Evidence Based Report Showcases Hub and Spoke Dispensing Benefits

A new report by Centred Solutions has found that a hub and spoke model of dispensing can pay for itself within two years. Director of Sales and Marketing, Louise Laban, talks through the detail of the report and what it can mean for pharmacy.

Earlier this year it was announced that hub and spoke dispensing would be extended so it could take place between different legal entities by January 2025. The argument for this move has always been that hub and spoke will create capacity within pharmacy for clinical services. However some critics of the model have argued that there is no evidence of any benefits as a result of hub and spoke.

At Centred Solutions we have been providing hub and spoke solutions to a range of pharmacy groups for over three years now. This has put us in a unique position to evaluate the effectiveness of hub and spoke models in different environments. We have been able to use this local data alongside national data to produce a report which demonstrates the benefits and return on a hub and spoke investment for the first time.

Our modelling has been able to show that when purchasing a FLOWRx Hub, an average pharmacy can expect to see a return on investment within in two years. This takes into account all the capital expenditure and operating costs incurred with setting up a hub. This return on investment can come from either redirecting time saved into delivering services or as a result of staff savings, or a combination of both.

Significant Profits from Services

The report also details a number of benefits that can be realised from hub and spoke models of dispensing. For example, moving to this model of dispensing will take a minimum of 50% of total dispensing volumes out of an average pharmacy and 70-80% of repeat dispensing volumes. Removing the dispensing process from stores frees up capacity for staff to deliver more services.

Even with a conservative NHS services model, a five-group branch each dispensing an average of 8,000 items, could make an average profit of £234,597 per year from services after year one and £909,712 over five years. This profit takes into account the capital expenditure and operating costs incurred with setting up the hub. The more stores the greater the profit. A 10-group branch dispensing an average of 8,000 items, could make an average profit of £521,930 per year from services after year one and £2,176,251 over five years and a 20-group branch dispensing an average of 8,000 items, could make an average of £1,189,605 per year from services after year one and £4,993,745 over five years after costs.

Cost Savings

Our data also showed a reduction of 80% of payroll costs per item when comparing a hub model of dispensing to an in branch model of dispensing. Payroll costs per item to dispense in a hub are 19p compared to 99p in a store. This means pharmacies can save 80p on payroll costs per item by moving to a hub and spoke model.

That wasn’t the only cost saving either. Moving to a hub and spoke model allows an average pharmacy to reduce stock in store by 50%, resulting in a one-off stock saving. Pharmacies creating their own hubs will also benefit from improved buying power and better stock control – providing medication only where it is needed and preventing over ordering in branch. It will also mean they save significant amounts of time absorbed by medication shortages, with all stock centralised into one location.

A realistic and affordable option

The evidence based report that we have developed finally demonstrates that hub and spoke dispensing is a realistic and affordable option for many pharmacies across the UK. Clearly every pharmacy is different so the findings in the report are based on averages and only look at NHS service fees. The potential profits to be made from private services will be even higher.

For pharmacies wanting to learn more we have developed a tool that will allow us to provide more specific data based on a particular pharmacy’s demographics. This tool will help us to bring to life the potential benefits and return on investment for specific pharmacies or pharmacy groups who are considering hub and spoke right from the outset.

We think that the findings are really promising. For pharmacies who have the appetite for it, hub and spoke has the potential to be a hugely profitable venture for pharmacy despite the ongoing funding challenges. With changes to hub and spoke legislation imminent, our advice to all pharmacy businesses would be to explore what hub and spoke could mean for your cash flow by contacting us today to get a bespoke savings and earnings forecast.

In the meantime why not download a copy of the report to read the full detail or take a look at the infographic for a high level overview.