Fred Gebhart

There are no guarantees when starting a pharmacy. Pharmacy start-ups have approximately a 40% chance of surviving 10 years.

Four key steps can help tip the odds in your favor. 

"Plan ahead financially, because you're probably going to have no to low income for 12 months," warned Enrique Reynoso, RPh, MBA, BCMTMS, owner of Beacon Wellness Pharmacy in Beacon, New York. "

Look ahead to how you are going to do your marketing, because without marketing, you’re not going anywhere. Listen to your patients and your community and deliver what they want, not what you think they need. And use every technology tool you can get to make those first 3 things happen.”

Reynoso spent 20 years learning how to get new pharmacies moving while opening more than 60 stores for Walgreens. He opened his own pharmacy in Beacon, in New York’s Hudson Valley, in December 2019.

The basics of opening a pharmacy haven’t changed. Solid financial planning is as essential today as it was decades ago. So is marketing.

The vast majority of potential customers for any start-up pharmacy are already taking medications that they get from some other pharmacy. Every start-up pharmacy has to be expert in no-hassle prescription transfers. The basic marketing pitch is “we do it for you.”

"As pharmacists, prescription transfers are simple, but our patients don't know that," said Max Caldwell, RPh, owner of Caldwell Pharmacy in Wynne, Arkansas. Caldwell and 3 partners have opened 15 pharmacies in the northeast corner of the state in towns with populations as small as 800. 

“A lot of people believe that if it says Walmart on the pill bottle, they have to go back to Walmart for a refill,” Caldwell explained. “It takes some education on our part. That’s one of the challenges of opening a new pharmacy “

It’s just as important to provide services and products that your patients want and need. What patients want most is convenience.

“Patients want fills and refills on their schedule, not ours,” said Lisa Wells, PharmD, pharmacy director for Apothecare Pharmacy, a group of 340B pharmacies co-located with Community Health Center (CHC) of Southeast Kansas, which operates 20 Federally Qualified Health Centers (FQHCs) in rural Kansas.

Many of the CHC clinics had no pharmacy within easy driving distance, which meant many patients saw a provider, got a script, and went home. The nearest pharmacy was too far away or they feared it would be too expensive. Simply opening a pharmacy steps from their prescriber eased a major pain point for patients.

Technology takes convenience beyond initial fills. Apothecare Pharmacy uses Liberty Software’s Pharmacy Management System, and after Apothecare rolled out a phone app, which is part of Liberty Software’s platform, refill rates surged.

“Patients may not have home internet connections in our part of rural Kansas, but almost everyone has a smart phone,” Wells said. “If they remember to refill at midnight, or while they’re out during the day, they just do it. And we get far fewer phone calls. The app 

helps our patients and it gives us more time use our knowledge of pharmacy to be a more active part of their total health care, not just a part of their prescription.”

Opening a new pharmacy is a gamble. According to the National Community Pharmacists Association, the number of independents has fallen by approximately 5% in recent years, from 23,029 stores in 2012 to 21,767 stores in 2018.

Or maybe the picture isn’t quite so grim. The Pharmaceutical Care Management Association (PCMA) used data from the National Council of Prescription Drug Programs (NCPDP) to conclude that independent pharmacy numbers increased by 12.9% between 2010 and 2019. PCMA said chain outlet numbers declined by 4.0% over the same period.

Either way, starting a business is risky. Bureau of Labor Statistics (BLS) data show that of new businesses started between 1994 and 2015, 54.3% survived 5 years and 35.7% survived 10 years.5 Health care start-ups, including pharmacies, fared somewhat better.

BLS found that 56.8% of health care start-ups born between 2004 and 2015 were still in business at 5 years and 42.6% at 10 years.

Pharmacists are opening their own businesses anyway. In business operations as in medication management, success is about risk management, not risk avoidance.

