Lloydspharmacy calls for drug payments reform as profits plunge

The calls for change come after Lloydspharmacy reported pre-tax profits plunged by more than two thirds last year, in part because of a number of cuts in drug reimbursements from the NHS over the last few years.

The pharmacy, which is owned by German pharmaceutical retailer and wholesaler Celesio, recorded a 69% plunge in pre-tax profits to £18m in the year to December 31, 2012. Sales fell 2.2% to £1.72bn.

Lloydspharmacy said: “The financial pressure facing community pharmacy over the last few years as a result of drug tariff reductions underlines the need to review the community pharmacy contract in order to deliver stable and fair funding.”

Lloydspharmacy said reductions in the drug tariff – where the NHS reimburses pharmacies for medicine – had “significantly” impacted gross margins. In order to offset this, Lloydspharmacy said it had been working with suppliers to reduce costs.

In addition, earnings were hit by the integration of Lloydspharmacy with Celesio’s wholesale business AAH, which led to expenses of £13.6m.

But the retailer said it was a “good performance during a period of considerable financial pressure for community pharmacy as a whole”.

It added: “The company believes it has the right strategy and underlying business strengths to drive profit growth in the years ahead as it now has a lower cost base and is continuing to develop and extend its range of healthcare services.”

Lloydspharmacy said it will continue to roll out its European Pharmacy Network store design, which was unveiled last year. So far 10 stores have been refitted.