Boots loots – what has happened to our friendly high street pharmacist?

Our friendly high street pharmacists are turning into trojan horses for further NHS privatisation.

Image: Flickr/Leo Reynolds. Some rights reserved.

Britain’s trusted high street chemist hasn’t been feeling well of late – and it’s getting sicker.

The brainchild of agricultural worker John Boot in 1849, the Nottingham herbalist store rapidly grew from humble beginnings into the country’s largest chemists’ chain. By revolutionizing access to affordable medicines in the pre-NHS era, Boots became a household name.

Since 1948 it has retained its central place in the functioning of the NHS. It is the largest single employer of NHS-trained pharmacists (6700) and pharmacy technicians (2500) outside of the NHS.

Pharmacy has long-been held up by the pro-privatisation lobby as an example of how the private sector has in fact been providing NHS services for years, ‘playing nicely’.

Boots made its name on providing patient care to millions. For 165 years it had what other companies would do almost anything for: the trust of its customers. Repeatedly named as one of the UK’s most trusted brands, Boots symbolised reliability and quality, securing a prominent and enduring position amongst our national retail heritage.

But times have changed. In 2006, Boots UK merged with European pharmacy wholesaler Alliance Unichem Plc to become Alliance Boots. And just one year later, the company went private in a £12 billion buyout led by US private equity firm Kohlberg Kravis Roberts (KKR).

That’s when the fairytale took a dark twist. KKR is one of the largest private equity firms in the world, ranking with the likes of Goldman Sachs and Bain Capital. KKR and its fellow private equity beasts don’t want to be passive investors, but to take the reins of the business and use their controlling position to restructure the company before ‘flipping’ their assets and selling off at a profit.

Now, KKR is selling its remaining stake in Boots to what will now become the biggest pharmacy chain in the world, US-based Walgreens. The complex deal is not likely to undo the damage inflicted by eight years of being one of the largest private equity buyouts in Europe. Walgreens have already said they will make $1billion of efficiency savings – or cuts – as a result of the deal, with no guarantees on protecting pharmacist and other staff numbers.

And for the last eight years, Boots has taken advantage of the private equity model that allows it to operate with far more secrecy and less regulation in its business dealings, than do publicly listed companies.

The impact on Boots values during this time has been stark. A recent example was its decision by Boots to sell e-cigarettes despite warnings from the Royal Pharmacological Society (RPS) about their risks. The World Health Organization (WHO), British Medical Association (BMA) and the US Food and Drugs Administration (FDA) are all unable to vouch for their safety. But Boots has persisted in the multimillion dollar deal – joining up with Fontem Ventures, asubsidiary of Imperial Tobacco.

More generally, Boots pharmacists increasingly feel that the logic of big business is compromising their professional autonomy, integrity, and statutory duties towards patients.

“I gave up my job because I could not keep working in such conditions,” a former Boots pharmacist told us. “I was offered a 40-hour contract, training, competent staff… But none of my colleagues had the requisite training to dispense medicines and I worked 12 hours every day without a break. It was all a lie. I became very anxious; it was just too much.”

Boots pharmacists have far less say over their working conditions than their NHS counterparts. Boots refuses to recognise the independent trade union, the Pharmacists Defence Association Union (PDAU). Without this protection and professional support, they are under pressure from management targets and a private equity culture that sees professionalism as a hindrance to profits. Their pay and conditions are cut, and their bureaucracy is increased. Anxiety and depression amongst staff is soaring, their mental health falling victim to the neoliberal message that if your lifestyle is on the down, it’s your own fault.

And Boots is becoming increasingly adept at using financial gimmicks to line its pockets – deriving enormous wealth not from management or investing skills, but from exploiting the tax system. Alliance Boots avoided paying at least £1.12 billion in tax in the 6 years after it became private, reducing its UK corporate tax bill by 95 percent, according to a report published in October 2013 by Unite, War on Want and US labour federation Change to Win. This money has disappeared offshore, personally enriching a handful of senior executives and investors, and shrinking the UK tax base.

