The Pharmaceutical Journal Vol 267 No 7165 p337-341
15 September 2001

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Verdict — 600 pharmacies could close

Over 600 independent community pharmacies could close over the next five years as a result of increased price competition from supermarkets, according to Verdict Research Ltd (www.verdict.co.uk).

In its latest report on health and beauty sales, Verdict forecasts a 5 per cent decline in specialist retailers, essentially pharmacies, by 2006. This would be about 600 of the 12,218 pharmacies in Great Britain as at 1 September.

Verdict predicts that, by 2006, 61 per cent of health and beauty sales will be through supermarkets and just 33 per cent through specialists, almost exactly reversing the position in 1990. Sales through supermarkets will grow by 54 per cent to £8bn by 2006, it says, while sales through specialists will remain almost static with only 3.5 per cent growth over the same period. It predicts that Asda and Tesco will be the main drivers for growth in health and beauty products.

Verdict says that community pharmacies will have to adapt if they are to survive the onslaught of supermarkets. It praises the strategies being adopted by Boots The Chemists and by Moss Pharmacy. Of Boots, it says that developing personal care services, such as dentistry, chiropody and optical, and exploiting its own brand ranges has put it in a better position to defend its traditional core business. Verdict says that Moss Pharmacy’s recently opened Total Health format (PJ, 18 August, p219) represents the way forward for independent community pharmacies.

The pharmacy plan requires pharmacies to shift their emphasis from retailing health care products to providing health care services. Verdict says that many independent community pharmacies are well placed to achieve this, building on their existing links with local doctors and the more intimate service they can provide for customers. Although supermarkets can also follow these strategies, Verdict says they are constrained by a need to balance health and beauty sales with other high-margin non-food sales and the fact that many large supermarkets are in out-of-town locations.

However, Verdict doubts that independent pharmacies have the financial resources or management skills to carry through the change to new services. It predicts that many will be driven out of business. Verdict says the best option may be to form alliances with competitors or simply to sell out to their larger rivals.

John D’Arcy, chief executive of the National Pharmaceutical Association, says that Verdict’s conclusions are not particularly surprising and reflect what had been said by the Community Pharmacy Action Group during the RPM case.

“The pharmacy sector is far from healthy. There is pressure on National Health Service margins, the effects of the loss of RPM and now the review of generic medicines. The first test will be with the major seasonal promotions for cough and cold medicines. Supermarkets will be making deep price cuts.”

Mr D’Arcy says that there are many resources available to community pharmacists from the NPA, wholesalers and manufacturers to help them restructure their businesses.

“Pharmacists must start thinking differently. They must differentiate their businesses and show that there is something special about the pharmacy experience.”

The abolition of resale price maintenance will result in a 25 per cent decrease in the price of non-prescription medicines during 2001, Verdict expects. This compares with 3.1 per cent price inflation last year. Overall, health and beauty products are expected to fall by 6.8 per cent in price because of the end of RPM.

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