So you want to open a pharmacy?
First off…. Woo hoo! Congrats! We like your kind around these parts.
Our team interacts with potential owners regularly and the majority have the same questions. So we decided to lay out some of the basic information you need to know as you let this plan marinate in your noggin.
Know the steps.
MAKE A BUSINESS PLAN. Download a template, and really fill it out. If you’re a pharmacist that’s never taken a business class or owned a business, I am especially talking to you.
Ask yourself how you plan to grow this business. Prescriptions alone will not cut it.
What specialties do you plan to provide that distinguish you from other retailers?
What do you want your pharmacy to look like in 1, 2, and 5 years?
Truly do market research on your desired locations.
Within your general business plan, there should be smaller business plans for specialties services.
This is for services such as compounding, immunizations, point of care, drug therapy management, LTC, supplements, mail order etc.
Form your Legal Entity, Employer Identification Number, and all your Tax IDs.
Get Financing through your preferred institution. Based on your history, they may ask for quite a few documents such as a business plan, personal tax records, credit worthiness, etc.
Find your location and design your pharmacy.
Decide how your space will be designed to meet your needs based on your services.
Shop around for Rx Software- some may even provide the hardware (cost savings!).
Research what you are required to have prior to applying with your state board.
Texas BOP requires the following with you application: Ownership information, Lease Agreement, credit worthiness document from primary drug wholesaler, alarm system, SOPs, to name a few.
Begin checking off the list of items required by your State Board prior to Application.
Once your application is approved, then you can start applying for the following:
National Provider Identifier (NPI) - you must have this in order to apply for PBM contract.
Drug Enforcement Agency (DEA)- to purchase/dispense controlled substances.
National Council for Prescription Drug Programs (NCPDP)- assists pharmacies in their interactions with pharmacy payers and claims processors.
Professional Services Administration Organization (PSAO)- these are companies that help you apply/manage PBM contracts.
Understand the timeline.
Because most this will not be in your control.
From first light bulb to the first flip of the “we’re open” sign, it can take 9-12 months.
“why so long?” :
Financing- This can take on average 30-60 days to gather documents, apply, etc.
Pharmacy license applications- The processing time itself varies state by state. This can take anywhere from two weeks in Oklahoma to a minimum of 90 days after all documents are submitted in Texas.
NPI- A minimum of ten days if you submit online with no mistakes.
NCDPD- Several weeks.
DEA- Their site states 4 to 6 weeks.
Wholesale accounts- These may take up to 6 weeks depending on credit worthiness documents are required.
Choosing software- This can take an average of 2-4 months from the time you research, review demos, sign up, and installation is performed.
PBM Contracts- These can take anywhere from 6 to 24 months due to multiple factors. To learn more about this, click here.
Be aware of the costs.
Initial start up costs can range $300,000 to $600,000:
Licensing Applications, Insurance Applications, other applications
Pharmacy Space- Buildout, Rent, Utilities, Equipment, Rx Software, POS, Alarm System
Department Essentials- Paper, Labels, Caps/Vials, Policies and Procedures, Reference Library
Inventory
Support- Legal Counsel, Accountant, Liability Insurance
Miscellaneous- Processing Fees, Reference Subscriptions, Compliance Programs (SOPs, FWA, etc), Website costs, marketing
Staff- if you’re not a pharmacist, you’ll have to hire one.
anticipate the challenges.
THIS is the part most articles don’t talk about.
It takes time to research! There are many rabbit holes you can fall into, but organize your findings to stay on path. Items I definitely recommend researching/comparing:
Website domains- Can you create your own? How easy is it to customize? What are the security features?
Graphic designers vs. Marketing companies- What exactly do you need to make your pharmacy be memorable and appealing? What can you do on your own?
Compliance subscriptions- Figure out what you truly need that will help you save time. What is your time worth? What items should you pay someone else to accomplish for you?
Wholesalers- for retail, compounding, supplements, supplies- Which have rebates, discounts, CC fees?
Software companies- What are the upfront costs, subscription benefits, ease of use, and customer service ratings?
Staff- If you or any of your partners are pharmacists, DON’T hire extra help in the beginning. Save the money and do as much as you can. There are very few things that you will not be able to accomplish yourself in the first few months. You may need a delivery driver a couple of hours a week, or a compounding tech to help knock out batches monthly, but don’t be quick to hire staff if you can help it.
Marketing- You’ll need a logo, website, facebook page, some pretty digital flyers, and some content to add to social media regularly. And while there are great marketing companies out there, you may just need a graphic designer and a few webinars. This may save thousands of dollars. Designing and ordering business cards/ flyers/ signs/ banners can be as easy as a few clicks on a website.
Retail Only Pitfall- More likely than not, you have multiple things you want to do in your pharmacy. And that’s great! You’ll need other revenue streams to diversify your profits. PBMs are not making it easy on independent pharmacies to maintain their profits. In other words, it’s extremely difficult to survive on scripts alone anymore if you accept insurance. But this is how you set yourself apart! Find those niches to specialize in, grow and conquer your corner of the market.
“Specialty” Pharmacy- This seems like low hanging fruit. Get reimbursed thousands off just one fill?? Right now insurance companies reimburse very well for certain NDCs. There are actually pharmacy modules out there that specifically focus on this. There are also companies and organizations that funnel these types of prescriptions to contracted pharmacies. The high reimbursement rates make profit margins look like winning lottery tickets. However, these models will NOT stand the test of time. PBMs are fully aware of these operations and soon the bottom will fall out, just like it did for the notorious high cost compounded pain creams. Telemedicine, “marketing firms”, MSOs are all touting the success of these types of operations with Rx pads and billing procedures that don’t quite seem, well… legit. And here’s the kicker: if a PBM feels that any possible fraud is occurring, they will investigate, claw back all their money, then drop you like a bad habit. NOT WORTH THE RISK.
Expectations- It.takes.time. You have to help yourself build a book of business. COLLABORATE with physicians, don’t just bring them cookies and then expect to see prescriptions sent your way. Walk-ins can also take time. A new pharmacy can take up to 2 years to get out of the red. But there are ways to speed this along.
Compliance- Everything in your workflow is dictated by state and federal regulations. And unless you read law books for pleasure, there’s things you could miss. You didn’t start your pharmacy to write policies, but don’t let that overwhelm you. Finding the right compliance consultants, subscriptions, policies and procedures are the basis for growing a successful company. They will help you sleep at night knowing your pharmacy can withstand the scrutiny of SBOP, DEA, FDA, and PBM Contracts.
So here’s the good news, now you know what to expect. You can still do this!
If you know the road ahead has potholes, you look out for them. You don’t drive with the intent of getting a flat tire.
This is no different. Pharmacy ownership is challenging, but you CAN build YOUR dream business.