.Is owning a pharmacy profitable? It’s a tricky question – and the answer is more complicated than you might think.
Long story short? It depends. Pharmacies fulfill an incredibly important role in our society, but we can’t forget that they are still businesses that need to be profitable in order to succeed.
A recent article from Drug Topics suggested that independent pharmacies in 2017 represented 35% of all retail pharmacies. That’s about 23,000 pharmacies. In addition, a 2013 study claimed that the average owner of an independent pharmacy was expected to take home roughly $247,000 a year.
Those findings taken together suggest that for many, owning a pharmacy continues to be a profitable venture. With that said, there are a number of changing factors that might impact the profitability of any pharmacy.
In this article we are going to review 5 factors that you should be considering when it comes to the profitability of a pharmacy.
1. The Market
The state of the market is one of the biggest factors influencing the profitability of any business – pharmacies included.
According to Drug Channels, the 2017 profit margin for independent pharmacies was 21.8%. It’s a healthy margin, but one that has been on a steady decline over the last several years.
It’s important to note that this is still one of the highest profit margins among any industry in the market today. However, when discussing future profitability it is always important to consider where the market is headed.
Make sure you are keeping up with the trends and research about what is happening in the healthcare space. There is a ton of recent and relevant research specific to independent pharmacies, so make that a starting point when determining profitability.
2. Number of Prescriptions Filled
This seems simple, but prescriptions are the bread and butter for any pharmacy. The number of prescriptions you and your team are able to secure will directly determine your ability to be profitable.
Prizm Media has many ways to help pharmacies improve the number of prescriptions they are able to fill, and how they are able to connect with prospective patients. Check out some of our other blog posts, or contact our team directly to learn how we can help improve your sales cycle.
In addition to filling prescriptions, over the counter sales have become increasingly important. Whether it’s grocery, equipment, or vitamins, having a strategy to boost over the counter sales can help increase profitability. Check out one of our recent posts for a few strategies to boost non-prescription sales at your pharmacy.
3. On-Demand Expectations
We live in a society where on-demand services are expected from customers and even patients. From electronics to meals to car rides, people expect these goods and services to arrive to them as conveniently as possible around their schedule. Amazon, Uber, Netflix, and RxtoMe are perfect examples that incorporate on-demand services.
Patients are generally not thrilled when it comes to refill pick-ups. Using gas mileage, parking, and waiting in line for their prescriptions is nothing but a hassle and another chore on the list. However, this no longer has to be a reality with prescription apps such as RxtoMe where patients can order on-demand and get their refills delivered to their door on a monthly basis.
In short, consider on-demand services such as mail-ordering for your pharmacy to reach more patients effectively and providing a better patient experience.
4. Financial Management
Prudent financial management is key to the profitability of any business, and pharmacy is no different.
With shrinking profit margins, it is more important than ever to boost revenue and control expenses wherever possible. Smart budgeting is one of the sure-fire ways to ensure your pharmacy maintains profitability.
While it’s easier said than done, some of the key tips include:
– Leverage promotion around popular prescriptions or items tailored to your customer base.
– Introduce new services as streams of additional revenue
– Cut back on non-essential costs or identify strategies to reduce costs (i.e. collaborations or partnerships, cost-sharing, etc.)
None of this will be new information to a pharmacy owner. The key is to ensure you are spending the time to think critically and thoughtfully about how you can make improvements in these areas to increase your capacity to be profitable.
5. Your Business
Above all else, and more important than any other factor on this list – is you, the pharmacy owner.
Everything that we described above will be directly influenced by your passion for and commitment to your business. Profitability, especially in a highly competitive space, relies heavily on one’s entrepreneurial spirit.
Like any business owner – you have to be willing to put in the hard work, make sacrifices where necessary, and go above and beyond for your employees and your patients alike.
An article from Monster.com describes how John Tilley (president of the National Community Pharmacists Association) took a lower salary than his pharmacists as he grew his business from 3 pharmacies to 17.
There will always be a degree of risk when it comes to operating a business, and that’s especially true of operating an independent pharmacy. Again, here’s a quick rundown of the factors we think you should pay attention to when you ask yourself “is running a pharmacy profitable?”
1. What is happening in the market? Are profit margins continuing to shrink? Is there growth in the sector?
2. How many prescriptions are we able to fill? What strategies can we employ to boost prescriptions OR over the counter sales
3. Are we budgeting effectively? Are we doing our best to control costs and boost revenues everywhere we can?
4. What is the customer experience like at my pharmacy? What can I adjust to ensure the optimal experience for (and optimum value from) each and every patient?
5. What do you need to be able to lead your pharmacy to success and profitability?
With answers to those questions in mind, you will be much better equipped to determine if your pharmacy is well-positioned for profitability.
6. Invest in Technology
As a Pharmacist, your only opportunity to interact with your patients is at the pharmacy. But what about outside the pharmacy? This is where investing in technology comes in. Consider patient management tools, to communicate and follow up with their experience with their prescriptions. Also, it can be an opportunity to send alerts and reminders about their refills. By creating frequent touch-points with patients, this puts your pharmacy at the forefront of their minds and improves the experience for patients, especially when they have questions or inquiries.
Patients will always appreciate you taking the time to support and educate them. With so many local pharmacies in proximity of your patients, invest in technology to improve patient loyalty, trust, and satisfaction. Stand out and emphasize the care factor of your pharmacy. It may be a tough pill to swallow when it comes to the thought of spending money for tech, but think like an entrepreneur, you need to spend money to make more money.