® talked with agreed that the major risks in opening a pharmacy are inadequate financial planning and resources, inadequate or inappropriate marketing, and an 

inappropriate mix of services and products for the patient population. All 3 can be managed. And technology, from pharmacy operating systems to point-of-sale, perpetual inventory, medication synchronization, repackaging, robotics, analytics, and more, are an essential part of managing business risks as well as medication and health risks.

New pharmacies don’t suddenly open like flowers bursting from a tightly closed bud. Opening a new store is a process that begins long before the first patient walks in the door.

“There is a waiting time for everything, and you are starting from ground zero with a start-up,” Reynoso said. “You have to anticipate what those delays are going to be, how long they might take. And be sure that you have the capital it takes to get through that preopening period and the first year or 2 of operations.”

Don’t expect to turn a profit the first year. NCPA regularly surveys pharmacies during their first 5 years of operation. The latest results were reported in the 

2020 NCPA Community Pharmacy Start-up Benchmarking Report

. An important take-away: The typical start-up pharmacy breaks even in the third year of operation.

That 3-year breakeven is based on building from 0 scripts the first day to 30,000 scripts annually in year 3. Dispensing represents over 90% of total revenue for the typical startup.6 The most effective ways to turn a profit sooner than 3 years are to build Rx volume more quickly or boost non-

“I personally like to buy an existing pharmacy because you have money coming the very next day,” Caldwell said. “It takes less money to start a store from scratch, but it takes longer to find the profit. You can make it work either way, but you have to know what you are getting into, financially and in the community, and plan for it.”

Caldwell’s business plan is opening pharmacies in small towns in economically depressed rural areas. It’s a market that most chains avoid and few independents consider. Some towns have a few hundred people, some have a few thousand.

The key factors are prescribers in the area, so the store has scripts to fill, and at least 20,000 people within a 10-mile radius to provide a reasonable Rx volume and delivery area.

Wells opens pharmacies in FQHCs. Scripts from providers in the center create an almost-automatic patient population for the co-located pharmacies. Proximity and familiarity helps create eager medical partners for clinical services such as INR monitoring, diabetes care, and more.

Reynoso serves a small town that has been growing steadily as multi-ethnic professionals and artists trade the crowded streets of New York City for the Hudson River Valley.

“My prescription volume has doubled every month, everything from diabetic to hypertension and some pain management,” he said. “When the coronavirus came, I saw a jump in immunizations with people coming in late for their flu vaccine.”

Traditional marketing channels, TV/radio broadcast, newspapers, direct mail, are the most expensive channels and the least effective for start-ups, Reynoso continued. Digital channels such as Google, Facebook, Instagram, and BeaconWellnessPharmacy.com, are both more effective and less expensive.

“Everybody is glued to their phones all day,” he said. “So I’m actively reaching out to people where they are. I have a place on every page to go if you have a question, wonder if maybe I can do something special. The town has a community webpage, so I write articles to get feedback and questions. It’s all about being part of the community and reminding people to come to me for their pharmacy needs.”

Reynoso’s pharmacy is across the street from a busy chain outlet. Rather than focus on prescriptions, which chains can fill more cheaply than most independents, Reynoso is building a different kind of practice. Good marketing can get new customers in the door once, he noted, but it takes standout service to get them back again. And again and again.

“Rite Aid doesn’t do durable medical equipment, I do,” he said. “I’m building a compounding center, I offer delivery, I take the time to talk with my patients. If you’re just getting started with diabetes, you may not know you’ll need hand holding and training, but I know. We have gourmet lollipops and supplement lines that are sold only in pharmacies. I’m the only pharmacy in town that takes the time to personalize the business.”

Refills are bread and butter for pharmacies. Higher refill rates translate to increased revenues, faster inventory turnover, more compliant and healthier patients. Higher refill rates also boost Medicare star ratings and help minimize direct and indirect remuneration clawbacks. That’s where medication synchronization (med sync) can make a significant difference.

Caldwell puts med sync patients on a 28-day cycle so they run out of medication every fourth Friday. A technician calls each patient the week before they run out to be sure there are no changes. The pharmacy orders early the week meds are due and delivers on arrival from the wholesaler or calls the patient for pick up. Caldwell piloted med sync in 2013 and was the first pharmacy in the state to enroll more than 1000 med sync patients.

