How to Start a Pharmacy

Part 1 - How to start a Pharmacy business - Background

Many neighborhood pharmacies also feature a convenience store that stocks health and beauty aids, food, greeting cards, and processes images. However pharmacies are also found inside hospitals, urgent care facilities, and as part of big-box chain stores.

Our guide is in 3 parts:

• Part 1 - How to start a Pharmacy business - Background
• Part 2 - Our planner tool to see if this idea is the right fit for you
• Part 3 - Action plan to get started

What are the costs involved in opening a pharmacy?

You will need to lease or buy a storefront, hire staff, purchase a variety of computers for POS and prescriptions, and invest in your initial pharmaceuticals order. For a typical neighborhood pharmacy, expect to need $1 million to $2 million dollars for your first year. For your five-year business plan, a $10 million investment is required.

What are the ongoing expenses for a pharmacy?

Your largest expense is maintaining your prescription medication supply. You must always have enough on hand to meet monthly demand while ensuring that no medicine expires before it is dispensed. Salaries and payroll will come in a distant second.

Who is the target market?

In a neighborhood pharmacy, your customers come from every age and demographic. While some prescriptions may have a higher profit margin than others, your commitment is to the health of your community, not your bottom line.

How does a pharmacy make money?

Profit is gained by purchasing medications for as low a price as possible, as co-pays and insurance reimbursements are fixed and cannot be altered by your practices. Knowledge of generics and name brand medicines is useful. The most profit is found in the name brands, but government regulations often dictate that generics must be issued.

How much can you charge customers?

There is a little wiggle room for pricing your prescriptions, but those costs are largely determined by the pharmaceutical and insurance companies. Customers will pay anywhere from a couple dollars for a common medicine to thousands for rare drugs to treat chronic illnesses. You will need to constantly monitor the competition to stay relevant in your neighborhood.

How much profit can a pharmacy make?

Once you are reimbursed by the insurance companies, drug stores typically see a profit of 10-30% on most prescription medications. Should your location be doing steady business, it is possible for the business owner to see an income of $300,000 per year.

How can you make your business more profitable?

The relationship that dictates your profit margin is the one you create with your pharmaceutical supplier. Large chain stores buy in bulk and are able to negotiate a lower wholesale price. As a small pharmacy, you will need a talented negotiator willing to so some entertaining for the business in order to get the best deal from a variety of vendors.

Day-to-Day and Growth

What happens during a typical day at a pharmacy?

• Receiving and filling prescriptions according to FDA regulations for a wide variety of patients with many different medical conditions

• Inventory medications and place orders to maintain stock

• Stock products in the over-the-counter displays in an easy to use and attractive manner

• Provide medical advice to concerned customers such they are able to use their medications safely and effectively

• Work with doctors offices to refill prescriptions or obtain a different script that is supported by an insurance plan

• Submit scripts to insurance companies for reimbursement

• Hire clerks and staff to maintain the front of the store

• Hire trained technicians able to support the required PharmD behind the counter

• Maintain the physical store

• Balance your books, issue payroll, work with a variety of vendors

What are some skills and experiences that will help you build a successful pharmacy?

Every successful pharmacy will have an individual who:

• Has a Doctor of Pharmacy

• Has extensive knowledge of insurance company procedures for reimbursement of prescription medicines

• Has garnered full comprehension of FDA regulations regarding controlled substances and how to issue prescriptions

• Is trained in business management skills regarding inventory, ordering, and accounts receivable/payable

• Understands payroll procedures

• Can hire qualified pharmacy technicians to support the PharmD

• Is able to explain dosage, use, side effects, and dangers of all medications to every customer with compassion and understanding

What is the growth potential for a pharmacy?

Customers often come to rely on their local pharmacist as a source of reliable information that they value beyond the price of their prescription. By providing superior service, more people will return to your store if only to purchase OTC cough medicines. When you develop an attractive store that surpasses your clients’ expectations, you may be able to expand into multiple locations.

What are some insider tips for jump starting a pharmacy?

Not only do you need to get the word out to the local community that you opened the doors, doctors offices must be made aware that you exist. Before opening you ought to attend medical conventions, seminars, and social mixers hosted by pharmaceutical companies. Make sure to pass out plenty of business cards, rent a table, and work the room. Many doctors recommend a particular pharmacy if their patient is unfamiliar with the neighborhood.

How and when to build a team

If you are not a Doctor of Pharmacy, it is wise to hire yours before you start building your location. The PharmD will have the knowledge and contacts to expand your presence in the local medical community. Store management, clerks and technicians can be hired up to one month before opening for training and stocking of the store.

Part 2 - Is a Pharmacy business the right fit for you?

Part 3 - Action plan to launch your Pharmacy business in 90 days