment (ie computer).
- Initial stocking with medicines and OTCs.
The cost of some of these will be affected by local circumstances and tenders should be sought. Specialist contractors are listed in The Chemist & Druggist Directory (01732 362666).
Capital may be supplied by the NHS or commercial lenders.
Enormous help will be provided to its members by the National Pharmaceutical Association (www.npa.co.uk) which now permits doctor-owned companies to join.
The most significant expenses are the staff salaries, the pharmacist's salary and the dispenser's salary. There may need to be more than one pharmacist or dispenser. A pharmacist must be present whenever dispensing is taking place, so that will mean a full-time and a part-time pharmacist and locums during sickness and holidays. Full-time pharmacists attract 30,000-40,000.
The current pay scale for a dispensary assistant may be obtained from the Association of Pharmacy Technicians (www.aptuk.org.uk).
Other expenses include local taxes plus rent, heat, lighting etc. All the latter are paid to the general practice owning the premises.
Pharmacists themselves are regulated by their own statutory body, The Royal Pharmaceutical Society of Great Britain (RPSGB), which acts in a very similar way to the GMC.
The RPSGB has a very clear and firm code of ethics that every pharmacist must observe. That code makes it absolutely clear that the superintendent pharmacist is responsible for the management of the pharmacy. That means that while any body of directors should take a keen interest in their company, the employee pharmacist must be allowed to run the business in any surgery pharmacy. The additional workload for the GP owners is not as great as would be imagined.
Practices that decide to run their own pharmacy will find the profits can be very large and therefore the need to scurry after the sources of nGMS earnings should be greatly reduced together with the stress. And, as in dispensing practices, patients will be delighted.
-Dr David Roberts's book Your Own Pharmacy
has just been published by Radcliffe Medical Press, Oxford, 27.95 plus 2.79 postage and packing. Radcliffe can be contacted on 01235 528820 or at www.radcliffe-oxford.com
Want to know more?
NHS (Pharmaceutical Services) Regulations
1992, No 662 and Amendments
The Drug Tariff
Pharmacy laws: Misuse of Drugs Act 1971,
The Poisons Act, The Medicines Act, 1968 and 1971
Sale of Goods Act etc etc etc
various as in general practice
Comprehensive guidance is given in:
Pharmacy Law & Practice, Merrills & Fisher, Blackwells, ISBN 0-632-04809-3
Your own Pharmacy, David Roberts, Radcliffe Medical,
published October 2004
David Roberts has spent his entire career from 1970 in dispensing practices, founded the original Dispensing
Doctors Association in 1984 and remains a member of the BMA council