Opening Independant Pharmacy - Real Questions

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Markiv

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I want to own independent pharmacy, but i have some really specific questions. Please give you inputs. Someone who has recently purchased an independent pharmacy should be able to help a lot in this.

1) Why should a customer go to an independent pharmacy versus going to a chain?
2) How much dollar investment (or % Investment) is required to buy an existing retail pharmacy?
3) How much does an independent pharmacist (business owner) make? Working in retail pays you around 110~120K depending on area. Is it possible to double or triple the income (off course with extra work and liabilities)
4) Do chains buy at cheaper costs and sell at cheaper costs?
5) Can independents compete the chains cost wise?
6) How do the chains outplay the in dependants?
1) Are chains selling drugs at cheaper cost? Lowering their margin?
2) Are chains taking on loss to increase and gaining geographical coverage area?
pharmacy

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I want to own independent pharmacy, but i have some really specific questions. Please give you inputs. Someone who has recently purchased an independent pharmacy should be able to help a lot in this.

1) Why should a customer go to an independent pharmacy versus going to a chain?
2) How much dollar investment (or % Investment) is required to buy an existing retail pharmacy?
3) How much does an independent pharmacist (business owner) make? Working in retail pays you around 110~120K depending on area. Is it possible to double or triple the income (off course with extra work and liabilities)
4) Do chains buy at cheaper costs and sell at cheaper costs?
5) Can independents compete the chains cost wise?
6) How do the chains outplay the in dependants?
1) Are chains selling drugs at cheaper cost? Lowering their margin?
2) Are chains taking on loss to increase and gaining geographical coverage area?
pharmacy


My father owns one so I'll let him answer these

1) I bought the independent store I own now because I worked for the chains for over 12 years. I knew their flaws and I knew what they couldn't offer that an independent could so I took advantage of that. I attract customers on the basis of friendly service, fast service, and the feeling of being a part of a community. You won't believe the amount of people who transfer in from walmart and complain about their wait times and how they are treated.

2) I put down 30%

3) I don't like discussing specifics but I will tell you this: double and triple what working in retail gives you isn't even close. Not even close.

4) I had a chain come by my store and offer me a 7 figure check to shut down and sell, I told them to come back with a real offer.

5) Depends. Not on the $4 generics, most of the independents who compete with walmart on those are out of business.

6) They trap people in the store by making the poor service and long wait times equal to what else you can buy in the store. Some people fall for the trap and others don't. It's the ones that don't that come to independents and spend all of their money.

I hope this helps, he's a fast talker so I tried to write down everything he said.
 
I can answer some of these from my past experience.

Chains generally will get deeper discounts on drugs from wholesalers via their contract. Most states of some sort of independent pharmacy coalition that collectively bargins for lower costs on drugs through specific wholesalers.

The outplay independents in the same way Wal-Mart outplays the mom and pop shops. The previous answer sums it up perfectly.

Chains do not operate at a loss to a degree. Obviously everyone is charging the same copays (unless they have special contracts) and cash prices are going to be relatively the same.

Yes, they will dispense certain generic drugs for $4. The thing to keep in mind is that the average cost of dispensing a prescription, minus the cost of the drug, is roughly about $10. So there, you are operating a loss of at least 60%. Since it is a very small amount and they are a big chain, it can be made up elsewhere.

And Walmart pharmacy, to my knowledge, has never turned a profit for the company. That should give you an idea on their practices.
 
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Thank you for you promt and helpful responses. Will be following this chain as to get some more responses.
 
I like this thread

I want to open my own pharmacy as well, I have been working in retail chain for 7 years, and I am ready to open my own, I feel the following:

1. As an independent I believe I can offer quick and friendly service
2. I would have more freedom of scheduling and tech help tailored to my needs
3. Earn more $$$$$$
4. People still like the independent community pharmacies

Anyone with Hints to 1st time openers please share here

Here are my questions

1. What is the best value for your $$, for a computer system?
2. which wholesaler offers better pricing and flexible payment? (i know each state may have different suppliers)
3. What is the most efficient way to insurance contracts?
4. How do we get into a buying group?

Sorry if these questions sound dumb, but I am just starting!

Pharmd1 :):)
 
I can answer some of these from my past experience.

Chains generally will get deeper discounts on drugs from wholesalers via their contract. Most states of some sort of independent pharmacy coalition that collectively bargins for lower costs on drugs through specific wholesalers.

The outplay independents in the same way Wal-Mart outplays the mom and pop shops. The previous answer sums it up perfectly.

