March The General Pharmaceutical Council (GPhC) Pharmaceutical Regulation

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1 What is the GPhC? The General Pharmaceutical Council (GPhC) Pharmaceutical Regulation 12, 13, 19 and 21 March 2013 Community Pharmacy West Yorkshire Your regulator Pharmacy Order 2010 (replaced RPSGB) 21.3 million Statutory purpose six functions Andrea James, Solicitor Head of Healthcare Regulatory George Davies Solicitors LLP Six functions Process Six functions 1. Education & training 2. Registering competent professionals 3. Registering pharmacies 4. Setting and monitoring standards 5. Inspecting pharmacies new standards Taking action when standards not met Grounds of impairment Grounds of impairment (cont d) Impairment Misconduct Deficient professional performance (competence) Adverse physical or mental health Failure to comply with a professional performance assessment Conviction Impairment cont d Caution Bind over Determination by other regulatory body Independent Barring Board/Scottish Ministers Here or abroad Any time 1

2 Statistics/Outcomes Outcomes (cont d) Statistics 45,435 pharmacists & 20,766 pharmacy technicians 777 complaints (1.17%) Outcomes : Close Letter of advice Outcomes cont d: Warning - 88 Suspension - 45 Conditions - 15 Erasure - 10 Undertakings - 3 Ongoing Looking ahead NHS (Pharmaceutical Services) Regs Looking ahead Modernising Pharmacy Regulation Five key principles Revalidation Law Commission review Rebalancing initiative The National Health Service (Pharmaceutical Services) Regulations 2012 Came into effect 1 September 2012 Main changes: Abolition of 100-hour exemption Revised regulatory regime Part 5 Part 6 Part 5: Refusal or deferral of applications to pharmaceutical list Language requirement Same or adjacent premises Deferrals arising out of LPS designations Part 6: Refusal, deferral & conditional inclusion on fitness grounds Must refuse: Convictions National disqualifications Conditions 2

3 Part 6 (cont d) Part 6 (cont d) Part 6: Refusal, deferral & conditional inclusion on fitness grounds May refuse: References Unsuitable NHS BSA/Secretary of State Prejudicial to efficiency of service Part 6: Refusal, deferral & conditional inclusion on fitness grounds Criminal proceedings Licensing or regulatory body investigations First-tier Tribunal appeals NHS BSA investigations PCT considerations Part 10 Part 10 (cont d) Part 10: Performance related sanctions Local dispute resolution Exceptions Remedial notices Breach notices Part 10: Performance related sanctions cont d Withholding of remuneration Removal of listings Justifiable & proportionate Appeals Secretary of State 2013 Regulations Delegate questions 2013 Regulations Come into effect 1 April 2013 Administrative in nature, e.g. Section 13 NHS Commissioning Board LATs HWBs CCGs Delegate questions 1. What can I do if the PNA is inaccurate? 2. What are Unforeseen Benefits? 3. Can you provide some clarity on significant and insignificant relocation? 3

4 Delegate questions (cont d) Delegate questions cont d 4. What s the position on essential services in the vicinity of distance selling pharmacies? 5. How is proportionality determined on sanctions? Ownership and Operation of Retail Pharmacies Current Trends and Legal Issues Arising from the Sale Process David Easdown, Associate Our experience Current issues Acting for two of the largest wholesale distributors in the UK Acting for one of the largest privately owned retail pharmacy chains in the UK (over 150 outlets) Providing commercial advice to independent pharmacists with single outlets or smaller chains including employment, litigation and property Regulatory advice provided with particular expertise in FHSAU matters led by Andrea James Nationally recognised pharmacy M&A team David Easdown has been involved with the sale and purchase of over 100 outlets including a purchase of a pre-trading pharmacy contract for 5,000 and a 38.3m acquisition in 2011 Competition Law and Script Direction (delegate query) Ownership of Pharmacies is it still worth it?! Due Diligence and Management Issues Key Terms Structuring a Negotiation Completion and Post-Completion Questions? Script direction Script direction - remedies 1. We have seen a large number of complaints over the last two years 2. Characterised (typically) by behaviour of some (but not all) GPs who have financial interests in adjacent or nearby pharmacies 3. GMC Regulation for GPs: Honest and open in all financial arrangements Financial and commercial interests must not affect prescription patterns or behaviour No inducements, gifts or hospitality Financial and commercial interests must not affect advice to patients Disclosure of interests Freedom of choice for patients without duress 4. GPhC Regulation of Pharmacists Professional judgement should not be affected by personal interests Avoid conflicts of interest and declare any professional interests (disclosure) What remedies are available to pharmacists who think that they are being affected? 1. EU/UK Competition Law (highest level) Competition Act 1998 and Enterprise Act 2002 produces a prohibition on certain trade practices. To be considered there must be: An agreement Which may affect trade in the UK (or part of it) Which has as its object or effect the restriction, prevention or distortion of competition in the UK In addition the effect on trade and competition must be appreciable Enforcement is carried out by the OFT. Whilst it has looked into other competition issues that we are aware of (e.g. direct to pharmacy model), it is unlikely that local level agreements would be looked into. 4

