Independent Pharmacy Owners: How do you survive with such low reimbursements?

[DrIndy]

I am a pharmacist currently working for a chain pharmacy, and I was looking to open my own independent pharmacy in the coming years. I was wondering how pharmacies in general survive with such low reimbursements. I won't divulge specifics,but I will give an example of common reimbursement for the chain. We buy a specific medication for $1.20 for a 30 day supply. The cash price is ~$100. The insurance reimburses the pharmacy AT COST (~$1.25) sometimes even lower if it is medicaid, plus $3 dispensing fee. What is even more crazy, the insurance hardly ever pays out anything, its usually just the patients co-pay is the only reimbursement we get. Assuming there are no clawbacks or audits (lol), and your independent pharmacy does 100 scripts a day, 5 days a week, at basically just the dispensing fee as profit, that gives you a grand profit of 74,000 before taxes, salary of 1 pharmacist, 2 techs, rent, insurance, inventory, pharmacy software, and countless other costs. Clearly you would at least lose $250,000 a year. I feel like PBMs are killing the pharmacy field, but realistically there is absolutely nothing you can do to stop it. I understand that some prescriptions may be more profitable, but some actually cost my chain to lose hundreds of dollars per script. Am I missing something? As an independent pharmacy owner, can you please give me some inspiration for another potential independent pharmacy owner? If you don't want to post numbers in the replies, please fill free to PM me. Thanks!

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[imcallingcorp]

I am a pharmacist currently working for a chain pharmacy, and I was looking to open my own independent pharmacy in the coming years. I was wondering how pharmacies in general survive with such low reimbursements. I won't divulge specifics,but I will give an example of common reimbursement for the chain. We buy a specific medication for $1.20 for a 30 day supply. The cash price is ~$100. The insurance reimburses the pharmacy AT COST (~$1.25) sometimes even lower if it is medicaid, plus $3 dispensing fee. What is even more crazy, the insurance hardly ever pays out anything, its usually just the patients co-pay is the only reimbursement we get. Assuming there are no clawbacks or audits (lol), and your independent pharmacy does 100 scripts a day, 5 days a week, at basically just the dispensing fee as profit, that gives you a grand profit of 74,000 before taxes, salary of 1 pharmacist, 2 techs, rent, insurance, inventory, pharmacy software, and countless other costs. Clearly you would at least lose $250,000 a year. I feel like PBMs are killing the pharmacy field, but realistically there is absolutely nothing you can do to stop it. I understand that some prescriptions may be more profitable, but some actually cost my chain to lose hundreds of dollars per script. Am I missing something? As an independent pharmacy owner, can you please give me some inspiration for another potential independent pharmacy owner? If you don't want to post numbers in the replies, please fill free to PM me. Thanks!

You’re not missing anything. Your financial analysis of a that script represents how most of the rx you fill on any given day will look. Yes you will hit some nice ones here and there but they are far and few in between and doesn’t last forever. If you are in a medicaid area their terrible reimbursement will kill you. If you are in a middle-upper class area the mailorder and preferred part d plans will not even let people use you. Yes there are some compound places that can withstand this but plain old retail not the time. Save your money and maybe later on. Retail pharmacy is in a terrible state due to PBMs and until it changes stay away.

 

[steveysmith54]

I live in CA, the ones that are still open have some kind of a niche and doing relative high volume... Whether it's being located inside of a hospital, doing high amount of HIV meds, injectable meds (RA/antipsychotics), and other higher reimbursement speciality meds, serving LTC facilities/ board and care, with bubble packing, compounding, dme etc...

They teach you in school to focus on clinical services but although doing vaccines and mtm helps, they reimbursement is just not there

 

[PharmLyfe17]

I did an APPE at an independent pharmacy and it was scary to see how much money they would lose on some scripts. Their system (RX30) was set up so that it would let you know if you were going to lose money on a script and how much money you would lose. Although, there wasn't much you could do about it unless you tried changing manufactures which would sometimes allow you to not lose as much money. A lot of independents partner with Good Neighbor Pharmacy so they have better purchasing power and can buy things at a better rate. I think NCPA puts out a publication every year about independent pharmacy and last year, they said that you had to average a profit of about $11 per script to stay afloat with salary, rent, supplies, etc.