“We synchronize meds for the whole family—adults, kids, dogs, everybody in the household,” Caldwell said. “Our stores are on perpetual inventory, so med sync helps minimize inventory. We order the day after the billing cutoff for next week, which gives us 10 to 12 days to pay instead of 4 days. Technology makes it all happen.”

Similar to Apothecare, Caldwell’s pharmacy uses Liberty Software’s Pharmacy Management Platform technology to enhance its services.

Technology also powers unit-of-use packaging, which Caldwell tailors to the patient. When he realized a patient who takes meds both morning and night could not read, he split refill packages into 2 boxes. One box has a sun, for morning doses, the other a moon for evening doses.

“Take care of the patient, that’s what you do as a pharmacist,” Caldwell said. “And when you take that extra step, that’s when they tell their family and friends. Word gets around in a hurry and brings you more customers.”

1. US Bureau of Labor Statistics. US Bureau of Labor Statistics Business Employment Dynamics, Entrepreneurship and the US Economy, Chart 4. Survival rate by selected industries, 2004 birth cohort, 2004-2015, in percent. Last modified April 28, 2016. Accessed July 14 2020. https://www.bls.gov/bdm/ entrepreneurship/bdm_chart4.htm

2. NCPA. 2019 NCPA Digest. Changing the Pharmacy Payment Model. NCPA Digest. 2019. Accessed July 14, 2020. http://www.ncpa.co/pdf/di- gest/2019/2019-digest.pdf

3. Mom and Pop Pharmacies Dwindle Amid Competition. PYMNTS. Published May 12, 2020. Accessed July 14, 2020. https://www.pymnts.com/news/re- tail/2020/mom-and-pop-pharmacies-dwindle-amid-competition/.

4. PCMA. Independent Pharmacies in the US are More on the Rise than on the Decline. March 2020. Accessed July 14, 2020. https://www.pcmanet.org/ wp-content/uploads/2020/03/FINAL_Independent-Pharmacies-in-the-U.S.- are-More-on-the-Rise-than-on-the-Decline.pdf.

5. US Bureau of Labor Statistics. Business Employment Dynamics, Entrepre- neurship and the US Economy. Chart 2, Survival rates of establishments, by year started and number of years since starting, 1994-2015, in percent. Last modified April 28, 2016. Accessed July 14, 2020. https://www.bls.gov/bdm/ entrepreneurship/bdm_chart3.htm

6. NCPA. 2020 NCPA Community Pharmacy Start-up Benchmarking Report. 2020. Accessed July 14, 2020. http://www.ncpa.co/pdf/2020-ncpa-start- up-report.pdf

Articles

What are patients in your area looking for? Which tech tools does your business plan need the most? How else can you improve your odds? This eBook reveals four keys to a successful pharmacy startup.

How to Make Your Start Up Pharmacy More Successful

Are you testing for coronavirus disease 2019 (COVID-19)? A recent National Community Pharmacists Association (NCPA) survey found that most pharmacists want to be part of the testing process, but few pharmacies offer sample collection or onsite testing.

“There are so many different barriers. One thing gets cleared, and then there’s another step and then another,” said pharmacy owner and California Pharmacists Association President Ken Thai, PharmD. “Especially if you are an independent pharmacy wanting to do testing, you have to find your own channels to get it going. And then it comes down to economics. Billing mechanisms seem to be in place, but they aren’t necessarily functional. There are still a lot of ques- tions before we can start widespread testing in pharmacies.”

Some pharmacists have opted not to test. In the Atlanta suburb of Johns Creek, Good Neighbor Pharmacy affiliate Lily’s Pharmacy focused on existing patients and the flood of discharge patients as Emory Johns Creek Hospital cleared its wards.

