Alliance Boots

Boots the Chemist was founded in 1849 in Nottingham and has long been an icon of the British high street. In 2006, Boots merged with European pharmacy wholesaler Alliance Unichem Plc to form Alliance Boots (AB). One year later, the company went private in a £12 billion leveraged buyout, led by executive chairman Stefano Pessina and US private equity firm Kohlberg Kravis Roberts (KKR). In 2012, US pharmacy chain Walgreen’s bought a 45% stake in Alliance Boots, with an option to buy the remaining 55% in 2015.

Pharmacy retail, wholesale and clinical homecare business. Boots is the largest community pharmacy chain in the UK, with nearly 2,400 pharmacies trading under the Boots banner. It is the largest single employer of pharmacists and pharmacy technicians outside the NHS, with 6,700 pharmacists and at least 2,500 technicians.

Alliance Boots’ subsidiary Alcura focuses on clinical homecare, which is funded through the NHS, and also provides clinical trial support.

Outside of the UK, Alliance Boots is primarily a pharmacy wholesaler—the biggest in Europe, in fact—although it hopes to expand its retail footprint and other healthcare services in Europe as well. (1)

Alliance Boots also has major wholesale investments in Turkey and China.

Alliance Boots is seeking opportunities to develop new services through the Any Qualified Provider contract model. (2) In its pharmacies, the company has begun offering tests for diabetes and treatment for asthma sufferers along with its prescription services. AB says it is seeks to provide more healthcare services such as medicine check-ups, weight management programmes, smoking cessation advice and flu vaccinations in the retail pharmacy setting. (3) The company expects its partnership with US pharmacy chain Walgreens to “further enhance our capability to deliver such services, many of which are at a more developed stage in the US.” (4) 

In the UK, the company has at least 16 GP surgeries in its stores and has announced plans to open up to 100 over the next 2-3 years. (5) The company also has a dentist surgery in in Manchester and plans to open more. (6)

Through its subsidiary Alcura, Alliance Boots has branched into an area of community healthcare known as ‘clinical homecare’ and participates in contracts that reach into millions of pounds. (7) Clinical homecare includes medicine administration, delivery and support within the home for patients. For example, Alcura is a provider of intravenous nutrition to patients in their homes as part of a £37.9 million contract with the Commercial Medicines Unit of the Department of Health. (8) The clinical homecare industry estimates sales of £1.5bn in 2012, with growth of nearly a quarter on the previous year. (9)

Alliance Boots’ global results for the year ending 31 March 2013 record revenues of £22.4bn and trading profit before tax of £1.265m. The company makes a significant portion of its revenues off public health care systems. Approximately 40% of Alliance Boots’ UK revenue comes, ultimately, from UK taxpayers for services that are mainly paid for by the NHS. This includes revenues from dispensing prescription drugs, which came to £2.2 billion for the year ending 31 March 2013. Additionally, Alliance Boots UK wholesale division generated an estimated £1.82 billion in revenue from independent pharmacies, which includes funds coming indirectly from the NHS. (10) Alliance Boots subsidiary Alcura UK Ltd. reported nearly £100 million in sales for the year ended March 31 2012, a portion of which comes from NHS contracts. (11)

Alliance Boots has significantly reduced its tax expense since going private six years ago. Since 2008, the company had no cumulative net tax expense in its income statement, and in fact had an accounting tax benefit of over £130m globally, according to an investigation by the Financial Times. This is despite generating £5.2bn in operating profit and £109bn in revenues since 2007. (12) The deal to buy Alliance Boots in 2007 was financed using over £9 billion in borrowing and was the first leveraged buyout (LBO) of a FTSE 100 company and the largest ever LBO in Europe. In the UK, interest payments on debt can be deducted without limits from taxable income, thus reducing the amount of tax owed.

The company has pharmacy contracts with the following NHS trusts: (13)

Surrey and Sussex NHS Trust (East Surrey Hospital)
Sheffield Teaching Hospitals
Derby Hospitals NHS Trust
Birmingham Heartlands Hospital
The Christie NHS Foundation Trust, Manchester
 
Great Western Hospitals NHS Trusts (Swindon) is in the process of negotiating an outpatient pharmacy contract with Alliance Boots.
 
