Pearl Chemist describes itself as a “fast-growing independent pharmacy chain”, but its superintendent pharmacist and director Mayank “Mike” Patel told C+D in an exclusive interview yesterday (August 6) that it is “frugal” and focuses closely on the “fit” of a possible new pharmacy.

The South West London and Surrey-based chain grew its estate to 24 pharmacies by the end of October 2023 and added three more pharmacies after the reporting period ended, according to its latest financial report.

The annual report published on Companies House last week (July 31) revealed that Pearl Chemist grew its sales by 4% to reach £48 million for the year ending on October 31 2023.

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But it reported a loss before tax of £290,000, down from the previous year’s profit of over £800,000. 

Its financial director Vijaykumar “Vijay” Patel told C+D that the loss primarily came from “amortisation” of the business, with the profit from 2022 coming after it “hived up” its estate.

Mike Patel told C+D that Pearl can pursue its growth strategy because it has “good infrastructure and a good team in place”.

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He added that Pearl doesn’t “tend to deviate” from its business model “unless something drastic changes” and that it “factored in funding cuts” to its calculations.

And Vijay Patel emphasised the business’s “solid” gross profit, which grew by 10% in the year to £12m.

 

Building on a legacy

 

Mike Patel told C+D that Pearl was “lucky” to benefit from the “very solid financial family background” left as a legacy by his and Vijay's father, Harindra “Harry” Patel, who passed away in November last year.

Mike Patel said that his father's support and mentorship had placed Pearl in “a different space” to many other contractors.

And mentorship is what Mike Patel would like to see more of, with owners of pharmacies supporting the “new generation” to learn “how to work and understand the finances”, he told C+D.

 

Growth strategy

 

Pearl began in Tooting and has grown in “concentric circles” through the years into South West London - Wandsworth, then Merton - and into Surrey, Mike Patel said.

It embraces being a regional operator - knowing its demographics and building relationships - but any possible new pharmacy “has to fit into what we're doing”, he added.

“We have got a growth strategy, but we'll only buy smart - we don't just buy anything, it has to fit into our portfolio of the kind of pharmacies that we want or it has to be in a specific region,” he said.

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“Buying something that is lovely and cheap but too far away from me doesn't make sense because there's a cost of looking after it and managing it,” he told C+D, adding that he wouldn’t buy a pharmacy in somewhere outside his region even if “somebody if offering it to me for free”.

And Mike Patel told C+D that contractors must also be “mindful of what you're stocking in your branches, what your core lines are, those kinds of things, and what services you can offer in those areas”.

He said that Pearl tries to understand “patient needs”, asking what an area is missing in terms of pharmacy services and how it can grow its business “with the community”.

 

Change is needed

 

But Mike Patel said that the current contractual arrangement for community pharmacy is “not conducive” to allow the sector to respond to local needs in a “patient-centric service”.

“We can create the capacity [and] we can grow the private side of the business, but the NHS side of the business is dictated by everyone else,” he said.

He called for a “massive uplift” to the contract so that the sector is paid “more fairly” - and a return of the establishment payment that was used to “cover a lot of things”.

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But he also sees room for growth in Pharmacy First, adding that more conditions and a “self-referral route” would bypass the “many hurdles” of the present service.

“If a contract improves, then there is a light at the end of the tunnel [but] if a contract doesn't improve, there are going to be problems - there are going to be more closures,” he warned.

 

Hub and spoke benefits

 

The jewel in Pearl Chemist’s crown is its hub facility, which Mike Patel hailed as “a brilliant solution” for organisations of Pearl’s size.

He stressed that a hub and spoke system is not cheaper to run, noting the impact of its “final mile costs”.

But, he told C+D, it has conferred significant benefits for Pearl’s “safety profile” and for the wellbeing of its workforce.

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With “60-70%” of the dispensing work resolved at the hub, he said that Pearl’s pharmacists are “actually able to concentrate on the patient”.

He hailed the “structured” approach to safety that Pearl’s hub and spoke system enables, which means that its “teams in branches are not stressed out”.

 

Count the costs

 

Mike Patel, who also serves as the chair of his local pharmaceutical committee (LPC), called on contractors to “learn to say no”.

“There's a cost for every single thing that we do in community pharmacy and we need to account for it,” he said.

He added that the “whole mindset” of many contractors needs to change as they work themselves to the bone to their “financial detriment”.

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A pharmacy owner will be “working until 11 o’clock at night” to make their accounts “look amazing”, “but how is he paying for himself?” he asked.

He told C+D that independent pharmacy owners needed to be “mindful” of the “difficult” choices needed around costs, because larger organisations are “happy to make those choices”.

Read more: ‘A history of failure’: Weldricks boss blasts pharmacy negotiator 

If the sector continues to “put 150 hours” of work in for “10 hours” return in payment, “the contract is never going to get better”, he said.

Last month, Community Pharmacy England (CPE) revealed that negotiations on the new pharmacy funding deal for 2024/25 will likely not resume until September at the earliest.