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How Do I Open an Independent Community Pharmacy?

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Owning an independent pharmacy is about being an entrepreneur, not just a pharmacist:

Did you know that independent pharmacies still outnumber the big chain pharmacies in the US? There are currently 19,432 independent pharmacies in the US according to 2023 NCPA data. Community pharmacies are poised to offer better quality patient care, unique services like compounding and immunizations, and affordable pricing.

Independent pharmacy ownership can be very rewarding, and opening up your own community pharmacy doesn’t have to be challenging. There are pharmacy ‘deserts’ being left all over the country with chains closing and no independent community pharmacies in these areas.

There are communities filled with patients that do not want to use mail order for their prescriptions. Beyond this, there are so many opportunities to diversify your revenue stream and profits within your independent pharmacy and not focus on prescription volume only. Opening your own community pharmacy can be challenging with today’s landscape, and pharmacy benefit managers constantly in your pocket clawing back your profits. But that does not mean that owning a community pharmacy can not be a tremendous success either. It simply means that you have to be smart about it. You have to do things differently than they were done even just a decade ago. You may say to yourself “Well I didn’t go to pharmacy school to sell cosmetics and gifts” – but if you want to be a successful pharmacy owner, it is definitely more than just an independent pharmacy, it’s a business. You need to look at the business overall, and how you can generate profits from any and all angles.

Key Tips for Pharmacy Success

Before we get into the steps you need to take in order to open an independent pharmacy, let’s go over a few tips of significant importance to ensure your overall success in this industry.

1: Location

Sounds like common sense. It definitely is not for most. Yes, you can get a cheaper space, in areas that have less traffic, maybe not as desirable, but you will likely pay in the long run searching for business. Finding a location for a retail pharmacy that may be within a strip mall with a good anchor store, or even next to a hospital or major medical office complex will help drive traffic to you. Making sure it’s easy to get in and out of your location with traffic patterns, stop lights etc is also important believe it or not. And parking should not be a hassle for customers, it simply turns them off. Alternative to a retail pharmacy, you could always look for space within a medical building or park, where commercial space per sq ft is cheaper than retail, you can occupy a smaller space, and have built in patients leaving physicians offices right outside your doorstep.

2: Size

Get a sense of what products you want to offer, what you want to do to differentiate yourself such as compounding, DME etc.  Get the right size location.  Don’t overdo it, it’s a waste.  And do not go too small where you’re limiting yourself to a very small front end and leaving you relying on prescription profits (unless you are inside a medical building/complex).

3: Learn the Demographic

Before you consider opening a new pharmacy in a particular location, get statistics on size of community, average age of the population, and median income and/or home prices.  Is it mostly retirees?  Or families?  Does the demographic look good to you for your business model?  And once you know it, you must plan a front end that accommodates that demographic.  The higher the income, the more expensive boutique style offerings you should have.  We have seen clients that do amazing business in their community pharmacy with 150 prescriptions a day, but a beautiful boutique up front selling unique gift items, jewelry, high end cosmetics and perfumes.  Older retiree communities look for that personal hometown feeling, conveniences such as delivery, and great pricing that beats out the local chains.

4: Lay out the business profit centers

What else are you offering besides prescriptions and a standard front end with basic OTC items?  Are you going to do compounding in your pharmacy?  Will it be sterile and non sterile compounding?  Have you considered DME sales and or rentals?  Immunizations?  Will you offer delivery, and for free?  This will help you with your business plan and budgeting for the setup of your independent pharmacy.  Remember, it may cost more to do it, but how much will it cost to NOT offer it in the long run?  Risk vs Reward.  Just because it’s cheaper, does not mean it will pay off well in the long run.

Before You Begin

It’s important to understand the challenges of modern day independent retail pharmacy before you even think about opening a new pharmacy.  Prepare yourself by doing plenty of research and educating yourself on the current landscape of independent pharmacy. Learn everything you can on the different types of community based pharmacies and savvy ways to build customer loyalty and long-term revenue. 

 

To recap: 

  • It is no longer advantageous to rely only on prescriptions and PBM driven profit centers
  • Diversifying your revenue streams can help you build a more profitable and financially stable pharmacy 

Be open to a unique model

  • Compounding pharmacies are typically cash only prescriptions, that do not rely on PBM reimbursements, and the chains do not offer compounding setting you apart
  • Long Term Care pharmacy- better reimbursements and long-term clientele.  Many pharmacies often become hybrid retail/LTC combination shops.  
  • Boutique front-end in high end neighborhoods.  If you’re in a high-end neighborhood you can stock upscale products such as makeups, fragrances, home accessories, and skincare. 
  • Affordable OTC products in lower income areas.  If you’re in a lower income area, generic brand products and half price greeting cards sell very well. 
  • DME sales and rentals- there is a huge market for durable medical equipment such as wheelchairs, walkers, hospital grade breast pumps, ostomy supplies, and much more! 
  • Vaccination services
  • Point of Care testing
    • Independent Pharmacies are convenient and easily accessible to patients
    • Point of care testing as 4 primary goals
      • Disease identification
      • Disease monitoring
      • Lifestyle modification
      • Limit roadblocks to care
    • requirements for POCT vary state by state. Contact your state authority for answers.*

