Featured, Market Study
Lloyds Pharmacy
Pharmaceutical Industry
The Covid-19 pandemic thrust the pharmaceutical industry into the spotlight, intensifying the pressure to deliver swift results. Since, companies faced a host of challenges.
The pharma’s role within the healthcare system is weakening due to:
– A sudden surge in demand which encourages research and development, but that implies high financial burden
– Economic strains,
– Suffocating regulatory change.
To remain profitable, pharmaceutical companies need to change their operational strategy as the industry faces new challenges. This is what LloydsPharmacy, once the 2nd largest pharmacy chain in the UK, did but faced with a cliff edge.
LloydsPharmacy, which was founded in 1973, had a significant potential.
Ownership history:
Over the past decade LloydsPharmacy (Clinical Homecare, LloydsDirect, Lloyds Online Doctor and a wholesale AHH) had many owners.
– In 1973, Lloyds Chemist began when Allen Lloyd purchased his 1st pharmacy in Polesworth (UK).
– In 1997, LloydsPharmacy was purchased by Celesio AG and merged with Celesio’s existing UK subsidiary, AAH Pharmaceuticals, forming a network of 1300 pharmacies.
– In 2014, the american healthcare company McKesson acquired Celesio AG, becoming the parent company of LloydsPhharmacy along with its other units: LloydsPharmacy Clinical Homecare, LloydsDirect, Lloyds Online Doctor, and a wholesale arm called AHH.
– In April 2022, McKesson’s UK businesses, including LloydsPharmacy, the wholesaler AAH, and a travel health service, were purchased by the Aurelius Group for £477m.
Transforming the company:
LloydsPharmacy became an omnichannel company platform. This strategy was validated with the significant growth across its online offering during the pandemic.
After the purchase by Aurelius Group, as a result, LloydsPharmacy joined the Hallo Healthcare Group, the holding company brand name for some of the UK’s most renowned healthcare organizations.
So, how did a business which had 1,338 stores at the end of 2022, just a over year later disappear from the high street.
LloydsPharmacy began to exit the pharmacy market, since 2017 due to:
– Government funding cuts
– Higher operating costs.
The chain swung to a pre-tax loss of £148m in the year to 31 March 2017.
The closures began in 2017 and continued with 17 stores in 2018, 60 in 2019, 76 in 2021 and 41 in 2022.
According to the Companies House, for the year ending March 31, 2022, Lloyds Pharmacy recorded further losses, with:
– operating losses worsening from £-35m to £-57m,
– net losses of £-66m, down from £100.8 million the previous year.
The company stepped up its « rationalization program » in 2023. In October 2023, the chain was running 138 pharmacies, compared with 1,338 pharmacies in March 2022 (-90%), according to the figures of General Pharmaceutical Council (CPhC).
In July 2015, LloydsPharmacy purchased all 281 pharmacies in Sainsbury’s supermarkets for £125 million but decided to close all in January 2023.
Liquidation:
LloydsPharmacy filed for voluntary liquidation and blamed the cut in government funding for its widening losses and the reason behind its store rationalization program.
In 2023, the chain ceased trading, with pharmacy staff transferred to their stores’ new operators.
In the statement of affairs report, the liquidators (Martin Armstrong and Andrew Bailey of Turpin Barker Armstrong Accountants) revealed that the pharmacy business owed £293m to 514 creditors, including:
– £228m owed to Diamond DCO One Limited /Lloyds Pharmacy,
– £50m owed to Aurelius Crocodile, a holding company used to control the business.
However, the financial documents show that as LloydsPharmacy had just £8.2m at its disposal to pay off its debts.
As a conclusion The pharmaceutical industry has faced challenges in recent years:
Low Margins & Diversification
Due to low margins on medications, pharmacies are expanding their offerings to include non-prescription products (parapharmacy). But this expansion requires additional investments.
Competition Risks & Regulation
In fact, the distribution of medications is deregulated, allowing mass-market retailers to enter the sector. It will intensify competition for pharmacies
LloydsPharmacy serves as a notable example. Today, the pharmaceutical industry will need to anticipate these risks and protect itself against the risk of non-payment.