For the past four years, almost all discussion of the barriers facing anyone wanting to open a community pharmacy in England has centred on the issue of 100-hour pharmacies.

 

This controversy has arisen from the government's decision in 2005 to allow any application for an NHS pharmacy opening for 100 hours a week to be approved unhindered. Although this has allowed many more pharmacies to open, it has created uncertainty for other contractors and for the primary care trusts (PCT) that pay for pharmacy services.

 

Now, after almost three years of reviewing and considering the impact of 100-hour pharmacies, the government finally looks set to overhaul the criteria that have to be met by anyone wanting to open new NHS community pharmacy premises.

 

Before 2005, anyone wanting to open a new pharmacy in England faced considerable barriers. Applicants had to demonstrate to their local PCT that the pharmacy they were proposing to open was both 'necessary' and 'desirable'. These restrictions were designed to give PCTs some power over 'control of entry' into the community pharmacy market. Allowing too much competition would, it was feared, create business uncertainty for current pharmacies and disincentivise their investment in new services.

 

However, these controls were seen by many as creating unnecessarily barriers to market entry. The Office of Fair Trading (OFT) was particularly critical of the restrictions and argued they should be completely scrapped and that any registered pharmacy with qualified staff should be allowed dispense NHS prescriptions.

 

Recognising the need for reform, but resisting calls to remove all restrictions, in 2005 the government set out it described as a 'balanced' set of reform the of the 'control of entry' regulations. These measures broadly comprised of the old 'necessary' and 'desirable' requirements allied with a new set of exemptions designed to remove barriers to the development of innovative pharmacies intended to improve patient access. Under the new arrangements, PCTs would not be able reject applications that met the requirements of any of four exemptions: pharmacies opening for 100 hours a week or more, pharmacies in  large out-of-town shopping developments,  mail order or internet-based pharmacies, and pharmacies in new one-stop primary care centres.

 

For many pharmacists these exemptions represented their first opportunity to own their own premises. The restrictions placed on market entry by the old rules had meant that goodwill values had risen well above those that any pharmacists wanting to open their first premises could afford. Being able to open a pharmacy without having to either pay these costs would be many pharmacists' only way of owning  their own premise. As a result, the number of community pharmacies opening each year has risen more than six-fold since the exemptions were introduced. In 2004/05, 42 new community pharmacies were opened in England. In 2005/06 this rose to 146, jumping to 270 in 2006/07.

 

This expansion has been driven largely by applications for pharmacies opening under the 100-hour exemption, which have represented half of all those granted since the reforms were introduced. In 2005/06, there were 339 applications granted to open a new pharmacy, 46 per cent of which were for 100-hour pharmacies. In 2006/07, 509 applications were granted, 51 per cent for 100-hour pharmacies. And in 2007/08, 46 per cent of the 489 applications made were for 100-hour pharmacies.

 

But the 100-hour exemption has also faced stiff criticism. PCTs have objected to the changes because they must pay for the 'essential services' these pharmacies provide without having any say in whether these services are needed. Other pharmacy contractors have complained that applications for 100-hour pharmacies reduce  business certainty, disincentivising investment in premises and services. And pharmacy organisations have expressed concerns abuse of the exemption. Premises have been thought to be opening under the exemption and then not providing a complete range of services for all 100 hours that they are open.

 

The background to these criticisms has been scrutinised in a slew of government reviews and consultations of the 100-hour exemptions since it was introduced. In June 2006, the government launched its first review of the impact of the reform, which recognised concerns about the changes but concluded that further major changes would be not be 'prudent' at that time. Instead, a more wide-ranging review of the way community pharmacy contracts in England were being awarded was launched in January 2007. The outcome of that review was included in the pharmacy White Paper, launched in April 2008. The White Paper acknowledged that 100-hour pharmacies had improved access in some areas, but it also recognised PCTs' concerns about the adverse effect on their funds and ability to plan services.

 

Eventually, in August 2008, the government put forward plans to scrap the current market entry restrictions. In their place, the government suggested introducing a system based on assessments by PCTs of the pharmacy service requirements of their local areas, so-called 'pharmaceutical needs assessments'. These assessments would become the basis on which PCTs would decide upon applications for new pharmacies.

 

Although PCTs already carry out  pharmaceutical needs assessments, these are likely to have to be considerably strengthened and standardised nationally in order to make them suitable for use as the basis of decisions about whether to grant applications for new pharmacy premises. Guidance on how to produce pharmaceutical needs assessments has been produced by NHS Employers and this sets out how to produce a PNA and how robust PNAs can be used to inform decisions on applications to provide pharmacy services.

 

The government also proposed that, ahead of longer-term reform, 100-hour pharmacies should remain exempt from additional application requirements. They should, however, be subject to local contracts with PCTs which would require them to provide defined services, the government suggested. But most respondents to the government's consultation argued that applications for 100-hour pharmacies should be subject to a  moratorium, because of their destabilising effect on local pharmacy services.

 

The government's full response to the consultation on the proposed changes to the current market entry restrictions is due to be published in the coming weeks. While it will undoubtedly confirm the government's intention to introduce market-entry criteria based on local pharmaceutical needs assessments, what new restrictions it will place on 100-hour pharmacies remains to be seen. These could be left entirely to local discretion or may impose new onerous demands on 100-hour pharmacies. Whatever is put forward, the government will be hoping that, without undermining current levels of service provision, the changes can successfully remove barriers to opening new community pharmacies and thereby widen access and improve services for patients.

 

May 2009