Chains do not operate at a loss to a degree. Obviously everyone is charging the same copays (unless they have special contracts) and cash prices are going to be relatively the same.

Yes, they will dispense certain generic drugs for $4. The thing to keep in mind is that the average cost of dispensing a prescription, minus the cost of the drug, is roughly about $10. So there, you are operating a loss of at least 60%. Since it is a very small amount and they are a big chain, it can be made up elsewhere.

And Walmart pharmacy, to my knowledge, has never turned a profit for the company. That should give you an idea on their practices.

I am a pharmacy manager for Walmart at a slower than normal store. We made 250k profit last year after paying my much higher than normal salary of 180+. Trust me, Walmart is making a profit.

That being said I am looking forward to saving up money and starting my own independent one day. I love everyone who doesn't think we give good service. There are 7 seven pharmacies in my town and no one gives better service than we do. It all depends on the pharmacy manager and whether or not he/she cares.
 
Best way to own an independent is to marry the only child of the boss.
johnep
 
Thank you very much for your contribution in this thread.

1. According to NCPA's data (2008), there are 23, 318 independent pharmacies in operation in the united states which comprise 39.4% of retail pharmacy. I cant speak about current data but even if we have 20,000 independent pharmacies in operation currently which still makes them bigger than any chain (7000+ walgreens) & (7000+ CVS) & (4000+ rite aid). If these companies have bargaining power to purchase drugs from wholesalers depending on their volume of 7000+ stores why cant independent pharmacy possess the same level of bargaining power despite being 20,000 stores around the nation. We always hear that independent pharmacy cant compete with $4 generic. Is it because they dont have bargaining leverage like other chains despite being 20,000 in number???

2. Even after outplaying all the chains in customer satisfaction/service, independent pharmacies are still struggling hard to survive. Is it because of high cost price to run a store (health insurance to employees, cost of vials, computer system, paper, printers etc)??? If that is true why cant they have an umbrella organization that works on their behalf with greater bargain leverage to purchase software or vials or paper bag or drugs or OTC products for 20,000 stores????

I dont want to see independent pharmacies dying. That would be a great set back for the profession and We will always have to bow down to corporate world.

I just want to see a stronger organization of independent pharmacy with great bargaining power for 20,000 stores that way independent pharmacy can give healthy competition to other chains.
 
Herding cats is easier than getting pharmacists to work together.
johnep
 
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Thank you very much for your contribution in this thread.

1. According to NCPA's data (2008), there are 23, 318 independent pharmacies in operation in the united states which comprise 39.4% of retail pharmacy. I cant speak about current data but even if we have 20,000 independent pharmacies in operation currently which still makes them bigger than any chain (7000+ walgreens) & (7000+ CVS) & (4000+ rite aid). If these companies have bargaining power to purchase drugs from wholesalers depending on their volume of 7000+ stores why cant independent pharmacy possess the same level of bargaining power despite being 20,000 stores around the nation. We always hear that independent pharmacy cant compete with $4 generic. Is it because they dont have bargaining leverage like other chains despite being 20,000 in number???

2. Even after outplaying all the chains in customer satisfaction/service, independent pharmacies are still struggling hard to survive. Is it because of high cost price to run a store (health insurance to employees, cost of vials, computer system, paper, printers etc)??? If that is true why cant they have an umbrella organization that works on their behalf with greater bargain leverage to purchase software or vials or paper bag or drugs or OTC products for 20,000 stores????

I dont want to see independent pharmacies dying. That would be a great set back for the profession and We will always have to bow down to corporate world.

I just want to see a stronger organization of independent pharmacy with great bargaining power for 20,000 stores that way independent pharmacy can give healthy competition to other chains.

Honestly,

You can compete..we match all prices...sooner or later many of our pts go onto some sort of ins (medicare or medicaid) and thats where you make it up...Yeah, we fill narcs, we do longterm care and soon we will do drug detox...You can survive and then some...my thought is mismanagment on part of the owners...you must find a way, a niche, and other sources of money...
 
I am a pharmacy manager for Walmart at a slower than normal store. We made 250k profit last year after paying my much higher than normal salary of 180+. Trust me, Walmart is making a profit.

That being said I am looking forward to saving up money and starting my own independent one day. I love everyone who doesn't think we give good service. There are 7 seven pharmacies in my town and no one gives better service than we do. It all depends on the pharmacy manager and whether or not he/she cares.

whats a "slower than normal" store in your case?
 
