PHARMACY INSOLVENCY & DISTRESS

Pharmacy insolvency and distressed pharmacies: the pharmacy-side adviser

If you are reading this at eleven at night because the wholesaler has put you on stop, start here. Write down tonight every creditor and what they are owed, the NHS money due and the date it lands, the rent and the next quarter day, and the payroll date. Then speak to a licensed insolvency practitioner tomorrow, before anyone else. The options that were open in week one have usually gone by month three.

What RSB is not. RSB Consulting is not an insolvency practitioner, not a solicitor, not an accountant and not a lender, and does not hold itself out as any of them. Acting as an administrator, a liquidator or a trustee is a licensed activity under Part XIII of the Insolvency Act 1986, and only an authorised practitioner may take the appointment. RSB works on the pharmacy side, alongside those people: what the branch does each day, whether it can keep dispensing, what a buyer is really taking on.

What does early distress in a pharmacy actually look like?

It rarely looks like insolvency. It looks like a wholesaler account moved to pro-forma, a PAYE arrangement that has slipped a month, a locum invoice paid late for the first time, and an owner doing the Saturday themselves to save a shift. Underneath it, NHS reimbursement runs behind the month the dispensing was done, so a pharmacy can be profitable on paper and short of cash in the same week.

The operational signs read more clearly on the shop floor. Owed items build up. The delivery round gets cut. A rota that used to cover itself starts depending on one person. Services that need a trained team quietly stop being offered, and the income goes with them, which is why falling profitability reaches the accounts last.

A winding-up petition changes the pace. Where a winding-up order is later made, dispositions of the company's property after the petition was presented are void unless the court orders otherwise (Insolvency Act 1986, sections 127 and 129). But the damage arrives with publicity rather than the hearing: banks generally freeze accounts once a petition is public, and wages, locums and wholesaler payments stop.

Which insolvency process lets a pharmacy keep dispensing?

Two of them. In administration a licensed insolvency practitioner takes day-to-day control under Schedule B1 to the Insolvency Act 1986; the company can keep trading, the directors cannot run it, and the appointment lapses after twelve months unless extended. A company voluntary arrangement leaves the directors in place and binds creditors to a payment proposal, approved on statutory majorities of those who respond. Liquidation, creditors' voluntary or compulsory, is not a trading process at all: assets are realised and the company is dissolved.

Owners use "going into administration" as a loose synonym for closing, and staff, wholesalers and buyers hear it that way. That is how a business loses its terms, its team and its buyer in the same week. And an administrator's duty is owed to creditors as a whole: NHS England's Pharmacy Manual records that administrators have no duty to act in the interests of patients or the NHS. Continuity of care is not something the process delivers on its own.

What does RSB do alongside the insolvency practitioner and the solicitor?

The pharmacy-side work, which sits outside what the insolvency practitioner and the solicitor are there to do: an operational assessment of what each branch can still deliver and at what cost; a continuity plan for dispensing, owed items and the delivery round; the staffing and operational information the practitioner and any buyer both need, which has to come from inside the business; workflow and service continuity where the rota has thinned; the NHS and regulatory position below; the premises and lease; the stock and the controlled drugs; buyer-readiness and the information pack; and transaction and transition support to handover. It also means saying when a branch should not stay open, and when a deal should not happen.

What happens to the NHS contract, the GPhC registration and the superintendent?

Three clocks, three decision-makers, and none of them is the insolvency process.

In England the pharmaceutical list entry belongs to the contractor as a legal person. It is not assigned and does not come with the business on an asset sale. The incoming owner applies under regulation 26 of the NHS (Pharmaceutical and Local Pharmaceutical Services) Regulations 2013 to replace the outgoing contractor; the integrated care board decides it; and it is not tested against the pharmaceutical needs assessment, so nobody can refuse it because the area no longer needs a pharmacy. The integrated care board must determine it as soon as practicable, and within 30 days of receiving all the information and documentation it requires, unless there is good cause for delay. What happens to the NHS contract when a pharmacy changes hands has the sequence.

Entering administration does not by itself remove anyone from the list. The Pharmacy Manual states there is no provision allowing the commissioner to remove a company and its premises on that ground; suspension and removal run through a separate fitness route with appeal rights. A body corporate that enters administration must notify the commissioner on the date the appointment takes effect, under regulation 67A, on a separate form for each set of listed premises. There is no equivalent duty in liquidation or bankruptcy. Separately again, the General Pharmaceutical Council must be told of a change of ownership within 28 days, or the premises leave its register.

The two statutory roles under the Medicines Act 1968 are not interchangeable: the superintendent pharmacist is the senior manager whose signed statement sits with the registrar, and the responsible pharmacist is in charge of the premises with the notice displayed. What stops a branch dispensing in a bad week is usually not the insolvency but a superintendent resigning to protect their registration, or no responsible pharmacist signed in.

What happens to the stock, the CD cabinet and the patient records?