 

[Rouelle]

I’ve always been curious about vaccinations. The chains push them as if vaccination is the best get rich program ever, but at the same time many physicians around here won’t do them because of the poor reimbursement.

 

[rph3664]

I live in CA, the ones that are still open have some kind of a niche and doing relative high volume... Whether it's being located inside of a hospital, doing high amount of HIV meds, injectable meds (RA/antipsychotics), and other higher reimbursement speciality meds, serving LTC facilities/ board and care, with bubble packing, compounding, dme etc...

They teach you in school to focus on clinical services but although doing vaccines and mtm helps, they reimbursement is just not there

My BFF works at an independent in a small city in a rural area. They stay afloat with their nursing home contracts, as well as their front end, which is mostly various impulse items (candy, junky plastic toys, magazines, best-selling paperback books, etc.) and they're the place in town to get high school merchandise.

 

[steveysmith54]

I’ve always been curious about vaccinations. The chains push them as if vaccination is the best get rich program ever, but at the same time many physicians around here won’t do them because of the poor reimbursement.

I think chains push them because they are freebies for them, what I mean is they aren’t going to allocate extra help to help you administer the vaccinations, no extra resources are needed to gain extra profit from their pharmacies. If you give 15 flu shots a day, with each shot yielding 15 dolllars profit that 225 bucks you just made for the Pharmacy.

 

[Old]

I think most independents partner with Good Neighbor Pharmacy or get a Med Shoppe franchise. At least with Med Shoppe I believe they get a rebate quarterly on their purchases which results in more profit than you are seeing when you fill an rx. I know of a couple that opened several years ago that seem to be doing okay. One a very small <1000sqft near a pain clinic and the other a Med Shoppe. However, I am quite certain that both have sales that are 60 to 70% narcotics. Personally I would rather dig ditch than fill narcotics all day long and know that a large portion are sold or are for recreational use. Wouldn't be able to sleep at night.

 

[imcallingcorp]

I’ve always been curious about vaccinations. The chains push them as if vaccination is the best get rich program ever, but at the same time many physicians around here won’t do them because of the poor reimbursement.

vaccinations don’t help much. all your profit is the administration fee. which is nice when doing flu shots because it’s cheap to stock. but lets be real how many flu shots will you do in a season lets say 500. so that might be a profit of around 5000 in a flu season. helps yes makes up for bad reimbursement no. and for zostavax if you order 1 vial you break even after admin fee because they charge extra to ship 1 vial , so to make that profitable admin fee must order 10 pack and yea thats pricey. so flu shots for a chain when multiplied by thousands of stores and they obviously get it cheaper is millions extra dollars.

 

[imcallingcorp]

I think most independents partner with Good Neighbor Pharmacy or get a Med Shoppe franchise. At least with Med Shoppe I believe they get a rebate quarterly on their purchases which results in more profit than you are seeing when you fill an rx. I know of a couple that opened several years ago that seem to be doing okay. One a very small <1000sqft near a pain clinic and the other a Med Shoppe. However, I am quite certain that both have sales that are 60 to 70% narcotics. Personally I would rather dig ditch than fill narcotics all day long and know that a large portion are sold or are for recreational use. Wouldn't be able to sleep at night.

the most important rebate you get is if you buy enough generics. in return you get a rebate from your brand purchases. this might be 1% or more depending on many factors . that in itself will not make up for reimbursement, dir fees, audits.

and pharmacies that work with pain clinics, well lets be honest regardless of how well intentioned the pharmacy and the drs are there are way too many addicts / sellers and when you fill c2s all day you will no longer feel like a pharmacist and it will no longer feel like a pharmacy. and the only real money those places make is selling cash oxys to the most obvious abusers/sellers. and at that point you are no better than a street dealer.