“The pandemic hit hard and fast,” said co-owner Jennifer Shannon, PharmD, BCPS. “Our volume went sky-high for the first 6 weeks of [COVID-19]—really sick patients who needed a lot of pharmacist attention. We started curbside pickup, ramped up delivery, and set up new protocols as hospitals and doctors closed. Relationships with our providers have been strengthened, and we are caring for patients at a higher level than just a few months ago. I’m amazed at how many people are coming by to say they never realized how much they needed a local pharmacy.”

Other pharmacists built their own testing programs. In rural Surgoinsville, Tennessee, Beth Bryan, PharmD, was the first pharmacist in the state and one of the first in the country to offer COVID-19 testing. Her Surgoinsville Pharmacy began offering appointment-only, drive-up testing in mid-April 2020. Pharmacy staff collected nasopharyngeal swabs and sent them to a lab for processing. Bryan said there are clear public health, community service, and professional advancement arguments for providing COVID-19 testing. And she didn’t have to worry about the business case. Her pharmacy partnered with the state health department to obtain sample collection kits, the local fire department to acquire hazmat suits, and a local welder for face masks. Community members donated N95 masks.

“Without community support, we would not have been able to obtain test kits or PPE [personal protective equipment],” Bryan said. “There is no good pathway to reimbursement. We’re working on it, [the US Department of Health & Human Services (HHS)] is working on it. There is a learning curve for all of us, just like there was with immunizations. But if somebody is looking for a big moneymaker, COVID-19 testing isn’t it.”

In West Sacramento, California, Capitol Pharmacy is building relationships, not profits. The Health Mart pharmacy has yet to be reimbursed for testing. Health Mart, part of McKesson, was part of an HHS pilot program to test community pharmacies as sample collection sites for molecular testing. The test manufacturer provided sample collection kits, McKesson provided PPE and supplies, and pharmacies provided space and personnel.

“We’re not paying for testing supplies,” said Capitol Pharmacy owner Thomas Bui, PharmD. “When we agreed to be a testing site, we got supplies overnight, but we didn’t have time to prepare, to communicate to the community that we would be offering COVID-19 testing. We’re just trying to give back to the community. It’s the right thing to do.” Economics made a huge difference at the University of Southern California (USC), said Richard Dang, PharmD, RPh,BCACP,assistantprofessorofclinical pharmacy. Plans to test the entire USC community—students, faculty, and staff—went on hold when the university saw cost estimates for test kits, PPE, and supplies. “They were not expecting the budgetary impact of testing,” said Dang, a California Pharmacists Association COVID-19 Taskforce chair and speaker. “They had sticker shock.”

And then there is the murky question of regulatory authority.

On April 8, HHS authorized licensed pharmacists to order and administer FDA-authorized COVID-19 tests, including serology tests. By mid-May, about two-thirds of states were allowing pharmacists to play a role in testing.

On May 19, the agency issued an advisory opinion (20-02) declaring that states and localities may not establish, enforce, or continue in effect any legal requirements that prohibit licensed pharmacists from ordering and administering FDA-authorized COVID-19 tests. HHS cited the Public Readiness and Emergency Preparedness Act as preempting state licensing laws that restrict pharmacists from ordering and administering COVID-19 tests.

By early June, some 40 states had cleared the way for pharmacists to test. California, New York, and Pennsylvania were notable exceptions. New York had announced plans for a pilot program with independent pharmacies to provide COVID-19 testing. However, the rollout was delayed.

In California, lawmakers thought they had the testing problem solved. The state conferred provider status on pharmacists in 2014 and allowed pharmacists to provide point-of-care testing. But point-of-care serology testing is limited to blood glucose, glycated hemoglobin A1c, and cholesterol, Dang noted. The FDA has issued Emergency Use Authorizations for 4 point-of-care COVID-19 tests, but the state is not allowing pharmacists to use them without first getting a Clinical Laboratory Improvement Amendments (CLIA) certificate of waiver from the state health department.

“We are seeing disagreement with HHS from the state,” Dang said. “Our department of health is indicating there are no changes to their requirements regarding CLIA certificates of waiver. The ultimate issue is that pharmacists are unable to obtain a waiver without having a qualified laboratory direction, whose definition does not include a pharmacist.”

