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Chemist opportunity? Opening your own pharmacy

1 March 2007

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Ailsa Colquhoun
Freelance journalist
specialising in pharmacy

New “control of entry” regulations, which came into effect in England in April 2005, have in the main made it easier and cheaper for parties, including practice managers and GPs, to open pharmacies.

Instead of subjecting an application to often-lengthy scrutiny by a primary care trust (PCT), or spending up to £1m to buy an existing contract to provide NHS pharmaceutical services, a GP wanting to open a pharmacy can just do it, providing the application falls into one of four new “exempt” criteria, and the pharmacy is prepared to provide the services that the PCT wants.

However, recently the Department of Health (DH) hinted that these new rules may not be here for much longer. Launching another consultation to take place in March, the outgoing health minister, Andy Burnham, said: “The question of whether the system remains a suitable vehicle to enable PCTs to meet their new roles and responsibilities for commissioning a patient-led NHS is open to further debate.”

The origin of the rules
The origin of the new pharmacy opening rules (the control of entry regulations) dates back to 2001, when the Office of Fair Trading (OFT) launched an investigation into the competitiveness of the pharmacy market in the UK. In 2003, the OFT voted to abandon the then 16-year-old legislation. However, vociferous opposition to the proposed free-for-all prompted the DH to opt instead for partial deregulation,
primarily through the mechanism of adding four exemption criteria:(1)

  • Pharmacies based in approved, out-of-town-centre retail areas, with more than 15,000 m-squared gross floor space.
  • Pharmacies that intend to open for more than 100 hours a week.
  • Consortia establishing one-stop primary care centres (see Boxes 1 and 2).
  • Wholly mail order or internet pharmacy services.



At the end of 2005/06, the DH evaluated the impact of the new regulations and found that there had been 390 applications to open new “exempt” pharmacies, 271 of which (69%) were under the 100-hour, and 10 (2.5%) under the new one-stop primary care centre exemptions. Overall, during the year, 58% of these applications were granted.(2)

The DH view
It is clear from the DH’s review of the reformed control of entry regulations that health ministers blame exempt pharmacies for at least some of the inefficient service planning that has been evident at PCT level over the past year.(2) Their report also notes that exempt pharmacy openings have had little significant impact on the price of over-the-counter (OTC) medicines – an objective that featured quite strongly in the original OFT report.

It also notes that patients had not universally benefited from having better access to pharmacies, leading to the conclusion that the costs and problems associated with exempt pharmacy openings outweigh the benefits they bring. Mr Burnham said: “Given PCTs’ responsibilities for strategic planning and commissioning, it is questionable whether, even after reform, the control of entry system is a suitable vehicle to enable PCTs to meet these responsibilities.”

Exempt positives
Despite the fairly negative tone, the DH report does, however, also find positives in the reforms – notably that they have “opened up the market and had provided more convenient services without jeopardising the vast majority of the existing pharmacy network or causing widespread upheaval or change.”(2)

Specifically, the DH finds that exempt pharmacies are able to provide proportionally more local enhanced services (LES) than nonexempt ones, thanks to legislation allowing PCTs to direct exempt pharmacies to provide an enhanced service as part of the terms of the application.

It also accepts that exempt pharmacy openings have improved access and competition. The report notes that, in the period 2003–6, the number of people who could not get to a pharmacy within 10 minutes of walking or using public transport fell from 16.2% to 15.7%.(2) It also reports that, thanks to the exemptions, pharmacies are increasingly becoming located near to a GP surgery and to each other.

Ministers also accept that some patients have had a good experience of extended opening hours, improved accessibility and access to the higher range and quality of services that the new contract offers. They conclude: “[Exempt pharmacies] are contributing to the goal of providing more convenient access to such services.”(2)

Opening a nonexempt pharmacy
GPs in England and Wales can alternatively open a pharmacy outside the route of the new “exempt” criteria by subjecting their application to the current range of control of entry tests. These were also amended for implementation from April 2005, and are seen as presenting new opportunities for GPs wanting to open a pharmacy – but they may also change, following the March consultation.

Under previous legislation, PCTs in England or local health boards in Wales had to assess whether any new pharmacy would be “necessary or desirable”. However, the new rules allow applicants to argue the necessity or expediency of a new pharmacy on the grounds that it would offer “competition and choice” (see Box 3).


Based on inhouse data analysis, pharmacy contract negotiator the Pharmaceutical Services Negotiating Committee (PSNC) believes that the concept of competition and choice has opened up the market, and is providing a mechanism for applications to succeed where formerly they would have been refused.

Evidence presented to the DH reveals that approximately 40% of the full applications that were granted during 2005–6 included arguments based on the new concept of competition and choice and that, in half of those cases, the application had been refused under the previous control of entry regime.(3) The PSNC said: “It is noteworthy that 45% of the full applications granted using the ‘choice’ criteria are adjacent to surgeries, compared with less than a quarter of full applications granted where competition and choice was not argued.”(3)

However, it is also worth noting that the necessary or expedient test has been designed to be deliberately restrictive, and as such was responsible for a 74% pharmacy application refusal rate in 2004–5.(4) David Reissner, from Charles Russell LLP, a law firm specialising in pharmacy contract applications, does not believe there is any reason to expect the refusal rate for (nonexempt) primary care centre sites under the new regulations to be any different than under the old.