Now that you know what it takes to be successful in owning your own independent pharmacy, here are the next steps to opening a new pharmacy

1. Research and plan

  1. Funding
    1. It costs on average between $400,000-$500,000 to open an independent pharmacy.
    2. Who will be funding your business?
      1. Investors- investors provide capital in exchange for a percentage ownership in your business. You may be able to tap into a silent partner or independent investor.
      2. Small business loans- these are loans either through the SBA programs or from third party banks, and the most common way to open a business. You will need a solid business plan in place, as the approval process can sometimes be difficult.
      3. Self funded- using your own resources such as savings, 401k, family money, or a line of credit against real property you may own.

2. Business insurance

be sure to protect your pharmacy from any unforeseen circumstances. Speak with your insurance agent to find out what coverage is necessary for you.

  1. General Liability / premises insurance
  2. Employment insurance
  3. Professional liability

3. Find a location

a great location when starting a new pharmacy is everything and can make or break your business.

  1. If you’re in a suburb do you have plenty of parking with easy ingress/ egress to your store?
  2. Are you located in a shopping center with a great anchor store?
  3. How much site work is needed to get the pharmacy up and running?
  4. Is it the right size? You don’t want a store that’s too big with too much space to fill up, but you also don’t want a tiny store with no room for growth or additional offerings.

4. Obtain all of the necessary licenses and permits

  1. State Pharmacy Licence
    1. Each state has its own requirements for opening a pharmacy
    2. Find out what your state requires here
  2. Obtain NCPDP Number
    1. An NCPDP Identification Number is a 6-digit code used for your transactions with third-party providers
    2. Apply for an NCPDP number here
  3. Obtain NPI number
    1. An NPI number is a 10-digit code used by the federal government for identification purposes. Every pharmacy practice has a unique NPI number.
    2. Apply for an NPI number here
  4. Obtain DEA number
    1. A DEA number allows you to handle controlled substances and ensure you follow the proper regulations.
    2. Apply for a DEA number here
  5. Building permits with your local township or village

5. Establish pharmacy vendor partnerships

  1. Setup pharmacy wholesalers
  2. Possibly join a PSAO
  3. Pharmacy management software and pharmacy Point of Sale software
    1. Do your research on the best pharmacy software vendors
    2. Read reviews – search multiple independent review sites (Avoid Pharmacysoftwarereviews.com- this site is owned and operated by RedSail, the company that owns PioneerRX and QS1)
    3. Schedule interactive pharmacy software demos
    4. Ask for referrals from existing top pharmacy software vendor clients

6. Open an Independent Pharmacy

  1. Is your build out and inspections complete?
  2. Hire the right pharmacy staff, and do not overhire! You can always add more!
  3. Meet your neighbors- referrals are always the best free advertising
  4. Make sure your pharmacy software and point of sale system are ready to go
    1. Have you been trained on the pharmacy and pos software?
    2. Are your labels set up?
    3. Do you have a go-live date scheduled with your pharmacy systems vendor?
  5. Place your wholesale orders and stock your shelves
    1. Drug inventory in the pharmacy
    2. OTC products for your front-end
  6. Market your business
    1. Create eye-catching mailers for local zip codes
    2. Meet local doctors and clinics and present how you can help work together for better patient outcomes
    3. Join local facebook groups and offer discounts
    4. Create a social media platform and advertise
  7. Throw a unique grand opening
    1. Attract your new customers
      1. Petting Zoo or something attractive to children
      2. Sip and shop
      3. Welcome bbq

You have started a new pharmacy, now what?

Now that you have opened your new independent community pharmacy, do not get discouraged if your business does not explode in the beginning. Being an entrepreneur means constantly adapting, and constantly working / modifying your business. Tailoring to the clientele in your community and looking to serve areas that are currently underserved. Be different than the competition, and make sure it’s known for miles around you. As you start to build your customer base, try not to hide behind the pharmacy system filling prescriptions all day. Let a technician do the lifting, and you handle the verification of their work. In the meantime, look around and find opportunities within the pharmacy and community to build off of. If you are too busy every minute of every day filling prescriptions in the pharmacy, you wont have the time to find and implement change for the better – and that is when businesses tend to suffer the greatest. Of course, get out from behind that counter and meet your new patients. Build the bonds that you know the chain pharmacies simply can not do. We wish you all the luck and if you ever need anything, Datascan is always here to assist and support independent pharmacies beyond just our pharmacy software systems.