CLIA waivers are also a barrier in Pennsylvania, said Patricia A. Epple, CAE, CEO of the Pennsylvania Pharmacists Association. The state’s Bureau of Laboratories, part of the health department, requires a lab director with a doctorate in science and at least 2 years of hands-on experience that is acceptable to the bureau.

“A PharmD would qualify, but the bureau is requiring experience in a clinical lab, which excludes most pharmacists,” Epple said. “Pennsylvania has the lowest percentage of pharmacies with CLIA waivers in the country, around 2.8% of our pharmacists. We have been working for 10 years trying to get changes and have not gotten any result.”

The reliability of existing tests is another consideration. The FDA released independent evaluations of 5 COVID- 19 serological tests in early June, including 1 that had been voluntarily withdrawn from the market. Among the marketed tests, positive predictive values ranged from 100% to 63.7%. Negative predictive values ranged from 100% to 99.5%. AmerisourceBergen is not distributing any of them.

“We just haven’t been comfortable with the accuracy of tests that have been FDA approved, so we are not distributing them,” said Rich Tremonte, executive vice president and president of community and specialty pharmacy at AmerisourceBergen. “We know that some of our independent pharmacy customers are administering tests and some of our chain customers are doing testing. They are focusing on molecular tests where you collect samples and send them to a lab for processing. Many independent pharmacies just don’t have the resources to do that.” The need for pharmacy testing is clear, especially as flu season approaches. Influenza and COVID-19 share multiple signs and symptoms. Pharmacists cannot practically identify one for treatment without ruling out the other. Respiratory syncytial virus is another potential confounder.

“The diseases are so similar in presentation that you want to be able to test for all 3 to advise the best course of action,” said Hannah Fish, PharmD, CPHQ, associate director for strategic initiatives at the NCPA. “We are seeing some of that preparation already taking place in pharmacies. We need clarification on pharmacists’ ability to offer testing and to bill for tests.”

Preparation taking place in some pharmacies, but clarification is still needed.

COVID-19 Testing Is Not an Automatic Choice for Pharmacists

In early April, the US Department of Health & Human Services authorized licensed pharmacists to order and use coronavirus disease 2019 (COVID-19) tests approved by the FDA. By mid-May, about two-thirds of states had adjusted regulations for pharmacist-provided testing, but just a handful of pharmacies had managed to navigate the maze of federal, state, and supply chain practicalities.

In California, pharmacy, medical, and consumer groups lobbied Gov Gavin Newsom and regulators for nearly 6 weeks before the state’s Department of Consumer Affairs eased restrictions that prevented most pharmacies from testing.

“This waiver will allow pharmacists to order COVID-19 tests for their patients and collect specimens to send to a laboratory for processing,” said Richard Dang, PharmD, APh, BCACP, COVID-19 Task Force chair and speaker for the California Pharmacists Association. “I am not currently aware of a pharmacy testing site that is set up, but I am hopeful that will change.”

Andrew Cuomo, governor of New York, issued his own executive order clearing the way for pharmacists to order and administer COVID-19 tests in late April.

“We got the privilege of testing from the governor, and we’re finding out that pharmacies need a laboratory certificate from the state before we can offer testing,” said Christopher Daly, PharmD, MBA, BCACP, a board member of the Pharmacists Society of the State of New York. “Beyond that, there are questions about [personal protective equipment], where will we procure the tests, billing, and more. Pharmacy is going to be a big part of the testing capabilities, especially when the second wave hits. But you can’t just start testing tomorrow.”

A key problem involves meeting both state scope of practice and state laboratory requirements. At deadline, the FDA had issued emergency use authorizations for 4 point-of-care COVID-19 tests. The tests require a Clinical Laboratory Improvement Amendments (CLIA) certificate of waiver, typically issued by the state health department.