And, as Nigel Morley, from Surelines, a Northampton-based company specialising in GP pharmacy contract application services, says: “Even with expert advice, they are doomed unless evidence can be demonstrated for the adequacy of pharmaceutical services in the neighbourhood  … the definition of [which] needs careful consideration.”

So, should you consider opening a pharmacy at all?
There is certainly public support for improving the pharmacy network. Consumer representative Which?, for one, has called for the whole control of entry regulations to be scrapped, describing the restrictions as “out of kilter with general policy trends” and not in the public interest. Deregulation would increase competition and lower OTC medicine prices, it said.(5)

Even some pharmacists welcome the opportunity of linking with a GP. Boots the Chemists, for one, has been actively recruiting GPs to consider giving space to a Boots-owned pharmacy. The retail pharmacy chain has opened eight practice-based surgeries over the past 12 months, bringing the total number of Boots healthcare pharmacies to 35.(6) A spokesman said the moves “more closely integrate pharmacy in the primary healthcare team.”

In his book, Your Own Pharmacy: A Guide For GPs, Dr David Roberts, who advises GPs on opening pharmacies, adds that GPs themselves may derive great professional benefit from running a pharmacy.(7) He says: “Any substandard or poor practice will quite reasonably reflect back on the doctors themselves.”


Examining the bottom line
There are, of course, also financial reasons for opening a pharmacy. Pharmacists generally enjoy two main income streams: NHS revenues and private OTC medicine sales. Currently, England and Wales’ 10,580 community pharmacy contractors have a share of £1,922m in the centrally negotiated global sum for 2006–7.(8) Additionally, pharmacies can negotiate local payments for enhanced services, some 17,745 of which were commissioned during 2005–6.(9)

OTC gains
At the end of 2005, consumer market analyst IRI valued the total OTC market at around £2,073m, a 2.2% increase on the previous year.(10) In a subsequent report, Verdict, another market analyst, states its belief that the retail pharmacy market is set for a period of strong growth, thanks to government initiatives to shift the emphasis from secondary to primary care, the aging population and changing consumer trends. It concludes: “Pharmacies are increasingly used as the first port-of-call for healthcare.”(11)

However, pharmacy OTC and NHS sales are under increasing pressure from the multiple grocers, most of whom already have ambitious pharmacy opening plans.(12) The Health Act, which came into force on 19 July 2006, may also impact on the prices a pharmacy may charge for its OTC medicines, as it allows for new pharmacy applications to be linked to improvements in access to, and provision of, OTC medicines and advice.

View of a pharmacy-operating GP
In June 2006, a pharmacy opened at the Stratford Healthcare Centre, Stratford, under the 100-hour exemption, as the practice does not have sufficient patient numbers to qualify as a one-stop shop primary care centre.

According to Dr Martyn Gill, a GP at the practice, the practice saw the pharmacy as a service that would “add to their overall healthcare offering” and that the practice’s current patient list size would make the pharmacy viable. So far, the financial business plan is on track, and patients say they enjoy the convenience of the “one-stop” service. The pharmacist also reports greater professional satisfaction.

Although the application using the exemption was straightforward, Dr Gill says the pharmacy has struggled to recruit sufficient pharmacists to cover the 100-hour opening: “It’s a sellers’ market, so you have to pay good salaries to get pharmacists, especially to cover the unsociable hours.”


  1. Department of Health. The National Health Service (Pharmaceutical Services) Regulations 2005: information for Primary Care Trusts (Control of Entry). Revised February 2007. Available from:
  2. Department of Health. Review of progress on reforms in England to the “Control of Entry” system for NHS pharmaceutical contractors – report. London: DH; 2007. Available from:…
  3. Pharmaceutical Services Negotiating Committee. The PSNC’s response to the Department of Health consultation: Control of Entry review. September 2006. Available from:…
  4. Family Health Services Appeal Unit. Annual report 2004–05.
  5. Which? Memo to the All Party Pharmacy Group Inquiry: The Future of Pharmacy. August 2006. Available from:…
  6. Boots the Chemists’ internal figures.
  7. Roberts D. Your own pharmacy: a guide for GPs. Oxford: Radcliffe Publishing; 2004.
  8. Pharmaceutical Services Negotiating Committee. National Contract Funding (England). Available from:
  9. The Information Centre/General Pharmaceutical Services. General Pharmaceutical Services (Annual Bulletin) 2005/06. November 2006. Available from:
  10. IRI Infoscan 52 w/e 24 December 2005.
  11. Verdict Research. UK Retail Pharmacy Market 2006. London: Verdict; 2006. Available from:
  12. Colquhoun A. Grocers catch pharmacy bug. The Grocer 2006;Oct 21:57–60.