 

[Sparda29]

We have something with EPIC where they track the reimbursements and recoup money if we are paid less than cost. We also buy the majority of our generic drugs from a company that sells short-dated items (expiring within 2-5 months), the drug cost is much cheaper compared to buying from AmerisourceBergen or something. Never buy big bottles that will expire on the shelf. Only stock basic drugs, if someone brings in a prescription for something expensive, get the script first, bill it to see if it's covered, order it, send via delivery next day. Compounding. Meet with doctors and convince them to send all their patients to you alone.

We work with pain management doctors. Remind the doctors to prescribe diclofenac 3% gel for pain. We buy it for about $200 a tube, reimbursement is between $600-900 per tube. Cash is not an option for paying for controlleds, insurance only.

So if you get like 30 scripts a month for Diclofenac 3% gel, #300 grams, apply to affected areas BID (lower back, joints, pain areas) (max 10 grams daily), that's a profit of $2100/script so $63,000 profit a month off of diclofenac 3% gel alone. Only problem with this is that the ****ing insurances are starting to put diclofenac 3% gel as a prior authorization required item and the doctors don't like doing PAs.

Aripiprazole is also a really good reimbursing drug so market yourself to psychiatrists.

Asthma/COPD drugs have pretty good reimbursements so market to pulmonologists.

HIV drugs have pretty good reimbursements so market yourself to HIV clinics. We offer discrete home delivery.

 

[Old]

the most important rebate you get is if you buy enough generics. in return you get a rebate from your brand purchases. this might be 1% or more depending on many factors . that in itself will not make up for reimbursement, dir fees, audits.

and pharmacies that work with pain clinics, well lets be honest regardless of how well intentioned the pharmacy and the drs are there are way too many addicts / sellers and when you fill c2s all day you will no longer feel like a pharmacist and it will no longer feel like a pharmacy. and the only real money those places make is selling cash oxys to the most obvious abusers/sellers. and at that point you are no better than a street dealer.

I have had partners in retail over the years that just didn't care. Fill some rx's on insurance, to much for insurance, cash is fine. sometimes just cash since they didn't want it on their insurance(wouldn't you question that?). Often times they were people previously convicted for drug offenses or would sell them in the store parking lot. When I would try to discuss with them there answer was always the same " I am not a policeman". The partners that I had that did that seemed to like the druggies calling them by their names and telling them what a good pharmacist they were. Self esteem issues maybe. Needless to say I was always the bad guy who wouldn't fill them when questionable.

 

[ChalupaBatman86]

We have something with EPIC where they track the reimbursements and recoup money if we are paid less than cost. We also buy the majority of our generic drugs from a company that sells short-dated items (expiring within 2-5 months), the drug cost is much cheaper compared to buying from AmerisourceBergen or something. Never buy big bottles that will expire on the shelf. Only stock basic drugs, if someone brings in a prescription for something expensive, get the script first, bill it to see if it's covered, order it, send via delivery next day. Compounding. Meet with doctors and convince them to send all their patients to you alone.

We work with pain management doctors. Remind the doctors to prescribe diclofenac 3% gel for pain. We buy it for about $200 a tube, reimbursement is between $600-900 per tube. Cash is not an option for paying for controlleds, insurance only.

So if you get like 30 scripts a month for Diclofenac 3% gel, #300 grams, apply to affected areas BID (lower back, joints, pain areas) (max 10 grams daily), that's a profit of $2100/script so $63,000 profit a month off of diclofenac 3% gel alone. Only problem with this is that the ****ing insurances are starting to put diclofenac 3% gel as a prior authorization required item and the doctors don't like doing PAs.

Aripiprazole is also a really good reimbursing drug so market yourself to psychiatrists.

Asthma/COPD drugs have pretty good reimbursements so market to pulmonologists.

HIV drugs have pretty good reimbursements so market yourself to HIV clinics. We offer discrete home delivery.

