Nigel Morley, managing director of consultancy Surelines said profits peaked around 2005/6, but have since dropped by up to a quarter.
He said smaller dispensing practices may not be viable. ‘You used to need about 500 patients to break even. Now you need 600 or 700.'
Analysts say this decline is partly due to factors affecting the entire pharmacy sector.
Geoff McKay, director of consultancy Stirling, said that ‘the pressure dispensing doctors are feeling, wholesale suppliers are feeling too.' But he added that such practices were ‘well placed' to provide extra community services, and thus keep up their income.
Mr Morley said that dispensing doctors may have been hit because many drug companies have withdrawn deals that directly target practices.
‘Dispensing income is going down all the time,' he added. ‘But we're a long way off a situation where dispensing becomes unprofitable.'
- Have your dispensing profits fallen by a quarter?
More news from 14 July
Access league tables to put pressure on practices
Swine flu 'could be more dangerous' than seasonal flu
GP and Independent Nurse shortlisted for two awards
NMC ends 16-month hunt for chief executive
GP suffering from swine flu dies