Economic Analysis of NHS Pharmaceutical Services
Published on: 9th October 2024 | Updated on: 31st March 2025
NHS England has published its Economic Analysis of NHS Pharmaceutical Services, which informed negotiations on funding and other arrangements for community pharmacies for 2024/25 and 2025/26. This independent review, conducted by Frontier Economics and IQVIA, was undertaken in direct response to pressure from Community Pharmacy England during previous negotiations. Community Pharmacy England was a member of the Advisory Board that oversaw the delivery of the project.
The report highlights that loss making and severe cashflow issues are affecting large parts of the sector, with 47% of pharmacy branches not profitable at EBITDA level in their last accounting year and an increasing number of pharmacies defaulting on Direct Debits for stock. In answer to its core inquiry, the Economic Analysis identifies that the mean Full Economic Cost to operate a community pharmacy in 2023/24 was £409-£573k, or £5,063 million for the sector, and that nearly 100% of pharmacies receive less funding than that.
Read the Economic Analysis of NHS Pharmaceutical Services report
This Economic Analysis, along with economic projects that Community Pharmacy England has itself commissioned, will continue to be used to press Government and the NHS to follow good practice in economic regulation, to make more evidence-based funding decisions, and most importantly, to sustainably fund community pharmacies.
Community Pharmacy England has developed the following summary briefing on the Economic Analysis aimed at Parliamentarians and wider policy stakeholders, which pharmacy owners and LPCs may also find useful.
Summary Briefing: Economic Analysis of NHS Pharmaceutical Services in England
Background
NHS England commissioned an independent economic analysis of NHS pharmaceutical services, to be carried out with Community Pharmacy England and pharmacy owners.
The Independent Economic Review – also referred to as an Economic Analysis of Community Pharmacy – was agreed as part of the Community Pharmacy Contractual Framework (CPCF) arrangements for 2022/23 and 2023/24 and followed the significant concerns Community Pharmacy England raised about the economic sustainability of the sector both through the CPCF Annual Review process and in subsequent negotiations.
Conducting the review
Frontier Economics and IQVIA were commissioned to carry out the economic analysis of community pharmacy on behalf of NHS England.
The project gathered data from pharmacy owners across the sector to answer the following key questions:
- What are the full economic costs of delivering NHS pharmaceutical services, and how do these costs vary across and within: different types of pharmacy; different mix of dispensing activity and services; and different locations?
- Are NHS community pharmacy businesses sustainable under the current funding model, including the current trajectory of the sector? To what extent are NHS services at risk of interruption?
- Which clinical services can be most efficiently delivered from community pharmacy as compared with general practice or the wider NHS?
The main stages of the project were as follows:
- Setting up an Advisory Board and Working Group comprised of sector and NHS England representatives to help inform the project, including determining the scope and methodology.
- ‘Bottom-up’ data collection – a small but in-depth survey of community pharmacies from a range of different business sizes and models. These initial findings were then used to inform the most important questions to retain in the ‘top-down’ survey.
- ‘Top-down’ data collection – a much wider but less cumbersome survey to obtain as many responses as possible. A campaign was launched to reach out to pharmacy owners.
- Analysing all data received and preparing the final report.
Community Pharmacy England’s involvement
The Independent Economic Review was a hugely important, but very complex and time-consuming project.
Community Pharmacy England had been telling Government and the NHS loudly and clearly that pharmacies are no longer economically sustainable. This review helps prove that to them, and that is why our Negotiating Team pressed hard for it to be carried out independently and included as part of the agreement for CPCF Years 4 and 5.
Having been involved with this project since the NHS England tender process, we worked to ensure the review gave a fair and accurate picture of the extremely challenging economic position that all pharmacies had found themselves in: this was essential to underpin any future negotiations and to inform future policy.
The project had an Advisory Board and Working Group, which included Community Pharmacy England staff and pharmacy owners. We provided an important sense-check for Frontier Economics and IQVIA as they established the methodology for the review, and remained in close dialogue with NHS and DHSC throughout the process. Regular supportive and constructive feedback was provided, whilst also laying down markers for our minimum expectations to avoid generating an incomplete picture.
Further information
For more information on this topic please email funding.team@cpe.org.uk
