Pharmacy market entry is governed by the Pharmaceutical Services Regulations
[1]. Between 1987 and 2005, new NHS pharmacy “contracts” could only be granted if a restrictive necessary or desirable test could be satisfied.
In 2005, the Pharmaceutical Services Regulations were relaxed to allow pharmacies to obtain an NHS contract without having to satisfy the necessary or desirable test if those pharmacies would be open for at least 100 hours a week.
According to a 2008 White Paper
[2], there were:
“… considerable problems with this exemption, which can be summarised as a lack of PCT control over where such pharmacies are located; there is no match between the better access that a 100 hours per week pharmacy delivers and the need for such an improvement locally; there is clustering of 100 hours per week pharmacies close to each other or around income sources…”[3]
In 2009, the Pharmaceutical Services Regulations were amended
[4] so as to prevent an application being granted if pharmaceutical services were already being provided at the application site. The reason, according to the accompanying Explanatory Memorandum was as follows:
“A loophole is removed which enabled a contractor to apply to provide NHS services at, or move NHS services to, a site where NHS services are already being provided. This can lead to a PCT paying up to twice the normal NHS allowances for what is in effect a single pharmacy...”[5]
This provision is now in regulation 31 of the Pharmaceutical Services Regulations.
In 2012, when the Pharmaceutical Services Regulations underwent a major change, the necessary or desirable test was replaced by a test linked to local Pharmaceutical Needs assessments, and the 100-hour exemption was dropped.
On 15 December 2015, the Department of Health (now DHSC) announced severe cuts to the funding of community pharmacies. Part of its rationale was that pharmacies tend to cluster
[6] together. In an Impact Assessment published by DHSC on 19 October 2016 to coincide with the implementation of the cuts, DHSC assumed that the cuts would result in pharmacy closures but said “there is no reliable way of estimating the number of pharmacies that may close as a result of [the cuts]”
[7]. The impact assessment addressed
[8] what it described as “Inappropriate focussing of NHS resources on certain clusters of pharmacy businesses”.
In 2016, DHSC amended the market entry regulations to enable pharmacy owners to apply to merge two pharmacies onto a single site
[9] (closing one of them) referred to as “merge & close”.
In March 2018, DHSC published a review the operation of the market entry regulations. This review noted that 1,135 out of 1,153 100-hour pharmacies were in a cluster.
[10]