Medicines and misuse of drugs law does not pause for an insolvency, and the duties sit on the contractor rather than the administrator. Registers must be kept for two years from the last entry, so they cannot go out with the fixtures. Schedule 1 to 4 controlled drugs may not be destroyed by a person required to keep records except in the presence of, and on the directions of, a person authorised for the purpose. Moving stock to a pharmacy that is a different legal entity is wholesale dealing, and has needed a wholesale dealer's authorisation since the pharmacist exemption in section 10(7) of the Medicines Act 1968 was repealed in August 2012. A clearance instructed by someone who reads the cabinet as inventory is how a closure turns into an enforcement problem, and the record-keeping duty sits on the person required to keep the records rather than on the administrator.

EPS nominations continue with the new owner on a change of ownership, but patients must be told within six months of the change. That notification is not a courtesy: it is what provides the basis for implying the patient's continued consent. On a closure there is no provision to move nominations to another of the contractor's own branches.

I am buying a pharmacy out of administration. What am I actually buying?

Less than most buyers assume, and more staff than they expect.

Not the NHS contract. You are buying a lease, fittings, stock and goodwill, then applying to the integrated care board in your own name. A pre-pack completes the corporate transaction only, and a completion with no regulation 26 application in hand leaves somebody else as the listed contractor while you are dispensing. Where the buyer is a connected person and the disposal is of all or a substantial part of the business or assets within eight weeks of entering administration, it needs either creditor approval or a qualifying report from an independent evaluator (Administration (Restrictions on Disposal etc. to Connected Persons) Regulations 2021).
The team. "Out of administration" is widely assumed to mean without the staff. Administration is not proceedings instituted with a view to liquidating the assets, so TUPE regulation 8(7) does not disapply the transfer, and employees assigned to the business generally transfer on their existing terms with continuous service preserved (*Key2Law (Surrey) LLP v De'Antiquis* [2011] EWCA Civ 1567). Whether there was a relevant transfer, and whether any dismissal was automatically unfair, is for an employment tribunal. What the process offers instead is regulation 8 relief, under which certain debts are met from the National Insurance Fund.
A premises position that depends on the process. During administration a landlord may not forfeit by peaceable re-entry without the administrator's consent or the court's permission. That is a feature of administration, not of insolvency generally. An administrator cannot disclaim an onerous lease — only a liquidator can, and a disclaimer can leave a guarantor, or a former tenant under an authorised guarantee agreement, exposed. An assignment still needs a consent somebody must ask the landlord for.
A working-capital gap. NHS money runs behind the dispensing month, the outgoing contractor is paid for their own dispensing, and you start a fresh cycle in the weeks when wholesalers want cash up front.

What happens in the weeks after completion?

The deal is the easy half. First, operational stabilisation: getting the rota to cover itself, confirming who is superintendent and who is responsible pharmacist on which day, and putting the SOPs into a state a team can work to rather than a folder nobody opens. Then service recovery and margin — owed items cleared, the delivery round rebuilt, buying terms renegotiated now the entity behind the counter has changed, and the stopped services restarted in an order the staffing can carry, with compliance and NHS service requirements checked against what is delivered, not what the seller claimed. Systems and integration take longest: a PMR migration, a new ODS code and reissued smartcards all land on the people already trying to dispense.

Is any of this different in Scotland or Wales?

Yes. Everything above uses the England lens. Wales runs on the NHS (Pharmaceutical Services) (Wales) Regulations 2020, with a change of ownership going to the Local Health Board under regulation 22. Scotland runs a neighbourhood test rather than a needs assessment, decides applications through the health board's Pharmacy Practices Committee with an appeal to the National Appeal Panel, and takes a change of ownership at the same premises outside that test. It also sits outside the Landlord and Tenant Act 1954 altogether, which cuts the other way: a Scottish commercial tenant has no statutory security of tenure, a lease continues by tacit relocation unless notice is given in time, and a landlord ends it for breach by irritancy rather than forfeiture. Administration, liquidation and TUPE run much the same way across Great Britain, which is also the GPhC's territory. An individual or a partnership in Scotland is sequestrated rather than made bankrupt, and there is no Official Receiver there. Northern Ireland has its own regulator and its own rules, and is outside what we cover.

What does the first conversation look like?

You describe where you are, in confidence, and get a straight view on it. If the next call should be to a licensed insolvency practitioner or a solicitor rather than to us, you will be told that, with a name. Rajkamal Singh Bhatti has advised on more than 120 pharmacies, around 50 of them independents, and trained more than 700 people.

*This is general information, not legal, insolvency, financial or tax advice. Only a licensed insolvency practitioner can take an appointment as administrator, liquidator, supervisor of an arrangement or trustee; your solicitor and accountant confirm the position on your own facts. If the fortnight has already started, tell us where you are.*

Related: A distressed pharmacy: the first fortnight · The adviser network

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*Rajkamal Singh Bhatti MPharm is a practising pharmacist (GPhC registration 2230365) and a former Superintendent Pharmacist of a national group of 120 branches, which he took through insolvency and sale. He founded RSB Consulting.*