Alliance Boots holds the following contracts to provide regular monitoring for patients requiring blood thinner medications to avoid dangerous clotting:
 
South Tyneside NHS Trust
Brighton and Hove NHS Trust
 

Alcura participates in NHS contracts worth over £80 million, often together with other companies in multiple-award contracts.

The company already has at least 16 GP surgeries in its stores and has plans to expand in this area.

Boots has a 49% stake in David Ormerod Hearingcare Ltd which operates 340 Boots hearingcare centres. David Ormerod also has AQP status with the following trusts under its trading name Community Hearing Care Services: 

Gateshead PCT
South Tyneside NHS Trust
Sunderland Teaching Hospital NHS Trust
 

Alliance Boots Executive Chairman, Stefano Pessina has spoken out in favour of reducing tax on business as well Osborne’s cuts. Demonstrating his favour for the coalition government, Pessina has said “I am convinced the Government in the UK is trying to do the right things and the fact they are reducing tax is going in the right direction. Unfortunately, the public opinion, the environment is not as favourable to businesses as the government is.” (14)

In 2010, Pessina participated in a business delegation to China alongside David Cameron, shortly after publicly backing George Osborne’s cuts. (15)

Former Secretary of State for Health Patricia Hewitt took a consultancy role with Alliance Boots in January 2008, seven months after standing down. (16) She was suspended from the Labour Party in 2010 after being secretly filmed by Channel 4 appearing to offer access to ministers in exchange for cash, though she faced no formal punishment. (17) It is unclear whether she retains the consultancy role at Alliance Boots. (18)

In the US, Alliance Boots’ new partner Walgreen is a pioneer in expanding the reach of pharmacies into medical services traditionally supplied in hospitals, doctors’ offices, and community health clinics, and Alliance Boots has expressed hopes to bring more of these types of services to the UK and the rest of Europe.

Already, Boots is drawing controversy by steering patients to one of its own pharmacies as part of one of its in-hospital pharmacies in East Surrey. (19)

There have been recent reports of two Boots’ pharmacists suspended for falsifying Medicine Use Reviews (MURs) who blamed pressure from management to meet targets, though the General Pharmaceutical Council ruled in both cases that Boots was not to blame. (20) An MUR is a review conducted by a pharmacist to help patients use their medicines more effectively. The current fee for provision of an MUR is £28, and pharmacies can be paid for a maximum of 400 MURs per year. The costs of MURs on the NHS have increased by 36% in the last two years to £75m, according to the Pharmaceutical Services Cash Monitoring, NHS Business Services Authority, prompting a question in parliament from MP Diane Abbott about soaring MUR costs. (21) 

Another leading corporate beneficiary of NHS privatisation, Virgin Care, has opened a NHS sexual health clinic in a Boots store in Milton Keynes. Boots told the Financial Times that an increasing number of providers to the NHS have taken space in its stores over the past five years, including GP surgeries, blood testing and dental services. (22)

Adult hearing is one of the areas opened up to Any Qualified Provider contracts. Alliance Boots already has nearly 400 hearing centres located in its stores. Opening adult hearing to AQP contracts “could have a significant adverse impact on the patient pathway, by fragmenting the service across a variety of providers, working to different standards and with different skill sets” believes David Cooper, Public Governor for Reading at Royal Berkshire NHS Trust, one of the leading audiology departments in the UK. Cooper cites Boots as an example of a private provider that could potentially contribute to this fragmentation. (23)

Many thanks to www.changetowin.org for providing this profile.

  1. Alliance Boots 2012/13 Annual Report, P.11. Available at: http://www.allianceboots.com/financial-information/annual-report.aspx

  2. Job Posting, Boots Hearingcare, “Non Commercial Hearing Aid Audiologist,” accessed 22 Aug 2013. Available at: http://careers.bootshearingcare.com/roles-in-hearingcare/non-commercial-hearing-aid-audiologist/; The Pharmacy Show, “Boots Talks Tough as Tough Times Loom,” accessed 22 Aug 2013. Available at:http://www.thepharmacyshow.co.uk/latest-press/boots-talks-tough-as-tough-times-loom/; The Northern Echo, “'Selling off' NHS services under way claim Labour,” 4 Oct 2012. Available at: http://www.thenorthernecho.co.uk/news/9964281.Selling_off_NHS_services_underway/

  3. Alliance Boots 2012/2013 Annual Report, P.15.

  4. Ibid.

  5. Dispensing Doctors’ Association, “Boots plan 100 in store GP practices,” 4 Oct 2012. Available at: http://www.dispensingdoctor.org/comments.php?id=2246

