Industry leaders have warned that the latest £140 million Category M clawbacks could be too much for some smaller pharmacies to cope with, industry leaders have warned.

The comments came after multiples said they would need to cut spending following the £140 million clawback. The cuts will see pharmacies losing on average £2,400 from purchase profits next quarter.

But some pharmacies are already struggling with cash flow so the latest clawback “couldn’t have come at a worse time”, according to Umesh Modi, specialist pharmacy financial adviser at Silver Levene.

Mr Modi said he was advising clients to be careful with investment plans and taking on extra staff. “In a recent case, one of my clients is refinancing his loan and we have had to ask for additional [money] to cover the category M shortfall,” he added.

Andy Harwood, director of business development at Pharmacy Partners, agreed some businesses were facing difficulties. He said margins were now at around 27 to 30 per cent whereas in previous years they had been 33 to 35 per cent. “Rents have been going up and bottom lines are already squeezed – it’s one thing after another,” he said.

Mark Griffiths, chairman of pharmacy support group Cambrian Alliance, said the clawback could be the “tipping point” for pharmacists already scratching around for their margins. And Mr Modi warned: “On top of the white paper proposals, removal of some services by the PCTs, the austerity measures and its unknown impact on the economy, this announcement will undermine confidence in this industry.”

The NPA called for pharmacists to be able to make reasonable predictions about income and cash flow. Raj Nutan, Numark’s director of commercial services, said the money being clawed back should be used to fund pharmacy-led services.