Pharmacies Face Funding Crisis Amid Rising Costs
Community pharmacies across the UK are on the brink of an alarming crisis, as many may soon halt deliveries of medications to vulnerable patients, reduce their operating hours, and even consider staff cuts. The situation arises from ongoing negotiations for a new funding settlement. Small business owners have voiced their concerns to The i Paper, indicating that the increase in employer national insurance contributions (NIC) and the national living wage, coupled with the removal of business rates relief set to take effect next month, could result in an additional financial burden of up to £100,000 annually. Unlike other sectors, pharmacies do not have the flexibility to raise prices in response to these imposed increases.
The National Pharmacy Association (NPA) reported a staggering real-terms cut of 40% over the past decade, which has already led to a record number of closures. The NPA, representing approximately half of the UK’s 12,000 community pharmacies, has warned that pharmacies in England are facing £310 million in unplanned costs. Without immediate action from the government, many pharmacies may be forced to scale back essential services, such as free delivery of medicines, free contraception, and smoking cessation programs, or even close their doors entirely.
Reena Barai, owner of S G Barai Pharmacy in Sutton, south London, expressed her concerns, stating, “The April crunch is very real. Moreover, April is typically one of our lowest-income months due to an outdated payment system that delays remuneration for services rendered. We receive payment in April for prescriptions dispensed in February—a month that is already short and often has low dispensing volumes. This creates significant cash flow challenges, which are further exacerbated as we move forward.” She highlighted the uncertainty surrounding current and future contracts as a major hurdle in making decisions regarding staffing and workload, leading to further concerns about the sustainability of their operations.
The government has only recently initiated discussions with Community Pharmacy England regarding a new funding contract, emphasizing the importance of pharmacies in delivering reforms outlined in the government’s Plan for Change. This plan aims to shift healthcare focus from hospitals to community settings, allowing pharmacists to utilize their skills and training to provide more services locally.
While pharmacies will continue to meet their obligations in supplying medications, some owners have warned that they may need to withdraw delivery services for vulnerable or housebound patients, forcing them to find alternative means of transportation for essential medications. Mike Hewitson, who runs Beaminster Pharmacy in Dorset, noted, “This situation could significantly impact small towns with limited pharmacy options and rural areas where access is already difficult.” He added, “The effects of these changes may not be uniform across the country, as some contractors have already implemented cuts while others wait for government action.”
There is a growing dissatisfaction among pharmacy contractors, with many feeling increasingly frustrated by the government’s lack of urgency in addressing their plight. Each day, pharmacies strive to maintain services, often at considerable personal expense, while receiving little acknowledgment or support from the government, which has repeatedly promised that talks would resume “soon” over the past six months. The delays are causing real-world consequences.
In her first budget announcement, Chancellor Rachel Reeves disclosed that employer NIC would rise by 1.2 percentage points to 15% in April 2025, while the threshold for contributions would decrease from £9,100 to £5,000. However, the impending increase in the national living wage (NLW) will have an even more pronounced effect on pharmacies. Olivier Picard, who operates four Newdays Pharmacy stores in Berkshire, highlighted that the 6.7% increase in the NLW to £12.21 per hour will add nearly £50,000 to his annual wage costs. The increase in employer NIC is projected at around £12,000, with business rates potentially costing an additional £13,620. Previously, pharmacies benefited from up to 75% relief on business rates under government support measures, but that relief is set to be drastically reduced or eliminated by the end of the month.
“There is no additional funding to counterbalance this burden of £85,000,” Picard stated. “The financial cliff facing us in April is not just theoretical; it is an imminent crisis. The combination of increased national insurance, rising minimum wages, and the elimination of business rate relief is pushing pharmacy owners to their limits.” He warned that without government intervention, many pharmacies would have no choice but to cut vital services, reduce opening hours, and reconsider their ability to assist vulnerable patients.
Last year, NPA members voted overwhelmingly in favor of collective action for the first time in the organization’s history if a new funding settlement that addresses these mounting costs is not promptly announced by the government. If action is not taken, around one million pharmacy hours could be lost in England, along with the discontinuation of free medicine deliveries. Picard emphasized, “This decision is not made lightly; it is a matter of survival. These are not merely business choices; they will directly impact patient care. Without intervention, more pharmacies will close, diminishing access to essential medications and healthcare advice.”
Additionally, an independent economic review on community pharmacy funding commissioned by NHS England has been completed but remains unpublished while negotiations continue. Owners like Picard view this delay as a serious warning sign, suggesting that the report’s eventual release may come too late to benefit struggling pharmacies.
“The government must take immediate steps to prevent the collapse of community pharmacies,” Picard asserted. “First, pharmacies should receive business rate relief comparable to other NHS sectors, such as GP surgeries, to ensure fairness and financial viability. Second, the long-awaited independent economic review report must be published, enabling pharmacy negotiators to engage in meaningful discussions and hold decision-makers accountable. Finally, a long-term funding settlement for pharmacies must be established and implemented at the start of each financial year, rather than leaving them in uncertainty for extended periods, as experienced this year. Without these urgent reforms, pharmacies will continue facing financial instability, jeopardizing patient care and local healthcare services.”
During a recent House of Lords debate, a majority supported a Liberal Democrat amendment that would exempt pharmacies from the proposed increase in national insurance contributions. Conservative Lord Ahmad of Wimbledon acknowledged the significant challenges community pharmacies face due to the NIC hike, stating that “they will have to shut” as they cannot afford to maintain their staff. NPA chair Nick Kaye urged the government to accept this crucial amendment, which would assist pharmacies in managing an impending burden of hundreds of millions of pounds.
Dr. Leyla Hannbeck, chief executive of The Independent Pharmacies Association, emphasized that the proposed NIC increase would significantly impact the financial stability of community pharmacies, many of which are already struggling to survive or at risk of closure. She called on MPs to support the amendment and exempt pharmacies from this increase.
Throughout the debate, Lib Dem Baroness Kramer expressed her determination to prevent pharmacies from cutting their hours and services, stating, “People are being told now that their jobs are at risk. This is not a hypothetical concern or an exaggerated claim; we are working to avert a disaster.” Hewitson noted that he has already begun to “scale back” recruitment and maternity cover, emphasizing the precarious situation, particularly when staff illness occurs. “There’s only so much we can cut without jeopardizing viability if unforeseen circumstances arise. We are contemplating changes to our opening hours and services that are underfunded.”
Around 90% of an average pharmacy’s operations are funded through the NHS, including medication supply and vaccination services for flu and Covid-19. However, these “extras” are now under threat due to the prevailing financial uncertainty. Many pharmacy owners are awaiting news regarding the new contract, recognizing that the outcome may necessitate difficult decisions concerning staffing, operational hours, and the services they provide.
A spokesperson for the Department of Health and Social Care stated, “Community pharmacy plays a vital role as we transition care from hospitals to community settings as part of our Plan for Change. We are currently in consultation with Community Pharmacy England regarding funding for this year and next, and we will provide an update in due course.”