I'm 51 and want to open my own Pharmacy, I worked retail for about 17 years and a Doctor owned independent for 3. He sold it out from under me, it was his business, I loved the independent pharmacy and it's benefits... Do you have any advise, just seems a little late in life to start a business, but I love Pharmacy and don't won't to go back to retail

Michael
 
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I am a third year pharmacy student. I was wondering while working at a pharmacy that how much do bottles of medication cost from wholesale distributor?
I am aspiring to be a wholesale drug distributor along with opening up my pharmacy chain.
How can i find out the cost of wholesale drug from teva, or ranbaxy or dr. reddys?

Information will be greatly appreciated.
 
I am a pharmacy manager for Walmart at a slower than normal store. We made 250k profit last year after paying my much higher than normal salary of 180+. Trust me, Walmart is making a profit.

I know this is a bit late, but I was referring to Walmart as a whole. Individual stores my turn a profit, but as a whole they do not
 
I know this is a bit late, but I was referring to Walmart as a whole. Individual stores my turn a profit, but as a whole they do not

They would never reveal that information. One thing to think about is that for the last 7 quarters Walmarts domestic sales have declined. They $4 list came out 4 years. Regarless of the recession, i wonder if this is a contributing factor.
 
My father owns one so I'll let him answer these


3) I don't like discussing specifics but I will tell you this: double and triple what working in retail gives you isn't even close. Not even close.


Realistically, many independents have closed and many start-ups will soon go under. It is not typical that independents make mega $$$ more than retail employee pharmacists. Many independent pharmacists must forego benefits such as retirement plans, health/dental/vision/life insurance, etc just to keep the business afloat. It's great that there are independents who are doing well but it is looking through rose colored glasses to believe that most independents will make you millions these days. The glory days are gone and it's tough work and long hours to survive and make a decent profit----depends on the area, if the business is well established, etc. Also, it takes a lot of capital and with economic conditions borrowing money will be difficult for an established pharmacy much less a start-up.
 
'how much do bottles of medication cost from wholesale distributor? '
How long is a piece of string? Usually, you should expect to make 50% mark up.
Still, as it appears you have several millions already 'wholesale drug distributor along with opening up my pharmacy chain.', should not be a problem.
johnep
 
First the chains could care less about you as an independent. So find you own path. The benefit of being an independent is flexibility, but being too flexible can be the start of your demise.
I owned my store for 12 years. For 5 of those years I made much less than my friends working in chains, but I was much happier.
Then pbm's really started their aggressive mail order campaign. They also figured out that independents are easy targets for audits, so look to give up several thousand a year for a stupid technicality.
The pharmacy business may as well be based in a communist or socialist society...you're told who you can service, when you can service them, and given a pittance for your trouble.
If you can open, pay all your debt within 10 years, while not buying a new big house or expensive cars, and your wife is satisfied to never see you, and your kids do not care if your home or not, and you have no hobbies or friends outside of your store....go for it....then when those 10 years are up SELL to the highest bidder and go work your normal forty hour week for some other guy. You MIGHT come out just a little bit ahead. But at least you tried.
 
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1) Why should a customer go to an independent pharmacy versus going to a chain?
Almost always, the reason why a customer chooses my store over a major chain is customer service. We know all of our regulars pretty well and we call them by name and shoot the **** with them. We also provide this kind of personal service while filling their prescriptions a lot faster than the big chains.

2) How much dollar investment (or % Investment) is required to buy an existing retail pharmacy?
Obviously it varies from deal to deal, but usually most business lenders or pharmacy owners who offer financing want at least a 1/3 commitment. You have to show that you believe in yourself enough to be willing to lose a good chunk of your own money. Again, this amount will vary, but you can pretty much bet on aroun 30%

3) How much does an independent pharmacist (business owner) make? Working in retail pays you around 110~120K depending on area. Is it possible to double or triple the income (off course with extra work and liabilities)
Every independent is different, what an owner decides to pay him/her self will vary. Some may choose to put a good portion of the profits back into the business for growth, but the older independent owners who are ready to get the hell out of dodge may pay themselves a little more, but I would say you can count on taking about 10% of your revenue for yourself, if you are running a stable successful business. If you open from scratch with no established customer base and you grow at an average rate, you may not be able to even pay yourself a reasonable salary for 3-5 years so you better have some capital or a well paid spouse to keep the bills paid for a while. (you have to make a sacrifice somewhere right?)

