Top 10 Things to Consider When Purchasing a Pharmacy
Updated: Oct 13
There are dozens of things to consider when purchasing a pharmacy and a simple list won’t cover it. Here are our Top 2.
Are there opportunities to increase profitability or expand the business?
Does the pharmacy provide services beyond traditional dispensing?
Read below to find all Top 10:
Opportunities to increase profitability. Many independent pharmacies don’t market themselves. Can you add services such as immunizations or delivery? Is there an opportunity for specialty or LTC business? There may be potential to expand the business.
Services beyond traditional dispensing. Blister packs and multi-dose are more labor and time intensive. Do they offer delivery? Do they have their own drivers? If there are things a buyer doesn’t plan to offer or continue, be sure to take this into consideration.
Key employee retention. Will their staff stay? Have a conversation with them to see if they are willing to stay, or if they will at least stay through a transition period for goodwill.
Controlled drug percentage. A reasonable percentage of 10-12% is reasonable. If 15%, ask questions. If over 20%, there may be reasons for concern. On occasion, a wholesaler can’t provide supplies to meet the controls.
Consistent financial statements and tax returns. Be confident in financials that are consistent or have slight variations up or down. Rely on financials prepared by professionals or tax returns rather than owner-prepared returns. There may be explanations for variances (as we saw during Covid).
Prescription density vs. number of competitors. There may be 15 independent pharmacies within a one-mile radius. This can be a challenge to achieve growth given the competition. Wholesalers can be a great resource to find out prescription densities.
Liens. Pull reports to ensure that the purchase price exceeds the amounts of liens. The seller may not be able to clear the liens if so.
Even distribution of prescriber mix. Does the pharmacy rely on a few subscribers for a majority of their prescriptions? If so, this can present a challenge if any of those subscribers go out of business or recommend other pharmacies.
Profitability and expense rations. How do their numbers compare to industry averages? NCPA is a great source for this information https://ncpa.org/resources. Top figures include gross margins, net profit, payroll and DIRs.
Predominant customer base/demographics. Do members of the staff speak in languages other than English? Do they print prescription labels in other languages? If a large proportion of patients have a first language that is other than English, and the buyer doesn’t have staff to replace them, these patients may transfer their prescriptions elsewhere.
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