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

Key notes about Insurance Contracts and Licensing when Buying or Starting a Pharmacy


If you are buying or starting a pharmacy one of the first things to understand is what you will have to do to receive your licenses and PBM contracts.   Not doing this could cause you to lose business or delay your opening/purchase. Below are key items to do to ensure you know what is required for licensing and insurance contracts.

1.       Call your State Board – understand what the process is for license approval. Are they going to do an inspection, when will the inspection occur, what is required to pass? What is the timeline? Some states require a board meeting you must attend. These are just examples and will differ from state to state, so call them understand it.

2.       Does your state require a state control license? Some states require a separate number via a separate application and if they do it can delay your process.

3.       Call Medicaid – every states process for receiving a Medicaid number will differ. Call Medicaid understand what is required to obtain. If buying, will you keep the number, will the number change, and do they require approval in advance of sale? If starting how long will it take?

4.       Do managed Medicaid plans require Medicaid approval? - In some states if you contract with the managed care company you automatically can bill Medicaid, in other states you have to have the Medicaid number to activate the managed care.

5.       Are you in a Hot Zone? CMS has Hot Zones and if you are in a hot zone you will be forced to wait on contracts with certain Medicare plans, sometimes up to 1 year.

6.       If buying are you doing an asset or stock sale? – this will impact all your licensing, if asset sale you will most likely get all new licenses and PBM contracts if you are doing a stock sale you will probably try to keep all the licenses and contracts. The stock sale will cause you to follow a different process and you may or may not be able to keep the licenses so make sure you understand this early in the purchase process.

7.       Are you going to bill Med B for diabetic supplies, immunizations or anything else? – Med B is not included with your PSAO like Medicare Part D and will require a separate application. Med B for immunizations can be obtained with a simple application however diabetic supplies is considered DME and all DME requires an accreditation which can take some time.

8.       Some PBMs will require an inspection – the PBMs will at times require an inspection and you will have to be open prior to them doing so. Call the key providers in your area and understand if they will or not.
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The Importance of Med Sync for Independent Pharmacies

This article maybe a little late to the game but as consultants and accountants to the independent pharmacy industry we view the operations of many more pharmacies than the average person and have noticed the focus of medication synchronization has dropped off. It was the “popular” subject at every tradeshow and at nearly every pharmacy for several years but now we do not hear it as much.   We are also not seeing the % of patients on med sync rising year on year as much as we once did.

Medication Synchronization should be a continued focus in almost every independent pharmacy. The reason why, it is the only process that impacts the 3 most important levers in a pharmacy, revenue, inventory/cost of goods sold and payroll. Med Sync increases revenue because the patients on Med Sync are more likely to get all their refills on time, it allows you to practice a true just in time inventory, whereby you order inventory when the patient needs improving your cash position and it reduces payroll in several ways (reduces number of inbound calls, reduces number of check outs/deliveries and reduces amount of separate fills you have to data entry, count, bag, etc.).

With lowering reimbursement pharmacies have to be more efficient and the process that makes the largest impact on efficiency is med sync. So, if you have 30% of your patient base on med sync we encourage you to strive for 60% and if you are starting or buying a pharmacy make med sync one of the priorities when you take over!
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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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Starting, Buying or Own a Pharmacy? Read These Books

Every year I set a goal for the number of books I want to read during the course of the year (last year it was 24 and I read 27) and try to ensure at least ¾’s of these books will help us make a positive impact on the pharmacies we own, our consulting practice or our clients. The below list outlines some of my favorites and the lessons learned from each. Hopefully these will help you too.

The E-Myth Revisited by Michael Gerber – this book outlines why individuals with a technical skill who start businesses tend to fail or not grow. This applies directly to the pharmacy industry where pharmacists start pharmacies because that is what they know. In many cases, however they are not as successful as they should be. He outlines what technical professionals “pharmacist” need to know to be business owners within their field. I would highly recommend this to anyone interested in buying or starting a pharmacy and any current owner of a pharmacy.

Ready, Fire, Aim by Michael Materson – what I really like about Michael is he simply outlines what you as the owner or CEO need to do to grow your business and the barriers you will face along the way. For this reason it is the best business book I have read in many years. For me it made it very clear what we need to do to take our businesses to the next stage of growth and what we can do to help our clients grow into extraordinary pharmacies.

The Lean Startup by Eric Ries – Both Eric and Michael Materson take similar approaches to innovation. The concept is to introduce new products and processes quickly and with very little cost. For any business owner, including us, it is difficult to create change in the organization. There are a million reasons, you may not have enough cash, not enough time, your employees are stretched too thin or maybe you are just a new startup. This book will provide you insight and guide you through constant innovation which will lead to profits and growth.

Traction by Gino Wickman – As an entrepreneur and leader every day it is difficult to find time. For me it was always difficult to know what 2 or 3 items I should focus on and how to get our team to focus on them as well. Gino provides the Entrepreneurial Operating System (EOS) and it will allow you to not be overwhelmed, have fun and improve your business.

Bold by Peter Diamandis – this book is about big ideas, some of which seem crazy. But I think it applies to pharmacy today because the industry is changing, being disrupted and we as entrepreneurs within the industry must think differently in order to thrive in the future. Go into this book with an open mind and be prepared to think how could we as a company do something completely different.

Solution Selling by Ed Wal – if you have ever spoken with me or seen any of my other postings about books, this book is always on the list. First Ed, personally taught me much of what I know about how a business works and how to sell to any organization. I consider him a mentor to me and many others. But also it is my opinion (and Michael Materson’s) that as an owner of a business you must also be its number one salesperson. This book will teach you how to sell, follow it, try everything in it and you will sell!
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