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The long-awaited economic analysis of community pharmacy has been published today and reveals the devastating impact years of underfunding is having on pharmacies – with around 78 per cent in England not sustainable in the short term.

The study, commissioned by NHS England and finally made public after months of campaigning by pharmacy bodies, analysed the economic costs of delivering NHS pharmaceutical services, pharmacies’ sustainability under the current funding model and whether NHS services are in jeopardy as a result.

A report on the analysis, based on the 12 months to March 31, 2024, made for grim reading. It found about 47 per cent of pharmacies were not profitable in their last accounting year according to their earnings before interest, taxes, depreciation and amortisation.

Cost of providing NHS pharmaceutical services was £4.397bn-£5.730bn

It estimated the full economic cost of providing NHS pharmaceutical services in England was £4.397 billion to £5.730 billion. That included £3.004 billion to £3.915 billion in pharmacy-level and centralised costs and £1.393 to £1.815 billion in other costs.

Community pharmacy operated on a contractual framework from 2019 to 2024 that funded the sector by £2.592 billion annually, although the sector effectively worked without a contract during 2024-25 as it waited for funding talks between Community Pharmacy England and the Government to begin.

They are currently embroiled in negotiations for 2024-25 and 2025-26 but the timing of the report’s publication will disappoint pharmacy leaders who called on NHSE to publish it before those talks opened.

Nonetheless, the report was deeply concerning. It showed some 8,469 pharmacies in England, equating to 78 per cent, had funding which was lower than pharmacy level and centralised costs by between £249 million and £1.160 billion.

Ninety-nine per cent, or 10,717 pharmacies, had funding which was lower than the full economic cost by £1.642 billion to £2.975 billion.

“Within these 99 per cent of pharmacies, NHS pharmaceutical services are not sustainable in the long run,” the report warned.

“There is a significant risk of interruption to NHS pharmaceutical services offered in these pharmacies due to closure of these pharmacies or due to operational pressures leading to a reduction in quality or scope of services provided.”

Rising number of pharmacies defaulting on direct debit payments

The report said an increasing number of pharmacies are defaulting on direct debit payments for stock and 99.9 per cent reported that financial pressures in the last three years had forced them to make “significant changes in the management of staff”.

The same proportion of pharmacies had to make “changes in operations”, 74.7 per cent reported “significant change in financing their business” and 81 per cent reported “significant changes in property management due to financial pressures”.

The analysis found a seven per cent net reduction in the number of pharmacies between January 2021 and November 2024, although those were “concentrated in the large pharmacy chains”.

The report noted the number of independent pharmacies and smaller chains had actually risen in the last year “as smaller companies bought some of the pharmacies being closed by the larger chains”.

However, it said 37 per cent of pharmacies “would be deterred from closing because of the costs incurred in doing so”, such as redundancies, lease commitments and “loss of asset intended to support pension”.

Pharmacy companies may struggle to meet debts in next year

Of the 17 pharmacy parent companies who provided data, 24 per cent had liabilities that exceeded assets.

“Around half of pharmacy companies in our sample who provided relevant data may struggle to meet their debts over the next year,” the report said. “This could lead to financial difficulties and even closure amongst a subset of these companies.”

NPA chair Nick Kaye said the report highlighted “the sheer scale of the financial crisis in community pharmacy that the current Government has inherited”.

“(The report) reflects the urgent issues our members have faced over the past decade to support millions of people in our communities,” he said.

Kaye also warned the analysis “lays bare this new government's dreadful inheritance” and insisted the NPA recognised “they have a mountain to climb if they are to begin to bridge the funding gap facing pharmacies and maintain services to patients”.

“This is a very serious situation for patients which we know ministers will take extremely seriously and we hope the Government’s financial settlement can start to turn the tide for pharmacies that are on the brink,” he said.

The analysis was carried out by IQVIA and Frontier Economics between April 2024 and March 2025.