Inside: You’ve grown used to declining reimbursements. But your pharmacy can still thrive. Increase independent pharmacy profit with these tips.
Your independent community pharmacy has grown used to declining reimbursements. To DIR clawbacks. To chain competition.
In other words, you’ve grown used to shrinking profits.
But it doesn’t have to stay that way.
Despite your lack of leverage with third party reimbursement rates, it is possible to boost independent pharmacy profit. And, it turns out the changes you make to improve profits can also help you better serve your patients.
Check out these 15 ways your pharmacy can increase its profits.
1. Reduce overhead
Overhead costs eat up independent pharmacy profit. Every cent you spend on overhead is one cent less you get to take home.
Find ways to cut overhead in your pharmacy.
Look at your rent, utilities, insurance and maintenance to find areas where you can reduce costs and increase efficiency.
Small changes, like the lightbulbs you use, make a big difference.
2. Focus on high-profit services
Some services deliver a higher margin than others. Most services without PBM intervention are going to bring in more profit, and there are many to offer.
High-profit services include:
3. Drive sales to high-profit front-end products
Like services, some front-end products deliver a higher margin than others.
Strategically design your front end around high-margin opportunities. For example, place high-margin products in high-traffic locations, like end caps and the checkout counter.
And use in-store marketing to drive patients to those high-margin products.
High-margin front-end products include:
- High-end vitamins and supplements
- Wound care
- Compression stockings
- Diabetes supplies
4. Increase medication adherence
When patients don’t adhere to their medication regimen, they don’t keep up with refills.
Every missed refill means lost profit for your pharmacy. And missing doses is bad for patients’ health.
Start a medication adherence program with dose packaging to help patients stay adherent to their medications.
You can also charge a fee for this extra service.
Read Next: 7 Foolproof Methods to Maximize Medication Adherence
5. Know and track your metrics
You can’t manage profit well if you don’t measure and monitor it.
Track the right metrics so you know where you stand. You’ll discover where you’re succeeding and where you need to improve.
Metrics you should track include:
- Key expenses
- Payroll costs
- Total sales
- Total profit
These Are the Most Important Pharmacy Metrics to Measure
This white paper includes 30+ formulas to calculate the most important metrics for independent pharmacies. You’ll learn to think like a retailer, discover the methods to track and measure meaningful pharmacy metrics, and learn ways to use pharmacy metrics to get insight into business performance.
6. Focus on the top 20 percent
The Pareto Principle says 20 percent of what you do produces 80 percent of the results.
So focus most of your time and energy into the vital 20 percent of what you do that generates the most effective results.
Apply the Pareto Principle to every category of your pharmacy:
- Patient base
- Front-end merchandise
7. Increase front-end sales
Front-end sales can reap large profits.
The average margins on front-end merchandise are 15 percent higher than the margins on prescription sales.
Although prescriptions will always dominate your sales, implement strategies to boost front-end purchases to increase pharmacy profit margins.
For example, suggest front-end products that pair with your patients’ prescription medication, such as supplements for nutrient-depleting medications.
8. Greet patients with friendly staff
Smiles may seem like a silly way to increase profit. But according to J.D. Power’s U.S. Pharmacy Study on customer satisfaction ratings, friendly and informed staff help increase front-end profitability.
Make sure friendly staff greet patients when they arrive at your pharmacy. It’ll foster loyalty and potentially increase purchases.
9. Invest in automation
Automation improves workflow and efficiency so you can dispense more prescriptions faster.
And the more prescriptions you sell, the more profit you make.
Consider investing in robotics to increase your independent pharmacy’s profitability.
10. Buy better
Cost of inventory affects independent pharmacy profit more than anything else. The less you spend on goods, the more you make from them.
The best way to spend less on your inventory is to negotiate a better contract with your primary wholesaler.
To negotiate a better wholesaler contract you need:
- High prescription volume (at least as much as a regional chain)
- Long-term contract commitment
- Multiple wholesaler bids
- Negotiation expertise
If you don’t have all of the above, you could get a better contract through ProfitGuard®, a unique buying group that guarantees a better wholesaler contract resulting in the lowest costs of goods possible.
Another way pharmacies miss out on profit is through their purchasing practices after the contract is signed. Wholesaler contracts include an array of requirements and incentives that substantially affect the total cost of goods at the end of the month. Pharmacies that aren’t paying close attention could be missing out on more than $17,000 on missed opportunities every month. And with the right tool, any pharmacy can maximize its contract incentives to save tens of thousands each year.
Learn how much profit you’re likely missing out on.
Getting the most out of your primary wholesaler contract is the best way to manage your cost of goods, but there are times when your primary wholesaler might not have the best price or might be out of the NDC you need. When these situations inevitably arise, you need to have a reliable secondary supplier to help keep your cost of goods manageable.
BuyLine®, an NABP-accredited secondary supplier, offers a full line of brands, generics, OTCs, and controls at the lowest prices in the secondary market. In addition to having low list prices, BuyLine also rewards purchases with cash rebates and significant discounts on brands. Earn up to an additional 10% cash rebate on generics and up to WAC -4% on brand.
With online ordering and next-day shipping options, shopping with BuyLine is quick and convenient. There are absolutely no commitments with BuyLine — no fees, no contracts.
11. Improve pharmacy workflow
With better workflow, you fill more prescriptions, waste fewer resources, cut wait times for patients. And that all translates to more profits.
Start improving your workflow by finding current inefficiencies.
From there, determine the best steps to make your process more efficient.
(Need inspiration? See how one independent pharmacy created an efficient pharmacy workflow system designed around stations.)
12. Foster patient loyalty
The average repeat customer spends 67 percent more money than a new one.
And, it costs less to keep a patient than to gain a new one.
RELATED: How to Create a Customer Loyalty Program
Here are five strategies to cultivate patients’ loyalty:
- Create a membership program
- Offer future-use rewards
- Host members-only special event
- Offer occasional freebie items
- Reward loyal patients with special offers
13. Use loss leaders
You don’t make a profit on loss leader items in your front end.
But loss leaders can produce profit elsewhere.
Loss leaders generate profit in the long run because they get people through your doors. They’re drawn to the low prices of popular items.
Once they’re in your pharmacy, you can get them to purchase high-margin products and services. This extra revenue can make up for the loss you take on the loss leader items—and then some.
14. Keep employees happy
Experts estimate that employee turnover can cost up to twice as much as a person’s salary.
For example, a tech who makes $50,000 a year could cost up to $100,000 to replace when accounting for total hiring costs.
Every dollar you spend on employee turnover costs you profit.
When you make your pharmacy a great place to work, employees are more likely to stay longer. You’ll keep great employees and reduce turnover costs.
15. Follow a budget
Budgets keep your spending in check to ensure you reach the profit goals you want.
Create a budget with spending goals you can achieve. And then stick to it.
If you’re struggling, work with your accountant to hammer out a budget and goals for meeting it.
A Member-Owned Company Serving Independent Pharmacies
PBA Health is dedicated to helping independent pharmacies reach their full potential on the buy-side of their business. Founded and run by pharmacists, PBA Health serves independent pharmacies with group purchasing services, wholesaler contract negotiations, proprietary purchasing tools, and more.
An HDA member, PBA Health operates its own NABP-accredited warehouse with more than 6,000 SKUs, including brands, generics, narcotics CII-CV, cold-storage products, and over-the-counter (OTC) products — offering the lowest prices in the secondary market.