Buying any business is an important transaction with many legal implications, but the regulation of the pharmacy sector imposes a number of further duties and considerations.
Neil Jones, of the Ansons Solicitors pharmacy team explores a number of issues that a buyer (and sometimes a seller) will need to consider investing in a pharmacy business.
When buying a pharmacy business (not the shares in a company) you will need to make an application to NHS England for a change of ownership under the NHS (Pharmaceutical Services) Regulations.
Quite often a sale and purchase contract will be conditional on this application being approved by NHS England. A timely application is therefore advised, not least because NHS England generally only review such applications once a month and there may also be a 30 day appeal period once the application is approved, although some local area teams are now taking the approach that an appeals period is not in fact required.
The NHS England application is a necessity for any purchase of a pharmacy business. We would advise that this application is submitted whilst the seller is in occupation and negotiations are on-going so that any issues that arise can be dealt with in good time before completion.
One issue that could affect a buyer’s application is in relation to the buyer’s fitness to practice. Under NHS Regulations, pharmacies are required to provide a fitness to practice declaration to their local area team when they join the pharmaceutical list.
A new pharmacist (whether a sole trader, partnership or corporate entity) that has not previously provided fitness to practice information should complete and submit the necessary forms to its local area team. This would be in addition to the market-entry application being submitted.
Where a pharmacist has previously provided the necessary fitness to practice declaration (if they have an existing pharmacy in the same area) then it may only be necessary to confirm it is up to date.
The General Pharmaceutical Council (GPhC) will need to be notified of a transfer of ownership of any pharmacy premises. This can be done by submitting a transfer of ownership of pharmacy premises form to the GPhC directly.
If the new owner is a limited company which does not already own pharmacy premises then it will also need to nominate a superintendent pharmacist (see below).
The GPhC also needs to be notified of a change in ownership within 28 days of the transfer taking place.
All such forms are available online from the GPhC website.
Whenever a limited company owns a pharmacy business it must appoint a superintendent pharmacist. This is a key position in the business which carries both responsibility and accountability.
A buyer will need to nominate a superintendent pharmacist and submit this nomination to the GPhC if:
Once again the forms are readily available online from GPhC.
There is now no differentiation between a “minor” or “major” relocation of a pharmacy. A pharmacy relocation will be exempt from market entry requirements if the relocation results, in the opinion of NHS England, in “no significant change” to the provision of pharmaceutical services in the area. An application for relocation will need to be made to the relevant NHS England local area team to this effect.
Where a relocation of premises is in conjunction with a change of ownership, a combined application can be made to NHS England to deal with both aspects at the same time.
Where a seller has the benefit of nominations from any of its patients for the purposes of receiving electronic prescriptions then the buyer needs to be aware that new nominations will ultimately be required. A nomination will remain valid for 6 months after a change of ownership and so new nominations will need to be obtained within that period.
An experienced pharmacy lawyer will ensure that, the details of all such nominations are disclosed to you at completion so that you are fully aware of what new nominations will be required and can attend to these in a timely manner.
The GPhC introduced new standards for registered pharmacies towards the end of 2012 in an attempt to ensure a safe environment within all pharmacies. Responsibility for compliance with these standards lies with the pharmacy owner, or, if the owner is a company, it also lies with the superintendent pharmacist.
A premises standards programme is required as part of the pharmacy’s system of clinical governance to ensure that the premises used for the provision of NHS healthcare are an appropriate environment within which patients receive that healthcare.
The new standards move away from a previously prescriptive or rule based approach to a more outcome focussed approach. Since November 2013 the GPhC inspectorate has been rolling out a prototype of their new approach to standards inspection and intend to inspect all pharmacies against the new standards.
The standards are grouped into five main principles and it is for the pharmacy owner and, where relevant, superintendent to show how they meet these standards. In summary these include the following:
As compliance with these principles could be costly and time consuming for owners it is important for a buyer to have inspected the premises with regard to the pharmacy standards and procedures and to have seen the business in operation, perhaps even on a number of occasions. A seller who is not complying with the standards may face a conversation around the cost of compliance and how that may affect the sale price. Having a standard operating procedure on a particular process does not mean that the proper systems are in place to keep patients safe, you have to show that the procedures work in practice and that the staff are aware of it and work in accordance with it.
If the property is not in good repair it could be argued that this is a breach of the third principle and therefore remedial works should be carried out. It may be necessary for staff to undertake training to ensure they are competent to safeguard the health, safety and wellbeing of patients and the public which is another expense for a new owner.
Should the GPhC believe the standards are not being met then the inspector may serve an improvement notice on the owner however, whilst the prototype programme continues statutory improvement notices will not be issued. Ultimately, a failure to comply could result in the registration of the pharmacy being suspended or removed.
The Ansons pharmacy team includes a number of commercial property and corporate lawyers who have a wealth of experience having dealt with over 40 separate pharmacy transactions in the last 12 months with an aggregate value of circa £30 million.
The Ansons pharmacy team is a supplier partner in the National Pharmacy Association’s supplier partner scheme and consists of experienced pharmacy specialist solicitors who are able to guide you through the ins and outs of buying or selling a pharmacy. This includes assistance from the initial due diligence, to drafting and negotiating the sale and purchase agreement on your behalf and then on to completion and post-completion tasks.
For more information please contact Neil Jones in the Ansons pharmacy team, on 01543 431184 or by email email@example.com.