Somebody who works for a PBM just read this and initiated an audit for unusual dispensing activity on Diclofenac 3% gel.


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[CetiAlphaFive]

We have something with EPIC where they track the reimbursements and recoup money if we are paid less than cost. We also buy the majority of our generic drugs from a company that sells short-dated items (expiring within 2-5 months), the drug cost is much cheaper compared to buying from AmerisourceBergen or something. Never buy big bottles that will expire on the shelf. Only stock basic drugs, if someone brings in a prescription for something expensive, get the script first, bill it to see if it's covered, order it, send via delivery next day. Compounding. Meet with doctors and convince them to send all their patients to you alone.

We work with pain management doctors. Remind the doctors to prescribe diclofenac 3% gel for pain. We buy it for about $200 a tube, reimbursement is between $600-900 per tube. Cash is not an option for paying for controlleds, insurance only.

So if you get like 30 scripts a month for Diclofenac 3% gel, #300 grams, apply to affected areas BID (lower back, joints, pain areas) (max 10 grams daily), that's a profit of $2100/script so $63,000 profit a month off of diclofenac 3% gel alone. Only problem with this is that the ****ing insurances are starting to put diclofenac 3% gel as a prior authorization required item and the doctors don't like doing PAs.

Aripiprazole is also a really good reimbursing drug so market yourself to psychiatrists.

Asthma/COPD drugs have pretty good reimbursements so market to pulmonologists.

HIV drugs have pretty good reimbursements so market yourself to HIV clinics. We offer discrete home delivery.

state funded HIV will kill a pharmacy.

My BFF works at an independent in a small city in a rural area. They stay afloat with their nursing home contracts, as well as their front end, which is mostly various impulse items (candy, junky plastic toys, magazines, best-selling paperback books, etc.) and they're the place in town to get high school merchandise.

Basically this.

You cannot survive without facility contracts and a strong profit / sq ft in OTC

 

[DrIndy]

For pharmacy owners: what is your actual average of profit per script? I know it varies from medicaid to commercial.. But on average, what is your spread and what is the average dispensing fee? I know Medicaids dispensing fee varies state to state, but what about PBM's, what is and average PBM dispensing fee?

 

[Sparda29]

Somebody who works for a PBM just read this and initiated an audit for unusual dispensing activity on Diclofenac 3% gel.


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Not unusual dispensing at all. If the script is written correctly with proper directions and annotations and no errors are made on the prescription label, audit passed.

 

[imcallingcorp]

We have something with EPIC where they track the reimbursements and recoup money if we are paid less than cost. We also buy the majority of our generic drugs from a company that sells short-dated items (expiring within 2-5 months), the drug cost is much cheaper compared to buying from AmerisourceBergen or something. Never buy big bottles that will expire on the shelf. Only stock basic drugs, if someone brings in a prescription for something expensive, get the script first, bill it to see if it's covered, order it, send via delivery next day. Compounding. Meet with doctors and convince them to send all their patients to you alone.

We work with pain management doctors. Remind the doctors to prescribe diclofenac 3% gel for pain. We buy it for about $200 a tube, reimbursement is between $600-900 per tube. Cash is not an option for paying for controlleds, insurance only.

So if you get like 30 scripts a month for Diclofenac 3% gel, #300 grams, apply to affected areas BID (lower back, joints, pain areas) (max 10 grams daily), that's a profit of $2100/script so $63,000 profit a month off of diclofenac 3% gel alone. Only problem with this is that the ****ing insurances are starting to put diclofenac 3% gel as a prior authorization required item and the doctors don't like doing PAs.

Aripiprazole is also a really good reimbursing drug so market yourself to psychiatrists.

Asthma/COPD drugs have pretty good reimbursements so market to pulmonologists.