4) Do chains buy at cheaper costs and sell at cheaper costs?
This question has a very logical answer, certainly walmart buys a stock bottle of lisinopril 10mg for much less than me. Wal-mart buys a lot of their medication direct from the manufacturer and work out special pricing with them because of the volume they purchase. They use this high quantity of medication to stock their own warehouse/distribution center, from which they stock their stores.

5) Can independents compete the chains cost wise?
I agree with earlier poster's father about the $4 generics. Can't really compete their with most of the meds on the list. If I can match it I will, but I take a good look at our medication cost as well as what other medications that patient could potentially bring to us to fill. Sometimes a patient will come in and say "Wal-Mart will do it for $4" I which point I say " Well, I can't do it for $4, but I can do it for $6 and I will have it ready in 15 minutes" They are already standing in front of you and most patients are not going to get in their car and drive up the road and wait twice as long to save $2. You got them and if you wow them with service they will come back again.

6) How do the chains outplay the independants?
Convenience and pricing mostly. Ex: Wags has a linked system so you can be anywhere and get your prescription refilled, which I think is kind of nice. They are on every corner and you can always find them and almost all with a drive-through. Now with the minute clinics and vaccine services they are pretty dam convenient, plus you can get a 20oz. Coke and a bag of chips ;)

1) Are chains selling drugs at cheaper cost? Lowering their margin?
Wal-mart can afford to lower their margin on drugs, because it is not a drug store. It is a major retailer and whatever they make take a loss on or a very small margin off of, they will make it up on the retail merchandise side.

2) Are chains taking on loss to increase and gaining geographical coverage area?
People have their limits on how far they will travel to get something at a cheaper price, especially with gas prices on the rise. With that being said, I don't think any major chain, even grocery based chains, are not interested in operating at a loss. They may operate below a desired margin to gain more business, but they will not lose money. It would be hard to justify to some corporation that a pharmacy running at a loss in a grocery store is beneficial , because you can't prove that a certain percentage of the grocery revenue was generated by customers who came there for the pharmacy.
 
That last post was hilarious to read. Completely incorrect but hilarious none the less. The average independent pharmacy makes $200,000 profit per year. Profit. After your salary. It's quite a bit of work to get it started or even to take over an existing pharmacy but the payoff is huge. My parents own an independent in an extremely small town and they beat the national average after paying BOTH of their salaries. Don't listen to the last guy, I'm not sure where his business went wrong but you can make a great living in a great independent atmosphere doing what you love. Good luck in your business ventures!

Common misconception, but profit does not always mean that it's money in your wallet. You could have liabilities come due over the next year that take a chunk out of it, you could be seeking some sort of improvement to the store or the business which will take a chunk out of it...

Sure you can perhaps pocket some of it, but if you're just starting out and/or attempting to grow a business you're gonna pump that profit back into the business and never actually see it.
 
Common misconception, but profit does not always mean that it's money in your wallet. You could have liabilities come due over the next year that take a chunk out of it, you could be seeking some sort of improvement to the store or the business which will take a chunk out of it...

Sure you can perhaps pocket some of it, but if you're just starting out and/or attempting to grow a business you're gonna pump that profit back into the business and never actually see it.

Agreed, especially during the initial few years. Your business has to pay taxes on any profit made, so during the initial years it would be wiser to use those profits to grow your business and decrease you margin. There is no law that says your business has to make money. Keep in mind that this will in some ways make your business look less valuable in terms of cash flow, but this will only hurt you if you are planning on selling soon.
 
The independent community pharmacy includes those pharmacist-owned, privately held businesses that encompass single-store operations and other pharmacist-owned businesses, such as regional chain, franchise, compounding, long-term care, specialty, and supermarket pharmacies. to open independent pharmacy, have lots of experience in hand Or you can hire pharmacy students who are expert in handing such type of pharmacies.
Pharmacy students may well have experienced an independent pharmacy—about 50% of independents utilize students in various rotations.:)
 
I am also interested in starting a local pharmacy.

1.) Who are the top distributors/wholesalers that local pharmacies buy from?
 
I am also interested in starting a local pharmacy.

1.) Who are the top distributors/wholesalers that local pharmacies buy from?

Same as everyone else, Cardinal, Mckesson, AmerisouceBergen.
There are also some buying groups/co-ops, we use API.
 
What are the margins that a large pharmacy like Walgreens makes per script filled? For example, let's say you had a script of Fluconazole 150mg tabs for $13.39 retail price, and insurance covered
$8.97, what would the pharmacy make in terms of the margins on this script?
 
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