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Opening a pharmacy at your surgery

An update on the current rules and changes ahead. By Nigel Morley, Joseph Forshaw and Tony Gentle

Practices planning a pharmacy relocation to their site will expect rental income via a secure lease
Practices planning a pharmacy relocation to their site will expect rental income via a secure lease

GPs interested in having a 'collocated' community pharmacy on their surgery site come from both dispensing and prescribing practices.

With perceived or actual profits reductions from their dispensary operations, dispensing GPs may need to explore the possibility of the addition of a pharmacy at their premises (or setting up one that is sited remotely).

A collocated pharmacy under a lease agreed with the practice is of even more interest to prescribing practices experiencing profits falls that are not cushioned by dispensing income.

It can be very difficult to get consent for a collocated pharmacy although reforms are on the way that may make this easier. A DoH consultation on draft regulations for 'Market entry by means of Pharmaceutical Needs Assessments and quality and performance' for England launched on 31 October 2011 and runs until 25 January 2012.

The consultation document states the draft regulations are intended to introduce a new entry system for opening pharmacies that would secure effective commissioning of 'adequate services which address local priorities'. Stimulating the market (making it more competitive) where identified needs are not met is another aim.

However, it will be some time until actual changes are made and in the meantime, applications will be considered under the current Pharmaceutical Services Regulations (PSR). At present, to open a collocated pharmacy in England, GPs need to apply to the PCT through a superintendent pharmacist for consent (a 'licence') to join its pharmaceutical list.

Different rules apply in Northern Ireland, Wales and Scotland where, as in England, GPs should get specialist professional advice.

Before any practice and its intended pharmacy associates apply for a pharmacy licence, a feasibility study should be commissioned to assess the financial viability of the proposal.

The parties should get specialist professional advice on the practicality and chances of obtaining a licence. Banks and other potential funding providers will want to see projected profit and loss accounts, a balance sheet, cash flow forecasts and set-up costings.

The types of applications for consent relevant to collocated pharmacies are:

  • Relocation of an existing pharmacy contractor onto your site.
  • 'Non-exempt' new application for consent to join the pharmaceutical list.
  • 'Exempt' new application for consent to join the pharmaceutical list.

Pharmacy relocation
Different and more onerous rules apply to relocating an existing pharmacy that is more than 500m away (major relocation) to one less than 500m away (minor relocation) from your surgery.

Practices interested in a pharmacy relocating to their site will expect an initial premium payment and rent through a secure lease. Pharmacy turnover or profit-related leases are not allowed.

Non-exempt applications
These new applications for consent are the traditional method of acquiring a licence and the PSR state (regulation 12) that consent should be granted if it is necessary or expedient to do so to secure adequate pharmaceutical services in the neighbourhood.

A non-exempt licence is not easy to obtain. Local pharmacy contractors will certainly object and you can also expect a well-argued objection from the local pharmaceutical committee.

While there has been a dramatic increase in collocated pharmacy numbers - with or without GP involvement in their ownership - the NHS Litigation Authority's Family Services Appeals Unit is difficult to persuade of the merits of applications where the applicant is a corporate body such as a company solely owned by GPs.

It is always better not to cite GP involvement in the initial application.

Exempt applications
The majority of exempt new applications for consent are for 100 hours' operation: the pharmacy must be open for pharmaceutical services for at least 100 hours a week during which time a registered pharmacist must be on duty. This is unlikely to be economically viable for practices with a list of less than 10,000 patients.

Applications for 100-hour pharmacies are often contentious and it is vital that the local community and town planners are on your side. Specialist pharmaceutical advice and involvement will be required from the start.

A PHARMACY AT THE PRACTICE

PROS
Capital value:
a pharmacy licence has considerable value.

Future proofing: in case dispensing by doctors is abolished.

OTC sales: on average 13 per cent of pharmacy income.

NHS and private payments: healthcare activities by pharmacists are increasing.

Opening hours: the pharmacy may be open when the surgery is closed.

Regulation changes: proposed reforms may make obtaining consent to open a pharmacy easier.

Collaborative ventures: the pharmacist(s) will take on most/all of the work and risk.

CONS
Application process:
protracted and subject to appeals.

Capital outlay: considerable.

Finding a pharmacist: may not be easy.

Space: between 60 and 125m2 required.

Expert professional advice: essential.

Planning permission: may be a major issue for a '100-hour' pharmacy.

Formal involvement of GP practice: not advisable until consent is irrevocably granted.

Lease renewals
The Landlord and Tenant Act 1954 gives pharmacy tenants significant rights and many pharmacy leases granted to GP practices a long time ago are now coming up for renewal.

Practices may find it difficult to obtain the high level of rents achievable in the past under a renewed lease and a fresh premium will not be payable.

However, all GP landlords of collocated pharmacy tenants should give notice that they wish their premises to be returned for their own use.

At worst, this will result in agreeing a higher rent for the new lease. At best, the practice can evict the tenant and set up its own pharmacy. Such tactics should not be attempted without advice. Consult a specialist pharmaceutical adviser at least 18 months before the lease expires.

  • Nigel Morley is managing director of Surelines Limited (www.surelines.com) which specialises in establishing collocated pharmacies; Joseph Forshaw is an emergency superintendent pharmacist, and Tony Gentle is a pharmacy commissioning specialist

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