HIV drugs have pretty good reimbursements so market yourself to HIV clinics. We offer discrete home delivery.

drugs like diclofenac 3% will not last long. just look at the other example you gave abilify. sure for a while you would make a few hundred per rx now most plans pay garbage for it. the problem is a business should not depend on a lottery system and right now good money on rxs is just that. what if tomorrow all the good reimbursement generics are gone and pay just like all the other generics. then what, there's no reason they should pay good for any meds the hell the PBMs care about you. and the money you make on those HIV meds is doodoo. I still remember one of the state medicaid plans paid me less $10 profit for a $2500 drug and yes my amazing 1% rebate will come one day lol. and yes I had good contract through wholesaler as we had few stores bundled

 

[PharFromNormal]

For pharmacy owners: what is your actual average of profit per script? I know it varies from medicaid to commercial.. But on average, what is your spread and what is the average dispensing fee? I know Medicaids dispensing fee varies state to state, but what about PBM's, what is and average PBM dispensing fee?

Are you asking for gross profit or dead net profit? Do I include purchasing rebates, DIR, labor, overhead?

My spread meaning average true acquisition cost - average sales price?
Are you assuming I include dispensing fee within my spread or not?
Average pbm dispensing fee on what line of business?
If I give you these numbers what assumptions do you have about my prescription mix and my line of business mix?

 

[PharFromNormal]

drugs like diclofenac 3% will not last long. just look at the other example you gave abilify. sure for a while you would make a few hundred per rx now most plans pay garbage for it. the problem is a business should not depend on a lottery system and right now good money on rxs is just that. what if tomorrow all the good reimbursement generics are gone and pay just like all the other generics. then what, there's no reason they should pay good for any meds the hell the PBMs care about you. and the money you make on those HIV meds is doodoo. I still remember one of the state medicaid plans paid me less $10 profit for a $2500 drug and yes my amazing 1% rebate will come one day lol. and yes I had good contract through wholesaler as we had few stores bundled

Going back years you can read even the big chains execs refer to the generic wave as a tailwind for the business. Yes good reimbursed drugs became less good but newer ones followed behind it. That wave is slowing down. The big blockbuster days and its wave won't help offset parts of the business anymore. Businesses need to get creative. Some considering market speculation (thanks California) of buying low when manufactor gives advance notice of WAC price increase on long dated product and trying to take advantage of the price inflation in the market. Others use short dating tactics as mentioned above.

 

[genesis09]

For low volume pharmacies, Wisconsin Medicaid's dispensing fee is about $15.

 

[DrIndy]

Are you asking for gross profit or dead net profit? Do I include purchasing rebates, DIR, labor, overhead?

My spread meaning average true acquisition cost - average sales price?
Are you assuming I include dispensing fee within my spread or not?
Average pbm dispensing fee on what line of business?
If I give you these numbers what assumptions do you have about my prescription mix and my line of business mix?

Really, what is an average PBM dispensing fee? Is it less ~$10 per script or is it less or more? I know medicaid varies state to state, but say.... United Healthcare: what is their dispensing fee?

Also, how much are DIR fees per year total?

 

[Claydoe]

Really, what is an average PBM dispensing fee? Is it less ~$10 per script or is it less or more? I know medicaid varies state to state, but say.... United Healthcare: what is their dispensing fee?

Also, how much are DIR fees per year total?

United Healthcare pays us 60 cents/rx in NJ

 

[DrIndy]

United Healthcare pays us 60 cents/rx in NJ

Yikes, where do you get the money to pay your techs and other overhead costs?

 

[Claydoe]

Yikes, where do you get the money to pay your techs and other overhead costs?

Our OTC sales on vitamins, probiotics, and homeopathic garbage are insane. I'd love to see the actual numbers, but I work in an orthodox jewish community where "natural" is a huge deal to a lot of the people so there's a high demand for it, then add on the premium you pay for kosher certified products and it adds up pretty quick.

 

[BenJammin]

I recently tried to acquire a pharmacy and was outbid to over $3 million.

