My Independent Pharmacy Thead

[Pharmgrlnxdor]

So I am starting this thread because it seems like I have not seen Dr M around in a while and I want to have a regular place to post questions etc. regarding my future independent. I will start from scratch vs. buy an existing entity and am going to relocate to an optimal location for my start up. I currently have state maps of 10 possible states hanging in my office and have identified on half of them the largest ten population dense areas in each state. I have decided against opening up in a more rural area as I have heard that they seem to have been the hardest hit in the last decade. While I wouldn't mind living in a rural location I want the greatest chance for success and feel a higher population area will be less likely to fail. Any opinions out there on population density requirements for a new start up? In other words, 1) what is the smallest population you would start an independent in or what do you think is an optimal population for a new start up? I would love some other opinions on this besides my own.

To begin to answer my own question I think it is important to first take into account not only the local population but also the number of existing pharmacies already present. So if for example I was looking at a rural town of ten thousand people in Arizona that already had a Walgreen's location I would be hesitant to pick such a location due to the fact that I would be worried if there would be enough business to support two pharmacies in such a location. At 10,000 people each getting 11.6 prescriptions annually ( per the Kaiser Family Foundation's info) that would equal 116,000 presriptions filled in that town annually. Playing devil's advocate I will cut that number down by 25% ... So that is about 87,000 prescriptions to go around. If I was hoping to ultimately do 1,000 prescriptions a week that would mean I would have to get more than half the total yearly prescriptions in the town, a scenario I consider rather unlikely. Do you think my method for determining viability of an area to support an additional pharmacy is valid or would you add some other parameters?

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[MountainPharmD]

I just completed my first year as an independent pharmacy owner. I basically did the exact opposite of what you posted above. You've made quite a few assumptions that in my opinion and experience are wrong.

I will start from scratch vs. buy an existing.
Why? From a financing perspective an existing pharmacy will be much easier to finance because you have a known quantity. You have historical sales figures and an established patient population the bank can evaluate. I never considered opening a pharmacy from scratch. There is too much risk involved unless you do something similar to what Dr. M did.

I have decided against opening up in a more rural area as I have heard that they seem to have been the hardest hit in the last decade.
I'm not sure where you got this information. When I was looking to purchase I specifically looked for pharmacies in rural areas. There is no way you can compete against the major chains unless you do something similar to what Dr. M did. The farther you are away from a Wal-Mart the better. All PBMs except Express Scripts/Medco have contracts with rural rates for pharmacies that lie a certain distance from the nearest pharmacy. This results in a 2% to 3% increase in reimbursement. In my opinion the majority of independents that will be open in 10 years will those located in rural areas to small to attract the chains but just big enough a small independent can survive.

Any opinions out there on population density requirements for a new start up? In other words, 1) what is the smallest population you would start an independent in or what do you think is an optimal population for a new start up?
Do you think my method for determining viability of an area to support an additional pharmacy is valid or would you add some other parameters?
Every scenario is different therefore the population requirements will be different. I do not believe there is one figure that can be universally applied. There are a hundred plus things to consider when looking to buy or start an independent pharmacy.

The #1 universal truth I have learned in the 10 plus years I've worked retail pharmacy is a customers loyalty extends about the length of a dollar bill. If they can get it for less somewhere else they will. The #2 universal truth I've learned, convenience is king and can occasionally trump the #1 universal truth. The bottomline...if your prices are higher and/or the other guy is more convenient you will lose.

Here are a few things to consider:

1.) Distance from major chains.
2.) Percentage of customers with Medicaid or Medicare Part D.
3.) Where are the doctors located.
4.) How far away is the nearest hospital.
5.) Who are the major employers in the area.

 

[SClENCE]

Here is what I could consider as far as location:

-Population density
-How many other pharmacies are around
-How many hospitals/urgent cares are around
-Demographics

When calculating population density, you could calculate people per square mile per pharmacy.

So area #1 has 5,000 people in 10 square miles with 2 existing pharmacies.
Area #2 has 6,800 people in 10 square miles with 3 existing pharmacies.

So area #1 would actually be more densely populated in terms of people per pharmacy. But if you can buy a lot in area #2 across the street from an urgent care when the next pharmacy is 8 minutes away then this might still be better.