It’s a classic private equity trick. By borrowing huge sums to ‘invest’ in a ‘leveraged’ buyout, then saddling the company with the debt repayments, they can deduct massive interest expenses from pre-tax profits. Boots 2007 buyout was funded with £9 billion in debt.

Such tax avoidance is significantly to blame for the growing strength behind the dangerous message that we cannot afford a free health service for much longer. It’s bad enough when it’s Google, Amazon and Apple. But it’s particularly galling when it’s a company that gets more than 40% of its UK revenue from the taxpayer, through NHS prescription dispensing and wholesale services.

Not only does debt allow private equity companies to avoid tax. They often borrow even more post ‘buyout’, and use that money to pay themselves huge “special dividends”. They recoup their initial investment while keeping the same ownership stake. These dividends create no economic value; they just redistribute money from the company to the private equity investors.

So private-equity firms are increasingly able to profit even if the companies they run crumble under the weight of debt and poor performance. In this way, private equity firms can actually fail to improve a company’s performance, fail to meet creditors’ obligations, screw workers – but still make a profit. It’s the trick pulled in social care – most notably doomed care home provider Southern Cross, bought out and driven into the ground by private equity company Blackstone – and now it’s taking root in healthcare as well. A back and forth between private equity and publicly listed companies is not uncommon – but with each throw, the race to the bottom worsens.

Boots is only the beginning.

Pharmacy – already more than 70% owned by corporate entities – is a soft route in for private investors interested in taking control of health infrastructure. Under the rhetoric of ‘care in the community’ and ‘self-care’, high street pharmacy chains including Boots are widening their influence by offering a range of healthcare services through the Any Qualified Provider (AQP) contract model. They are moving in on anti-coagulation and hearing test services already – services that many clinicians feel are better offered in the multi-disciplinary, fully equipped expert setting of NHS hospitals and clinics. Boots are also taking over hospital pharmacists, using favourable tax loopholes that put the NHS at a disadvantage.

Beyond pharmacy, private equity company Cinven bought the BUPA hospital chain a few years back, re-branding it as ‘Spire’ and again indulging in a level of debt-driven tax avoidance that commentators branded a ‘scam’. Fellow private provider (and owner of many of the disastrous ex-NHS 111 services) Care UK is ultimately owned by Bridgepoint private equity. Both groups are advised by former health ministers – and both have benefitted hugely from the increasing outsourcing of NHS clinical services from hip operations to mental health beds. This outsourcing – or privatisation – is often invisible to patients, disguised under the NHS logo.

In November 2013, the Department of Health sold an 80% stake in Plasma Resources UK, the state-owned NHS plasma supplier, to a US private equity firm Bain Capital, the company co-founded by Republican presidential candidate Mitt Romney, in a £230m deal. Lord David Owen commented “It’s hard to conceive of a worse outcome for a sale of this particularly sensitive national health asset than a private equity company with none of the safeguards in terms of governance of a publicly quoted company and being answerable to shareholders.”

The Boots story tells that ownership affects institutional values. Unethical tax practices, unfair labour arrangements and unsafe patient services are the only way private equity can work.

A number of organisations concerned with tax justice, NHS privatisation and the rights of healthcare workers are highlighting these concerns. In June proteststook place outside Boots stores in London and across the country, organised by MedactUniteWar on Want and most recently, UK Uncut, calling on the company to pay its fair share of tax and on the government to investigate the company’s finances. Meanwhile, pharmacist employees at Boots continue in their struggle to win independent representation to protect their rights and working conditions. Medact are urging healthcare professionals to add their name to their petition asking the government to investigate these issues.

The growing disquiet about private equity in the NHS is not mere brand-bashing. Given the already apparent effects of private equity trickling down through Boots, we can only expect the same for the NHS – and that’s the kind of ending to the story that we must try to avoid at all costs.

Additional reporting by Caroline Molloy

[Originally posted: 28.8.14 on OpenDemocracy]

Medact on Boots:

Tax abuse is a public heath risk – it’s time to pay up Boots!

About the author

Guddi is a doctor training in Paediatrics in London. She also has a Masters in Public Health from Harvard University and has worked for the World Health Organization. She is passionate about social justice, human rights and challenging barriers to access to health.