5 Factors That Might be Eroding Your Pharmacy's Value |
Posted: August 25, 2021 |
Pharmacies are not always profitable businesses. Many pharmacists open their own practice as an entrepreneur and find themselves in large amounts of debt. They continue to invest in their business even further, and it is years before they start seeing a profit and enjoying the fruits of their labor. When they start thinking, ‘I want to sell my pharmacy’ a few years down the line, they are often disappointed with the lack of reward they receive for the years of hard work and the large amounts of money they have devoted to building their business. When it comes to selling an independent pharmacy, the short-term activities that drive profit and increase cash flow are the same activities resulting in long-term success. Unfortunately, in recent years, the pharmaceutical industry has taken several hits that have decreased cash flow and eroded the value of many pharmacies. Here are some of these value erosion trends. Generic Cost BaseThe retail pharmacy industry has failed to increase the dispensing or professional fees relative to inflation. Instead, the industry has been made whole by the drug manufacturers as an alternative. In Canada, pharmaceutical payers aim to lower generic drug prices to ensure they are cost-effective. Although this was helpful for paying patients, it was not so great for pharmacy revenue and profitability. Increased CompetitionFor entrepreneurs wondering, ‘why is it so difficult to sell my pharmacy?’, the answer may lie in the increase in competition. With the increasing pharmacist graduation rates and the rise of international credential recognition, more and more new pharmacists are opening up their own practices and driving increasing competition. However, this becomes a problem when existing pharmacy owners want to sell, as there are more targets available, albeit those with lowered profitability. Wage InflationSelling a pharmacy business has also been made more difficult due to the additional scrutiny of wages. Minimum wages have increased over recent years decreasing profitability, and this has made some buyers decrease their offers in anticipation of additional increases. Frequency of DispensingMany jurisdictions across Canada have made the rules around dispensing and prescriptions much stricter to combat fraud and medication abuse. This means pharmacists are now limited to dispensing frequency when needed for patient safety. This can further reduce profitability and value of the pharmacy. Continued Downward Pressure on Dispensing FeesThe final factor that might be making selling an independent pharmacy more challenging caused by eroding value is due to dispensing fee “deflation.” Government and third-party payors have not increased pharmacy dispensing fees in keeping with inflation. This results in pharmacy owners seeing lower margins and decreasing value each year. There are many ways however to bolster the value of a pharmacy through sound operational practices. To learn more on how to ‘sell my pharmacy,’ contact EVCOR today.
|
||||||||||||||
|