Former GP Dr David Roberts explains how some practices earn up to £500,000 a year in profit through locating a pharmacy in their premises.
Following cut after cut in your ever-diminishing income, there is a way to boost your income that does involve much extra work. Open a pharmacy within your own premises.
To set a pharmacy up, all you need are a few essential publications, some background knowledge and a little time to put it all together. But you may have to hurry as the regulations will shortly be stiffened up.
What will my main expenses be?
Your expenses will be at least a couple of pharmacists, at £45,000 each, and the same number of dispensers at £15-20,000 each – and, of course, the running costs of the pharmacy.
Sounds a lot? Don’t worry, the income will far exceed this for all but the smallest practices, because anything up to 90% of in-house of prescriptions will go to your pharmacy. Don’t believe me? Well, why do Lloyds and Boots beat a path to surgery doors?
What could my income be?
The income of a pharmacy depends to a large extent on the number of items dispensed. Every GP should know from his PACT figures the number of items prescribed and the majority should be dispensed by a well-run in-house pharmacy they own.
For larger pharmacies, your income could easily reach six figures, depending on the number of patients in your practice who use the service. For example if the pharmacy dispenses 300,000 items per year, it will generate an income of £550,000 per year – and this is in fees alone.
Most pharmacy fees are within the NHS Drug Tariff and are paid per prescription item. Others are paid according to scales also set out in the tariff. The new pharmacy contract ‘enhanced fees’ are paid by the PCT.
In addition to this there is income from services provided, (private and NHS), profit on drugs dispensed (say around 10% of a large figure), and retail sales.
So its viable, now what should I do?
By Pharmaceutical Society regulations only a pharmacist can run a pharmacy, so you will not be involved in the day-to-day running of the business. Set up a pharmacy company, managed by doctors, with a superintendent pharmacist. These are the ‘bodies corporate’.
Now download a copy of the NHS (Pharmaceutical Services) Control of Entry Regulations 2005 and the plain English version. You will also need, as a bare minimum, a Pharmaceutical Needs Assessment from your local PCT, which sets out the various pharmaceutical services they believe are needed in your area.
Read them all thoroughly and then decide which route your application will take.
How can I apply?
There are three main ways of achieving the contract. Most will be opposed by local pharmacies fearful of losing their vast incomes. Don’t worry about that. They are trying their best to protect their income, but there are ways around this.
The three routes are:
1) The straightforward route: You have to demonstrate the new pharmacy is either necessary or expedient. Until recently the word was ‘desirable’. This is a fairly stringent test upon which several applications have foundered. For ‘adequacy’ you will have to prove that the incumbent’s service provision is inadequate in today’s changed circumstances, whereas yours is the bee’s knees. Again, not all that simple and I would advise you seek specialist advice. On the plus side, there would be little or no pharmacy opposition to this kind of application.
2) The ‘competition and choice’ route: This is more complicated. You have to prove your pharmacy would be will be much better than the existing pharmacies. You also have to show it is ‘necessary or expedient’ (as above) and that it passes the ‘adequacy’ test. An application here can come to 80-100 pages.
3) The exempt route: There are four so-called ‘exempt’ routes which do not have to pass either of the above tests. They include premises in shopping areas of 15,000 sq feet; totally IT-based pharmacies; pharmacies in one-stop health-care premises with at least 18,000 patients and the ‘100-hour’ pharmacies. Only the 100-hour pharmacies are really worth considering as they are a guaranteed way to get a contract, but only as a last resort as they are expensive to run.
Dr David Roberts is a former GP and author of the book ‘Your own pharmacy: a guide for GPs.’ Contact him at Davidroberts@doctors.org.uk for more information regarding setting up a pharmacy or visit www.countrydoctor.co.uk
Practices earn up to £500,000 a year in profit through locating a pharmacy in their premises.