Or you could try to locate near a nursing home and supply medical supplies like oxygen and stuff. But this in my opinion should be a supplement and not a business plan.

Also, what if half of the city is employed by one company that gives all employees caremark insurance?

 

[ExpressMaiL]

Consult NCPA for some information on opening or purchasing an independent pharmacy. There are several models on how to assess value of a pharmacy... like Mountain said, you may want to consider buying a pharmacy that is already running.
Think of the pharmacy like an engine - an existing pharmacy will have records you can analyze and how much "maintenance/repairs" you will need to perform. Opening a new pharmacy will most likely be cheaper but if there is no gas around (patients), it's going to be difficult. If you want to try your hand at specialty pharmacy, there was one listed (with no price) in Southern California. I think it had grown from 7mil to 14mil/year under the most recent owner. Actually I think OptumRx acquired it.

There is a lot of research you need to do. Including an analysis of your financials.

As a small business owner, I want to see fellow small business owners succeed. As a pharmacist, I want to see fellow pharmacists make it so they're self-employed and able to sustain themselves. As a risk-taker, I want to see fellow risk-takers reap windfall ROIs... You should also consider seeking out retired business owners who can share their knowledge, because they may be willing to share more.

One last thing, owning and running a pharmacy is very different from just running a pharmacy. I've done both and when I was just running a pharmacy, I thought I knew everything about owning one. WRONG. It's very different when you put your own money into it and the stakes are real.

The landscape of independent pharmacy is this- PBMs own you. Unless you have a niche or a way around them, it's going to be tough. Reimbursement under cogs is terrible, in so many ways.

Just my thoughts. Good luck.

 

[Pharmgrlnxdor]

Thank you for the feedback! I am at minimum 2 years away from being able to open an indie pharmacy. Prior to pharmacy school I worked in corporate America and made others wealthy by running their businesses. I ran mainly small family businesses in the range of 4 million to 30 million in sales for owners that were nearly absentee. One owner would show up about two times a year, take a walk through the plant, tell me good job and wouldn't be seen again for six months. I moved that company from a 20,000 square foot facility to a 40,000 square foot facility and relocated one product's production line to a more employer friendly state. That location is booming now and the money is rolling in.

I have no thought that I know it all, I love the learning process and am always looking to improve my knowledge base but know that I have to stabilize my financial situation first having had a rough time transitioning from a well compensated executive to a lowly tech and pharmacy student. So now I want to take some time analyzing the possibilities before moving in any definitive direction while I get my personal life and finances back in order.

This thread is a chance for me to play with ideas regarding location, niche pharmacy ideas, operating systems, etc. while I work for my big box employer (once again making someone else wealthy) and keep my spirits up knowing that my servitude to chain retail pharmacy is not a permenant reality. For instance I am thinking of going to the NCAP trade show this year to familiarize myself with as many vendors as possible. Would love to hear from additional indie pharmacy owners regarding my method for determining viability of an additional pharmacy. BF7 where are you? Would love to hear your opinions!

I considered starting a blog for this purpose but it seems silly to do that as this site seems to attract such a large number of pharmacy types already, even if most of them are just lurkers.

 

[PharmacyPodcast]

Thank you for the feedback! I am at minimum 2 years away from being able to open an indie pharmacy. Prior to pharmacy school I worked in corporate America and made others wealthy by running their businesses. I ran mainly small family businesses in the range of 4 million to 30 million in sales for owners that were nearly absentee. One owner would show up about two times a year, take a walk through the plant, tell me good job and wouldn't be seen again for six months. I moved that company from a 20,000 square foot facility to a 40,000 square foot facility and relocated one product's production line to a more employer friendly state. That location is booming now and the money is rolling in.

I have no thought that I know it all, I love the learning process and am always looking to improve my knowledge base but know that I have to stabilize my financial situation first having had a rough time transitioning from a well compensated executive to a lowly tech and pharmacy student. So now I want to take some time analyzing the possibilities before moving in any definitive direction while I get my personal life and finances back in order.