I am a pharmacist currently working for a chain pharmacy, and I was looking to open my own independent pharmacy in the coming years. I was wondering how pharmacies in general survive with such low reimbursements. I won't divulge specifics,but I will give an example of common reimbursement for the chain. We buy a specific medication for $1.20 for a 30 day supply. The cash price is ~$100. The insurance reimburses the pharmacy AT COST (~$1.25) sometimes even lower if it is medicaid, plus $3 dispensing fee. What is even more crazy, the insurance hardly ever pays out anything, its usually just the patients co-pay is the only reimbursement we get. Assuming there are no clawbacks or audits (lol), and your independent pharmacy does 100 scripts a day, 5 days a week, at basically just the dispensing fee as profit, that gives you a grand profit of 74,000 before taxes, salary of 1 pharmacist, 2 techs, rent, insurance, inventory, pharmacy software, and countless other costs. Clearly you would at least lose $250,000 a year. I feel like PBMs are killing the pharmacy field, but realistically there is absolutely nothing you can do to stop it. I understand that some prescriptions may be more profitable, but some actually cost my chain to lose hundreds of dollars per script. Am I missing something? As an independent pharmacy owner, can you please give me some inspiration for another potential independent pharmacy owner? If you don't want to post numbers in the replies, please fill free to PM me. Thanks!

I can tell you, MountainPharmD and BF7 will probably back me up on this, that as a chain pharmacist you are not seeing the actual financial numbers. These CVS and Walgreens pharmacists who think they don't make money filling prescriptions (one guy said pharmacy is a loss leader LOL) have no idea what they're talking about. Those chains are not building stores on every corner because they're making $1.25 for every prescription.

 

[deleted462159]

I’ve always been curious about vaccinations. The chains push them as if vaccination is the best get rich program ever, but at the same time many physicians around here won’t do them because of the poor reimbursement.

Physicians get paid more than pharmacists. Also on the medical side, you bill for the visit. On the pharmacy side, you bill for specific products dispensed.

Now large medical groups would just have nurses or medical assistants administer vaccinations. So sometimes I too question why we need pharmacists doing it. But at least the independent pharmacies are happy with their vaccination $$ (unlike drug reimbursement). And I guess the plus is pharmacies are far more accessible for vaccinations.

 

[rxdawg21]

I recently tried to acquire a pharmacy and was outbid to over $3 million.


I can tell you, MountainPharmD and BF7 will probably back me up on this, that as a chain pharmacist you are not seeing the actual financial numbers. These CVS and Walgreens pharmacists who think they don't make money filling prescriptions (one guy said pharmacy is a loss leader LOL) have no idea what they're talking about. Those chains are not building stores on every corner because they're making $1.25 for every prescription.

In addition the few independent owners I know get a ~10k rebate check every quarter from their supplier. This typically is for a moderate volume store doing 150-200 a day. My friend I talked to the other month was stating how reimbursements have actually started trending back up for them as they were making as low as $6 net profit on average on RX a year or two ago. When I say net I know this is after all expenses for the drug and packaging. Not sure if it includes labor (certainly not pharmacist labor). But at $6 profit that is still $1200 a day doing 200 RX a day. Pay the pharmacist yourself $600 a day and your techs $100 each per day averaging 4 of them and you are making $200 a day profit to pay the rent/put back in your business. Not much but not bad. They are now up to making $9-10 profit.

 

[PharFromNormal]

In addition the few independent owners I know get a ~10k rebate check every quarter from their supplier. This typically is for a moderate volume store doing 150-200 a day. My friend I talked to the other month was stating how reimbursements have actually started trending back up for them as they were making as low as $6 net profit on average on RX a year or two ago. When I say net I know this is after all expenses for the drug and packaging. Not sure if it includes labor (certainly not pharmacist labor). But at $6 profit that is still $1200 a day doing 200 RX a day. Pay the pharmacist yourself $600 a day and your techs $100 each per day averaging 4 of them and you are making $200 a day profit to pay the rent/put back in your business. Not much but not bad. They are now up to making $9-10 profit.

Don't forget about employee benefits (retirement, health, etc.), insurance, utilities, (does the pharmacist time include the time you need to keep the books?)...