5 Script direction - remedies Ownership- is it worth it? What remedies are available to pharmacists who think that they are being affected? 2. Regulators (GMC/GPhC) Large number of complaints received by the GMC Issuing guidance for pharmacy-owning GPs later this month GPhC similarly concerned to issue guidance notes 3. NHS Competition Rules Complaints are being passed to the NHS but the issue remains that despite all of the concerned parties involved there isn t an immediate way of policing it, neither are the resources there to do so if the law was changed (see media speculation last week) BUT (for pharmacists) note s30 of Schedule 4 to NHS (Pharmaceutical Services) Regs 2012 which prohibits offering rewards or inducements. This doesn t prohibit being in business with GPs or, on the face of it, paying them for consultancy services, which is often the route taken in joint venture arrangements. Despite the abolition of 100 hour pharmacies, the pharmacy market continues to see a softening of prices since the heady days of when pharmacies were changing hands in some cases at 2 of goodwill per 1 of turnover The current trend is for pharmacies to be valued at a multiple of EBITDA. This is a much more sensible way of valuing pharmacies as it is effectively a measure of how long it will take for the shop to pay for itself and begin to make true profit The current multiple is around 6 x EBITDA for community pharmacies, with a racier multiple for pharmacies located at health centres. For example we had a very modern pharmacy recently that had a 100 hour contract turning over around 1.2m per annum but which was only making a very low EBITDA due to the costs of the business. As such there was a large discrepancy in what the parties thought the pharmacy was worth and what the banks (perhaps understandably) were prepared to lend This has led to some pharmacies being valued by banks (when funding a purchase) at much lower than the notional price that the parties have agreed. Coupled with increased information governance and regulation, this has led to some operators wondering whether it is still worth owning a pharmacy and we have seen a large number of retirement sales in the last 18 months Ownership- is it worth it? (cont d) Due diligence- financial issues However, given the downward pressure on pharmacists salaries, falling locum rates and more competition for jobs, ownership is still attractive for many pharmacists and on balance, it is likely to yield a higher level of remuneration than a salaried position would Therefore we want to remain positive and highlight some current issues that we are seeing in the market generally and specifically due diligence issues that have arisen on recent deals This is useful for buyers and sellers of pharmacies, but also pharmacy managers and pharmacists who can assist their employers with spotting these issues before they occur It is imperative that in assessing a target pharmacy s financial performance, that wholesaling does not distort the underlying turnover and profitability of the target pharmacy when assessing its financial performance Wholesaling can now be categorised as high volume/low margin work but that is not always true and there are some anomalies which can cause profitability to increase. It is important to understand when and how the target pharmacy wholesales stock (e.g. to reduce wastage) Are the staffing levels correct? What impact would additional staff have on the financial performance? What effect has competition had on script numbers recently? (100 hours opened nearby?) Effects of category M on profitability Due diligence - legal issues Due diligence - legal issues (cont d) Commercial due diligence Relationship with nearby GP surgeries see previous slides! How long do the GP s have left at their current location? Understanding the script origination data - this should be asked for as part of due diligence Relationship with nursing or care homes high effort work but some operators (especially internet pharmacies) are targeting them specifically and taking them away from traditional operators Competition Property due diligence Is property freehold or leasehold? If freehold does the building retain the same value if no pharmacy? (relocation) If leasehold can breaks be negotiated if no pharmacy? If leasehold in a health centre breaks can be contemporaneous with GP/PCT lease Key issue is to avoid being stranded or with an overvalued building if pharmacy moves GPhC registration of premises mandatory 5

6 Due diligence - legal issues (cont d) Key terms Employment due diligence Experience from dental clients seeing locums claiming employment rights on termination of their engagement Need for a written agreement with locums Indemnity from the seller for any claims Beware TUPE on asset sales Structuring the deal Supporting the due diligence with warranties and indemnities is the DD true? Retention to cover claims? Involving the bank s valuers and lawyers as early as possible Existing commercial arrangements with GPs to be honoured in light of previous slides? Timescale considerations where is the third party involvement? Take specialist advice Completion and post-completion Questions Ongoing commercial points Evaluate new applications and change of ownership notifications when they land. Will there be an impact on your business? Staffing levels and contracts Relationship with suppliers - buying groups? Marketing beware NHS s Code of Practice for the Promotion of NHS-Funded Services and GPhC s Professionally Promoting and Advertising Pharmacy Services and Medication Meet the team Andrea James David Easdown Associate andreajames@georgedavies.co.uk Associate davideasdown@georgedavies.co.uk