• LATEST PHARMACY NEWS AND EDITORIAL

    LATEST PHARMACY NEWS AND EDITORIAL

Our latest thoughts and inspirations on buying a pharmacy, starting a pharmacy, and ongoing pharmacy operations

What are the key pharmacy accounting and financial metrics?

It is easy to be distracted from the core procedures and processes that drive our businesses. Distractions occur every day, from customer issues, new opportunities, to personal obligations. So how do we stay focused? One way is to track and measure key metrics that impact your business, but what are these? We believe in 3 core areas to focus, below we outline these along with metrics to follow. Hopefully this helps you manage your business without surprises!

1.       Revenue

·         Script Count – compare 2 week periods

·         Sales Revenue – compare in 4 week periods

·         Revenue/script – review monthly

·         Total Patients – compare in 4 week periods

·         Lost Patients – review monthly

·         Transferred Patients – review weekly

·         Revenue per payer – review monthly

2.       Cost of Goods Sold/Inventory

·         Gross Margin Dollars – review monthly

·         Gross Margin % - review monthly

·         Gross Profit/Script – review monthly

·         Deposits vs Purchases – these are real dollars spent – review monthly

·         Slow Mover Report (inventory not used for 100 days) – review monthly

·         Total Inventory – review monthly

·         Margin per payer – review monthly

3.       Payroll

·         Labor dollars per script – compare every 2 weeks

·         Labor dollars as a % of sales – compare every 2 weeks

·         Overtime – review amount every 2 weeks
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What is the Purpose of Due Diligence when Buying a Pharmacy?

Due diligence from a buyers perspective three main objectives. Below outlines each:

1.       Determine if the business you are exploring the purchase of is what you expected. In other words is there a reason not to buy the pharmacy? Objectives include, finding out is the pharmacy revenue accurate, are script counts correct, are control substance %’s acceptable, etc. You should strive to verify all operational and financial information.

2.       Pharmacy Transition – Once you know the business is what you expected, then you want to gather information that will assist you in transitioning the business after acquisition. Some objectives of this diligence include, what is current wholesale agreement, what health benefits are provided, what staff is staying or not staying, what marketing is done.

3.       Legal – you should have your attorney gather and review information to ensure legally you can buy the pharmacy and that also the pharmacy does not have a legal concern that would cause you to not purchase. Examples include, assisted living contracts, PBM contracts, lease, UCC checks, etc.
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Thoughts on Notifying the Staff when Buying a Pharmacy

You have done all your due diligence, you have built your business plan, you have signed the purchase agreement, and you are ready to assume ownership of the pharmacy. Now comes a very important step in the process. How do you inform the staff of the sale?

The best way to inform the staff is to have a meeting the evening before or the morning of the transition date. If the owner has not already informed the staff he should be the one to do so at the meeting. He should let them know that he has appreciated their help throughout the years and wanted to be sure to sell the store to someone who could carry on what he has built. By passing up chain store offers the store can continue to operate. He can tell them that that he understands things won’t be exactly the same but he has taken great care to be sure the store is in good hands. Then he should introduce you.

The first thing you should do is thank the owner for the opportunity and let him know you will do everything you can to take care of his “baby”. Let the staff know that pharmacy is a relationship business and there is no way the owner could have been successful without a great staff. And there is no way you will be successful without the great relationships that the staff has with the patients. That is why it is important that everyone will be given an opportunity to continue in their roles. Emphasize, you need great relationships to be successful not only with the patients but also with you.

However it is also important that you do not box yourself in with false promises. Everyone wants you to say “Don’t worry nothing will change” for no one likes change except a wet baby. You want to be reassuring but you must be honest. It is better to say “I won’t stand here today and say that nothing will change because I want our relationship to be built on honesty and I simply cannot make that promise”. Let them know change may or may not come after you spend the next few weeks learning the business and what and who makes it successful. Tell them you want to meet with each of them individually over the next few days and you will ask them what they like about their jobs and what things would they change if they were the owner. Say “I may or may not agree with you but I promise you I will always listen”.

Finally, reassure them that they are an important part of the business and you need their trust and their help. Try to answer broad questions but stay away from individual issues such as what will me schedule be, are you offering the same benefits, etc. Let them know you will address those issues when you meet with them individually.
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Think Bigger when Starting a Pharmacy

I am asked a lot, what is the difference between very successful pharmacy businesses and those that are just okay. My answer is always the owner thinks bigger. Your typical pharmacy is primarily retail and will do traditional marketing, provide the typical services, rely on great service and market to 2 or 3 mile radius. All these are important but the great pharmacies will go big and do things that are uncomfortable. Examples include:

·         Looking at the target market not just as a 2 mile radius but as a 10 or 20 or even 50 mile radius.

·         Seeing the customer as not only the patient walking in the door but also as the prescriber, hospital, facility, pharmaceutical reps, other businesses in the community, etc.

·         Not being afraid to seek out multiple lines of business, compounding, long term care, retail and specialty.

·         Owning multiple pharmacy locations not just in the local area but maybe hours away or even a full state or two away.

·         Creating programs specifically designed for a doctor’s office, hospital or other partner.

·         Focusing on one or two disease states to drive business from a large community of patients.

·         Having a call center to attract and solicit new patients.
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What should be in a Pharmacy Business Plan?

You probably read a lot about if you should even have a business plan or not. We think you should but not like those taught in academia. We have a plan for our businesses every year, they help us have a goal, understand how we are going to execute on that goal and what we need to reach the goal. So if you are starting or buying a pharmacy you should probably have a plan and here are our thoughts on what should be included:

1.       Goals: what are your 1, 2 and/or 5 year goals?

2.       New Customers: How are you going to gain new customers? In a pharmacy you always have to be gaining new customers as people move and pass away and at a minimum you have to replace them.

3.       Customer Retention: How are you going to retain customers? You can spend all this time gaining new customers but if you lose too many all that effort goes to waste.

4.       Products & Services: What products & services are you going to provide?

5.       Personnel: How many people do you need to operate your business and execute on numbers 1, 2, & 3 above?

6.       Tools, Technology & Equipment: What other tools, technology, and equipment do you need to reach our goals and execute your plan?

7.       Operations: how are you and your team going to deliver on the above? What process are good and which if improved will make the largest impact on your goals.
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