The first step to pharmacy-based COVID-19 testing is the certificate of waiver, said Allie Jo Shipman, PharmD, MBA, director of state policy for the National Alliance of State Pharmacy Associations. Next comes navigating the scope of practice regulations, which can be a frustrating exercise.

A recent poll by National Community Pharmacists Association (NCPA) found that most of its members want to test for COVID-19. “As an association, we have had to temper expectations a bit,” said Hannah Fish, PharmD, CPHA, NCPA’s associate director of strategic initiatives. “Testing is coming, but getting there is a step-by-step process, and you need to work out the logistics.”

Reimbursement remains uncertain. Federal regulators require insurers to cover COVID-19 testing at no cost to patients, but there are no requirements to reimburse test providers. Commercial insurers have mechanisms to cover medical costs but not pharmacy costs.

“Centers for Medicare & Medicaid Services is trying to take advantage of access to pharmacies as providers, but they are hemmed in by existing statutes,” said Tom Kraus, JD, vice president of government relations for the American Society of Health-System Pharmacists. “They are creating work-arounds like having pharmacies register as labs to get paid, and there are mechanisms like incident-to payments for pharmacists in health systems or in medical practices. But there are no mechanisms that work for most community pharmacies. That’s something we need legislation to fix.”

“Testing is coming, but getting there is a step-by-step process, and you need to work out the logistics.”

States Slowly Ease Barriers to Pharmacist-Provided COVID-19 Testing

Pharmacies that haven’t added digital marketing and advertising to their mix are missing the target.

Digital isn’t a trend, it is where most Americans spend their time. “It’s important to meet your customers where they are,” said Steve Hoffart, PharmD, owner of Magnolia Pharmacy in Magnolia, Texas. “Where you market depends on what resonates with the majority of customers. Our patient population responds well to the interactivity of our digital and social media efforts, so we’ve been leaning heavily on that approach.”

Brittany Sanders, PharmD, owns The Pharmacy at Wellington in Little Rock, Arkansas. She opened the pharmacy with newspaper ads, billboards, flyers, and other conventional approaches in 2015. Today, she focuses on digital channels. “Digital lets us hyper target,” she explained. “If somebody is searching for something as simple as ‘Band- Aids’ or anything related to pharmacy within 3 miles of our store, they get us. We can be so specific that if somebody is in the Walgreen’s parking lot across the street, we serve an ad to bring them over. You can’t do that with conventional channels.”

Conventional marketing is based largely on a combination of geographical coverage, newspaper circulation, television or radio broadcast range, and best guesses about which demographics are most likely to read a specific paper or tune to a particular channel. Digital marketing is customer centric. And the cost per impression is far lower than conventional channels.

Sanders spends about $500 for 9000 impressions on over-the-top (OTT) ads on streaming media, such as Sling and YouTubeTV. OTT advertising targets specific demographics, including age, sex, income, health status, education, and specific geographical areas. Anyone in her target demographic within 5 miles of the store sees her ads no matter what they are streaming. And she knows which ad spots in each demographic is most successful.

“Sam Walton, the founder of Walmart, used to say that half of marketing dollars are wasted, you just don’t know which half,” said Blair Thielemier, PharmD, founder of BT Pharmacy Consulting in Jonesboro, Arkansas. “Digital tells me what is working and what isn’t. So if I want to target people with diabetes who live within 10 miles of my store, I can see precisely what works [and] what doesn’t.”

As smartphone use grows, a mobile app becomes a key marketing tool, added Kurt Proctor, PhD, RPh, senior vice president of strategic initiatives for the National Community Pharmacists Association (NCPA) and president of the NCPA Innovation Center.

“With a mobile app, your store is effectively open 24/7,” he said. “You connect with patients on their time, not yours. Convenience is vital now that we have all come to expect immediate response.”

Author | Fred Gebhart

Articles

How to Make Your Start Up Pharmacy More Successful

COVID-19 Testing Is Not an Automatic Choice for Pharmacists

States Slowly Ease Barriers to Pharmacist-Provided COVID-19 Testing

Digital Marketing 101: How to Advertise Your Pharmacy