Pharmacy New Year’s Resolutions Part 4: Improve Your Profit Margins

Pharmacy New Year’s Resolutions Part 4: Improve Your Profit Margins by Elements magazine |

Want an ambitious New Year’s resolution for your pharmacy? How about increasing your profit margins by 6 percent?

As lofty as that resolution sounds, you can achieve it.

You can combat diminishing profit margins even as reimbursements dwindle and DIR fees stack up with this one change.

It’s not making your operations more efficient.

Or improving your reimbursements. (Yeah right.)

And, it’s not going all in at the casino.

It’s paying less for your pharmacy’s inventory.

How the Primary Wholesaler Contract Comes into Play

The money you make from your prescription inventory drives your pharmacy business.

The logic is simple. The less you spend to buy your inventory, the more you make when you sell your inventory.

The way to achieve that isn’t simple. It depends almost entirely on your primary wholesaler contract.

Wholesaler contracts are notoriously frustrating for independent pharmacies because they often seem like a take-it-or-leave-it transaction.

And because pharmacists don’t have the knowledge or time to negotiate contract terms and pricing, it’s hard to get the best deal.

Does that sound like you? Do you feel restricted by your current deal? Do you wish you had a better contract?

Other independent pharmacies feel the same way. And some of them have made changes to increase their profit margins by up to 6 percent.

And here’s the good news. You can, too.

These Are the Best Ways to Improve Your Pharmacy’s Profit Margins

Here’s how you can improve your profit margins and make this the best year for your business.

Turn up the volume

How do national chain pharmacies get such a great cost of inventory?

And why don’t you get the same deal?

One word. Volume.

When it comes to contracts, wholesalers consider volume.

How much do you buy from them?

A higher volume means wholesalers can serve a pharmacy less expensively. And that’s how high volume gives national chain pharmacies leverage to negotiate a lower cost of inventory.

Your leverage reflects your volume. And yours is smaller.

Theoretically, if you increase your volume, wholesalers will want to win your business. They’ll want to give you lower pricing to get your exclusive commitment.

But that’s easier said than done.

Unless you own a regional chain of pharmacies, you’ll never get near the volume you need to significantly lower your pricing. And even if you do own a regional chain, you likely still can’t touch the pricing national chains receive.

Certain strategies can help you increase the script count at your pharmacy but keep reading and we’ll share one solution that can exponentially increase your volume.

Turn up the competition

Take a lesson from free market economics.

Competition spurs innovation and lowers prices for consumers. If one company isn’t giving people what they want (e.g., a good price), then another company will.

But monopolies give power to a single entity.

Because consumers must go through them to get what they need, the entity has total control over the terms. It can set prices to whatever it wants. (The fact that monopolies are illegal should give you a sense of how detrimental they are.)

This dynamic plays out at every level of business, including your pharmacy.

When you only negotiate with a single wholesaler, you give that wholesaler considerable power over your contract terms and pricing.

When you negotiate with several wholesalers, you gain considerable power by making them compete to earn your business.

Many independent pharmacies grant a single wholesaler a monopoly on their business and don’t think twice about it.

They don’t realize how much they’re losing.

When’s the last time you sought a bid from another wholesaler?

You can drive down your cost of inventory by negotiating with multiple wholesalers before you re-sign your contract. If you get more wholesalers to compete for your business, you’ll get a better deal.

Volume is crucial to competition.

The level of competition you’ll get from wholesalers depends on the level of volume you bring. The higher the volume, the harder they’ll fight to get your business.

Turn up the negotiation

Like your pharmacy, wholesalers need to protect their bottom line.

When negotiating a contract, both wholesalers and independent pharmacies want to get the best deal possible.

With an effective and strategic relationship, pharmacies and wholesalers can achieve a win for both sides.

But to make the relationship equal, your pharmacy needs someone who knows wholesaler contracts inside and out. Someone who’s read, written and negotiated hundreds of them. Who knows what details to look for. And who can protect you with the right terms.

You need an expert.

Here’s the Solution You’ve Been Looking For

Now you know what it takes to get the best primary wholesaler contract.

The next question is, do you have the means to do it?

Can you exponentially increase your volume? Can you get multiple national wholesalers to bid on your business? Do you have an expert negotiator with deep experience with wholesaler contracts?

Achieving all of these is next to impossible on your own.

You can’t simply boost your volume to where it needs to be. And without that volume, you can’t get wholesalers to compete for your business. And without those two crucial factors, negotiation won’t get you anywhere.

But there’s a solution. A way to solve all of these problems at once. One that more than four hundred independent pharmacies are using to increase their margins.

It’s called ProfitGuard. This primary wholesaler contract negotiation service from PBA Health secures independent pharmacies with the best overall profit margins and operations possible. The service also includes dynamic data analytics tools that dramatically improve your purchasing.

ProfitGuard gives independent pharmacies the three pieces they need to achieve the best possible pricing.

1. It gives you more volume

ProfitGuard creates a book of business that wholesalers will pay attention to. The service forms regional groups of pharmacies and then takes that entire group’s volume to the wholesalers for bid.

2. It gives you increased competition

ProfitGuard seeks bids from up to six wholesalers. Those wholesalers compete for your group’s book of business, which earns everyone a better deal.

3. It gives you negotiating power

Expert negotiators with decades of experience represent the group of pharmacies in negotiations with the wholesalers. And they work closely with pharmacies throughout the process to make sure they get the terms they want.

What are you waiting for? The New Year could be the year you increase your profit margins like never before.

Learn how you can join ProfitGuard to improve your profit margins.


Follow the Blog Series

Pharmacy New Year’s Resolutions Part 2: Expand Your Patient Base by Elements magazine |

Get ready to improve your pharmacy in the New Year. Follow along as we discuss a new pharmacy New Year’s resolution every week.

Pharmacy New Year’s Resolutions Part 1: Refresh Your Front End

Pharmacy New Year’s Resolutions Part 2: Expand Your Patient Base

Pharmacy New Year’s Resolutions Part 3: Become an Advocate for Independent Pharmacy

Pharmacy New Year’s Resolutions Part 4: Improve Your Profit Margins


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Elements is written and produced by PBA Health, a buy-side solutions company.

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