This thread is a chance for me to play with ideas regarding location, niche pharmacy ideas, operating systems, etc. while I work for my big box employer (once again making someone else wealthy) and keep my spirits up knowing that my servitude to chain retail pharmacy is not a permenant reality. For instance I am thinking of going to the NCAP trade show this year to familiarize myself with as many vendors as possible. Would love to hear from additional indie pharmacy owners regarding my method for determining viability of an additional pharmacy. BF7 where are you? Would love to hear your opinions!

I considered starting a blog for this purpose but it seems silly to do that as this site seems to attract such a large number of pharmacy types already, even if most of them are just lurkers.

Eventually, I'd like to assist several new Independent Pharmacy owners build their pharmacies.
If you're (SERIOUSLY) interested, let's chat.
BE SURE to TAKE A LISTEN: http://pharmacypodcast.com/preservation-profitability-of-independent-pharmacy/

• Episode 178

Preservation & Profitability of Independent Pharmacy

 

[PharFromNormal]

Thank you for the feedback! I am at minimum 2 years away from being able to open an indie pharmacy. Prior to pharmacy school I worked in corporate America and made others wealthy by running their businesses. I ran mainly small family businesses in the range of 4 million to 30 million in sales for owners that were nearly absentee. One owner would show up about two times a year, take a walk through the plant, tell me good job and wouldn't be seen again for six months. I moved that company from a 20,000 square foot facility to a 40,000 square foot facility and relocated one product's production line to a more employer friendly state. That location is booming now and the money is rolling in.

I have no thought that I know it all, I love the learning process and am always looking to improve my knowledge base but know that I have to stabilize my financial situation first having had a rough time transitioning from a well compensated executive to a lowly tech and pharmacy student. So now I want to take some time analyzing the possibilities before moving in any definitive direction while I get my personal life and finances back in order.

This thread is a chance for me to play with ideas regarding location, niche pharmacy ideas, operating systems, etc. while I work for my big box employer (once again making someone else wealthy) and keep my spirits up knowing that my servitude to chain retail pharmacy is not a permenant reality. For instance I am thinking of going to the NCAP trade show this year to familiarize myself with as many vendors as possible. Would love to hear from additional indie pharmacy owners regarding my method for determining viability of an additional pharmacy. BF7 where are you? Would love to hear your opinions!

I considered starting a blog for this purpose but it seems silly to do that as this site seems to attract such a large number of pharmacy types already, even if most of them are just lurkers.

Yes working for a big box you are making many shareholders wealthy. While I understand the negative stigma attached to chain pharmacies, I encourage everyone working for one that has the dream of owning their own to learn all of the whys on all of the things a chain does. While you don't have to agree with them or you decide you won't end up adopting the same tactics/policy/strategy etc. the fact is chains have been very successful in being profitable. Putting yourself in the position of owning all of the shares of the company changes your prospective. As someone mentioned above, running a pharmacy is different than owning a pharmacy.

Running a chain pharmacy as a manager people tend to bitch about not having enough staff or placing high emphasis on convience and customer service over whatever else the manager wants. As an owner, money not spent on unnecessary payroll is more money the business has. Focusing on catering to the customer needs gets you customer retention and in turn business growth.

 

[marscole]

I'm not good at dealing with finance or numbers, when the insurance underpaid, how would you deal with that?

 

[504poboy]

I'm not good at dealing with finance or numbers, when the insurance underpaid, how would you deal with that?

You need to shop around better for your wholesaler. The insurance companies are changing their formulas. They are not reimbursing like they used to and you need to write to your local congressman. In any other business, people would be in uproar. You NEED to join NCPA. NCPA sends out weekly email articles. People don't fail, they give up.

 

[SClENCE]

Owning a pharmacy would be so satisfying but at the same time the amount of paperwork and legal responsibility is intimidating in my opinion. Setting yourself up to bill insurance/medicare and finding outside vendors... decided what to stock and how much of it... finding a computer system... the list of major and critical obstacles goes on. Making these decisions I would find fun and rewarding but how to go about them would be difficult for someone who has never been through the process. A lot of independents have to offer medical supplies/compounding to survive. As much as I'd like to be invested in an independent as a partner/owner I just don't see it as being a strong financial decision when you can walk into a chain store and make 120k. A lot of independents go for 5 years before they even hit a break even point from what I understand.