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Lloyds demands 25% rent reduction on 300 pharmacies

The UK's second largest multiple struggling with high rents in pandemic

LloydsPharmacy parent company McKesson UK is “insisting” on a 25 per cent discount from its health centre landlords amid concerns some branches are becoming “unviable” during the pandemic.

In a statement yesterday (November 19), the company said that due to reduced footfall during the Covid-19 crisis existing rents in health centre locations are “unsustainable” and must be renegotiated to avoid closures. A spokesperson told Pharmacy Network News that the multiple has around 300 branches based out of health centres. 

LloydsPharmacy says it has “already exited” 99 of its branches in the past 12 months “as a result of mounting cost pressures and declining footfalls”.

Rents in many health centre locations are determined by the number of patients on the register, the multiple says, meaning that during the pandemic footfall has not been sufficient to cover costs in these branches.

The multiple pointed to a National Pharmacy Association report highlighting that the current terms of the community pharmacy contract could put 72 per cent of pharmacies in deficit by 2024.

The direct plea to landlords follows “multiple failed attempts to engage in rent negotiations with NHS Property Services,” LloydsPharmacy said, adding that it is “now insisting on a 25% discount to the rent in these locations”.

McKesson UK chief financial officer Chris Keen said: “As we deal with the second wave of COVID-19, some of our landlords continue to refuse to engage in discussions about unsustainable rents.

“Many health centre landlords base their rents on the number of patients on their register, but these patients are currently being encouraged not to visit sites as GPs provide video and telephone consultations.

“Some institutional landlords have engaged to discuss alternative solutions but the majority, including NHS Property Services, are refusing to recognise the impact of reduced footfall. This is clearly unsustainable and puts at risk our ability to continue providing vital healthcare services to the communities we serve.”

Mr Keen added: “We ‘re grateful that most of our landlords have agreed to move to monthly rent payments, or to work closely with us to look at a lease re-gear. This, together with the business rates relief, has certainly helped to maintain the stability of the pharmacy network.

“However, many pharmacies are no longer financially viable, with nearly a quarter of our English LloydsPharmacy sites being loss-making after incurring significant COVID-19 related costs.”

An NHS Property spokesperson said: “As an organisation owned by the Department for Health and Social Care, it is vital that NHS Property Services (NHSPS) obtain best value for patients and the public. All monies generated are invested directly back into the NHS estate for the benefit of patients.

"We recognise the challenging trading environment which small businesses and larger organisations, such as McKesson, operate in. As such, in early November we wrote back to the CEO of McKesson UK to offer a variety of practical and tangible solutions, including a bespoke site-by-site approach to ensure that communities retain these vital services. We have not received a response to our proposals.”

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