Caveat Emptor is a Latin phrase that translates to “let the buyer beware.” Always conduct thorough due diligence prior to making a purchase. We’ve compiled a list of the top red flags we see most frequently:
What are the Top 5 Red Flags when buying a pharmacy to look out for?
Bank Statements. Look at bank statements. Do the income (deposits) and expense (debits) match the profit & loss statements? These should match.
Inconsistent Financials. Do the profit & loss statements match the tax returns? If not, find out why. These should always match.
High House Account Balances. If a pharmacy has a high house account balance, this may be an indication they are waiving co-pays.
Third-Party Plans. Have there been third-party plan cancellations? This may be cause for concern, depending on the reason.
Variances from Industry Averages. In 2021, gross margins were around 21% for retail pharmacies. If their variance is +/- 4%, figure out why. They may have a large front-end with DME sales or large 340(b) plan that skew the profit?
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