  6. Marketing Magazine, “Boots revamps pharmacies to reflect specialities,” 4 May 2012. Available at:http://www.marketingmagazine.co.uk/article/1130470/boots-revamps-pharmacies-reflect-specialities

  7. Information obtained from NHS Supply2Health database. Available at: https://www.supply2health.nhs.uk/S2H-Home.aspx

  8. Ibid.

  9. National Clinical Homecare Association, “Creating the new future for out of hospital care,” accessed 22 Aug 2013. Available at: http://www.clinicalhomecare.co.uk/images/downloads/NCHA_FINAL.pdf

  10. Analysis of company financial statements.

  11. Alcura UK Ltd Annual Accounts for the year ended 31 March 2012. Available from www.duedil.com.

  12. Financial Times, “Anger at Alliance Boots Tax Breaks”, 17 June 2013. Available at: http://www.ft.com/intl/cms/s/0/c9f9b49c-d509-11e2-9302-00144feab7de.html

  13. Information obtained from NHS Supply2Health database. Available at: https://www.supply2health.nhs.uk/S2H-Home.aspx

  14. The Telegraph, “Stefano Pessina: I want to merge Boots, not float it,” 17 May 2012. Available at: http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/9270369/Stefano-Pessina-I-want-to-merge-Boots-not-float-it.html

  15. The Mirror, “David Cameron accused of crony payback over megabucks Far East trip,” 9 Nov 2010. Available at:www.mirror.co.uk/news/uk-news/david-cameron-accused-of-crony-payback-261086; The Daily Mail, “Business leaders back Osborne cuts: Recovery won't be undermined, say 35 bosses,” 18 Oct 2012. Available at: www.dailymail.co.uk/news/article-1321469/George-Osbornes-cuts-backed-business-leaders-Recovery-wont-undermined.html

  16. The Guardian, “Former Labour ministers rushing to take private sector jobs, report finds,” 16 May 2011. www.theguardian.com/politics/2011/may/17/labour-ministers-consultancy-private-sector

  17. The Guardian, “Ex-ministers suspended from Labour party over lobbying allegations,” 23 March 2010. Available at: www.theguardian.com/politics/2010/mar/23/ex-ministers-suspended-lobbying-allegations

  18. Bloomberg Business Week, Executive Profile, accessed 22 Aug 2013. Available at: investing.businessweek.com/research/stocks/private/person.asp?personId=42375726&privcapId=19685&previousCapId=19685&previousTitle=Cinven%20Limited

  19. This is Surrey Today, “East Surrey Hospital criticised over Boots 'monopoly'” 8 Dec 2012. Available at: http://www.thisissurreytoday.co.uk/East-Surrey-Hospital-criticised-Boots-monopoly/story-17512081-detail/story.html#axzz2WSzw2jiY

  20. Chemist & Druggist, “Pharmacist suspended for falsifying records to meet Boots MUR target,”16 Aug 2012. Available at: http://www.chemistanddruggist.co.uk/news-content/-/article_display_list/14442009/pharmacist-suspended-for-falsifying-records-to-meet-boots-mur-target; Chemist & Druggist, “Boots pharmacist suspended for falsifying more than 600 MURs,” 1 Jul 2013. Available at: http://www.chemistanddruggist.co.uk/news-content/-/article_display_list/15909002/boots-pharmacist-suspended-for-falsifying-more-than-600-murs

  21. House of Commons Debates, Daily Hansard - Written Answers. Available at: http://www.publications.parliament.uk/pa/cm201314/cmhansrd/cm130716/text/130716w0004.htm#130716w0004.htm_wqn32; Dispensing Doctor, “MURs cost £75m in 2012,” 19 July 2013. Available at:http://www.dispensingdoctor.org/comments.php?id=2719

  22. Financial Times, “Virgin Care opens clinic in Boots outlet,” 29 Jan 2013. Available at: http://www.ft.com/cms/s/0/b8f39c10-6a26-11e2-a80c-00144feab49a.html#axzz2XyvHK6d7

  23. Reading Health Forum, “The Impact of AQP on Audiology Services in RBFT,” 20 Jan 2013. Available at: http://readinghealthforum.wordpress.com/2013/01/20/the-impact-of-aqp-on-audiology-services-in-rbft/


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