Pharmacy consolidation regulations - Part 1
A number of questions arise from the new regulations which we hope to address in a series of three articles, starting this month.
As pharmacists have known for some time, the government is unhappy with ‘clustering’ of pharmacies. Arguably to help battle these clusters, since the end of last year it introduced amendments to the Pharmaceutical Services Regulations to allow two or more pharmacies to consolidate their services on to one site. These regulations came into force on December 5 2016.
Practically speaking, the new regulations allow two pharmacies located within the same Health and Wellbeing Board to apply to NHS England to move services from one site (site A) to another existing site (site B) and then close down site A.
Consolidation applications can be made only in relation to bricks and mortar pharmacies rather than internet pharmacies. Where the owners of the consolidating pharmacies are not the same, the person or company who will own the remaining pharmacy will need to make a change of ownership application at the same time.
NHS England will not automatically grant an application for consolidation. Instead, it will consider the following test: will allowing the closure of the pharmacy create a gap in pharmaceutical services that could be met by a new pharmacy application?
Generally speaking NHS England will also consider whether, if any enhanced services are being moved from one site to another, those services will be interrupted without good cause. If the answer to both questions is no, NHS England may then decide to grant the application.
Once an application is granted, the local Health and Wellbeing Board will usually publish a supplementary statement alongside the Pharmaceutical Needs Assessment (PNA). This statement should assert that the closure of the consolidating pharmacy does not create a gap in service provision that could be met by an application for a new pharmacy, made under one of the three main categories (relating to a current need, a future need or the conferring of benefits which were not foreseen when the PNA was published).
The supplementary statement will form part of the PNA until a new one is published, which could be as far as three years away.
Importantly, after a pharmacy has been closed under the merger regulations, NHS England will be required to refuse any new application for a contract if it is based on an alleged gap created by the consolidation.
The surviving pharmacy will therefore have protection from post-merger competition – at least until the next PNA is published.
So, once consolidation has taken place, what hours and services must the remaining pharmacy (site B above) provide? Assuming NHS England will continue to commission enhanced services provided by the closing pharmacy (site A), site B should continue to provide these.
Otherwise, site B will generally not need to provide any additional services over and above those it was providing prior to the consolidation. Site B will not be required to take on the hours of site A.
Therefore if site A was a 100-hour pharmacy and the remaining site B was a 40-hour pharmacy, site B can continue to provide services 40 hours a week and need not take on site A’s hours.
Perhaps the most important question pharmacy owners will be asking themselves is why they should consolidate pharmacies? There may be a number of reasons why a pharmacy business may wish to merge with another.
For example, an existing 100-hour pharmacy business may wish to purchase a 40-hour competitor pharmacy whose premises are in a more advantageous location, move over enhanced services from its existing premises, then close down its ‘old’ premises.
This will ensure that it continues to commission enhanced services at a more profitable location and no longer has to bear the burden of a costly 100-hour pharmacy without having to worry that a new pharmacy application will be made at (or near) its previous premises as soon as it has closed down.
Once pharmacies have decided to merge, further legal, property and commercial issues may arise and these will be considered in future articles.
This article was written by Andrew Sweetman, Associate. For more information please contact Andrew at email@example.com or on +44 (0)1483 252 676
This article was first published by Pharmacy Businesss on 1 June 2017. The rest of this series will continue to be published online by Pharmacy Business and Charles Russell Speechlys.
News & Insights
Kiadis Pharma secures €20 million debt financing facility from Kreos Capital
Charles Russell Speechlys advises Kreos Capital V Ltd on additional growth capital investment of €20 million in Kiadis Pharma NV
Charles Russell Speechlys advises Kreos Capital on €20 million growth capital facility in Medtech company
Charles Russell Speechlys have advised Kreos Capital on its additional growth capital facility of €20 million in Cellnovo Limited
Smoothing over a pharmacy sale
There are things pharmacy owners can do which can help the due diligence process to go smoothly and minimise delays.