by Alan J. Hymowitz and David E. Coit, Jr., DBA, CVA, CVGA, CM&AA

Volume 5 Issue 20, September 25, 2018

As we indicated in our recent article, “What’s The Value Of Your Independent Pharmacy (Part 1)?,” the market for independent pharmacies continues a very dynamic run. Private equity, strategic consolidators, and other investors are looking to add scale and locations, whether special needs/long-term care (LTC), retail, home infusion, compounding, nuclear, or hospice pharmacy.

Numerous factors have contributed to the strength of the “perfect storm” in the pharmacy marketplace and include:

Decreasing margins – At first take this would seem to be a negative, but we see it as the inevitable reshaping of the market which will create new opportunities for entrepreneurs. Pharmacy Benefit Managers (PBMs) and other payors are also requiring dual accreditation, data-based outcomes measurement, performance guarantees and Direct and Indirect Remuneration (DIRs), adding to the reimbursement pressure.

Payor consolidation – Payors, ranging from PBMs and chain retail to supermarkets and even Amazon, are creating a new model for reimbursement that rewards technologically savvy pharmacy entrepreneurs that see the same future.

Fragmentation – Despite significant M+A activity, the independent pharmacy marketplace not only remains highly fragmented, it is actually expanding. What this means is that the value opportunity is growing. The mail order pharmacy market alone is $100 billion per year and climbing.

So, how do you take advantage of this environment and build discernible value in your pharmacy? Here are a few options to consider:

Expand OTC – The over-the-counter (OTC) pharmacy product demand is growing with the Baby Boomer generation desire to access these products and will likely continue strong for at least the next 20-25 years.

Make the tech investment – Investing in technology will increase your access to new pharmacy payors, especially with consolidation and requirements for LTC-related reimbursement.

Pursue special needs opportunities – This market will continue to grow rapidly for the millions of people with special needs as well as the continuing expansion of Medicaid.

Integrate in-store clinics – Just as hospitals have given way to urgent care centers and ambulatory surgery centers, so pharmacies are increasingly becoming sites for primary care and partnerships with clinics, hospitals and insurance companies.

Adding other peripheral services – The traditional model of pharmacies is becoming more robust with pharmacies a variety of services from therapies to nontraditional healthcare approaches and products. Customers love one-stop healthcare shopping including healthy food.

In short, the market is strong and the opportunity ripe for entrepreneurial pharmacy executives and owners. If you’re looking for more specific insights on your personal options, including a complimentary valuation of your pharmacy or a potential acquisition, just let us know.