Value of goodwill disputed in contract
A dispute between the Pharmaceutical Services Negotiating Committee and the Department of Health over goodwill values is going to be central to negotiations over funding for the new pharmacy contract.
The PSNC believes that the goodwill value of pharmacy businesses is part of the
capital employed in providing pharmacy services, while the DoH believes that
the NHS should not pay for that aspect.
The PSNC and the Department have agreed the principle that the payment due to
pharmacists under the new contract should cover the cost of providing the contract
plus a fair return. This will be met by a global sum or equivalent, plus purchasing
incentives (retained profit on NHS buying).
Godfrey Horridge, financial executive at the PSNC said last week: “We are
a long way off agreement on fair return and purchasing incentives. We have agreed
that there will be a global sum and our objective is that it should be uncapped.” But
the Department might insist on a capped global sum, as it has done with the new
general medial services contract.
The DoH position is understood to be that it should not pay a return on goodwill
because it is not a tangible asset. The PSNC position is that goodwill is a major
part of the capital cost of buying a pharmacy business, even though there is
no goodwill cost in setting up a new pharmacy.
In accounting terms, goodwill is the difference between the value of a business
as a going concern and its liquidated value. In the case of pharmacy businesses
this can be a considerable sum.
The Department has accepted that purchasing incentives are needed if community
pharmacists are to continue to try to drive down costs by seeking better deals
on generics and parallel imports. The issue at stake is how much profit there
should be and how much the NHS will allow contractors to keep.
Confirmation that negotiations are going to be tougher than first hoped was given
by the minister with responsibility for pharmacy, Rosie Winterton, at a meeting
of the All-Party Pharmacy Group on 1 December. Mrs Winterton said: “Discussions
will last longer than expected and longer than we hoped. We prefer to get it
right. We will have an agreement by the end of March and implementation as soon
as possible after that.” |
