How Much Does An Independent Pharmacy Make?

How Much Does An Independent Pharmacy Make
It is time to bring the unique look into the business economics of independent pharmacy operators that Drug Channels has been providing up to date. In spite of what you may have heard, there are still a significant number of independent pharmacies operating in today’s extremely competitive retail climate, as our data once again demonstrates.

While there was no change in the amount of money made from prescription sales, pharmacy owners saw an increase in their salaries for a second consecutive year. Continue reading for more on the finances. The retail pharmacy sector in the United States is being buffeted by a number of strong headwinds. DIR reform and income from COVID-19 immunizations are two examples of the developing good trends; nevertheless, there are also other emerging positive tendencies.

You can count on the fact that independents will keep fighting. CONFORM TO THE RECORDS Once more, we make use of the information provided by the National Community Pharmacists Association (NCPA) Digest, which is sponsored by Cardinal Health. You can read the news release by clicking here.

  1. The digest provides a selection of the 2020 financial and operating data that was supplied by owners of pharmacies.
  2. These statistics have a number of advantages and disadvantages.
  3. However, they do offer the only routinely reported and accessible to the public look into the financial state of independent pharmacies.

Additionally, the NCPA gathers more specific financials; however, it does not make this data available to independent experts. As a result of the fact that I do not have access to the full financial report, some of the data that are provided below are estimations.

Nevertheless, the National Community Pharmacists Association (NCPA) has, for the very first time, generously disclosed information on prescription revenues. As a result of these findings, we have revised the historical numbers that were discussed in earlier articles by making some very small adjustments to them.

PROFIT PRIMER The sale of prescription medications, over-the-counter items, vitamins, cosmetics, food, and other types of commodities all contribute to the earnings of a pharmacy. The filling of prescriptions accounts for more than ninety percent of the average independent pharmacy’s income. The revenues of a pharmacy are subtracted by the cost of items (net of discounts and returns) purchased from a manufacturer or a wholesaler to determine the gross profit of the pharmacy. The gross margin is the proportion of total revenues that corresponds to the gross profit.

The amount of money left over after deducting operating costs and calculating operational profit is referred to as the “gross profit.” Operating expenses consist of the following: (1) payroll expenses, which include the wages, taxes, and benefits paid to the pharmacy’s staff, including the owners of the business; and (2) general business expenses, which include everything else that is required to run the pharmacy, such as rent, utilities, license fees, insurance, advertising, and other business costs.

Gross earnings minus operating expenditures are the components that make up operational income. In order for a pharmacy to turn a profit, its total operating expenditures must be lower than its gross earnings. For instance, a pharmacist-owned drugstore may record an apparent “net loss” if the owner of the pharmacy decided to pay themselves a bigger salary rather than declaring a positive net profit. Please refer to our yearly Economic Report on U.S. Pharmacies and Pharmacy Benefit Managers for further information on the economics of pharmacies and prescriptions. FAB FIVE The following are five reflections on the most recent data: 1) The profit margins of independent pharmacies, on average, have not changed.

  • In the year 2020, the overall gross margin that independent pharmacies achieved from both prescription and non-prescription items was 21.9%.
  • That is within the range of the numbers that were recorded in the preceding four years, which varied from 21.8% to 22.0%.
  • The figures from this year are not entirely consistent with the numbers provided by the United States government, which indicate that both chain and independent drugstores had larger total gross margins.

According to the findings of the United States Census Bureau for the year 2020, the total average gross margin for the pharmacy business was 24.4%. (source) The total industry margin is larger than the margin of independent pharmacies due to the fact that front-end non-prescription items sold in chain pharmacies account for a greater percentage of sales and have higher gross margins than those sold in independent pharmacies.2) The profit margins for prescription sales at independent pharmacies are likewise consistent.

  • The gross margins on sales of prescription drugs were 21.2% for the year 2020.
  • The graphic that follows demonstrates that gross margins on prescriptions have been fairly consistent throughout the course of the previous five years.
  • The NCPA sample reported an average revenue of $55.96 per prescription in the year 2020, which is relatively equal to the figure of $55.86 per prescription reported for 2019.

Between $11.50 and $12.00 was the range of annual gross earnings from each prescription for the years 2016-2020.3) The rates of generic medication dispensing in independent pharmacies trailed behind those of the entire market. An unexpected difference has been recorded many times in the NCPA digest.

  • The generic dispensing rate, often known as the GDR, is the percentage of prescriptions that are filled with a generic medicine rather than a branded drug.
  • The generic dispensing rate for independent pharmacies has trailed behind that of the broader market.
  • According to the findings of IQVIA’s research, the GDR for unbranded generics in the entire market was 88.5% in the year 2020.

According to the findings of the NCPA Digest, the GDR for independent pharmacies was just 86% for the year 2020.4) In the year 2020, the median annual income for a pharmacist who ran a single drugstore was around $158,000. According to our best estimates, the owner’s discretionary profit (ODP) for each individual drugstore dropped from around $200,000 in the year 2015 to just $129,000 in the year 2018.

  1. Since then, remuneration has improved, and now stands at an expected 141,000 dollars for the year 2019 and 158,000 dollars for the year 2020.
  2. The rise was not the result of a larger prescription volume but rather of improved expenditure control.
  3. The NCPA sample found that the average number of yearly prescriptions filled by each pharmacy was decreased in the year 2020 compared to the figure for 2015.
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However, overall non-owner payroll expenditures decreased as well, which helped to compensate for the reduced gross profit that each pharmacy in the NCPA sample generated as a result of the lower prescription volume. In recent years, there has been a narrowing in the pay difference between self-employed pharmacists and those hired by other pharmacies.

  • On the other hand, this chasm has grown wider over the course of the previous several years.
  • In the year 2020, a pharmacist working in a retail, postal, long-term care, or specialty pharmacy made around $124,000 gross per year as their typical base income.
  • See the Job Market for Pharmacists in 2020: Increases in Retail Wages, but Increases in Hospital Employment In other words, owning a pharmacy, with all of the headaches and responsibilities that come along with it, has once more become more lucrative than working for someone else.5) The number of independent pharmacies represented by the NCPA has decreased.

The NCPA has adopted a new approach to measuring the overall number of community pharmacies that are independently owned. The number 21,683 locations of independent pharmacies was arrived at by the NCPA using “NCPA analysis of NCPDP data and NCPA research” for the year 2019.

  1. However, beginning with the 2021 edition, NCPA began utilizing IQVIA’s data on retail pharmacy locations throughout the United States.
  2. More than one-third of all retail pharmacy outlets are expected to be owned and operated by independent pharmacies in 2020, according to the NCPA’s projections.
  3. There is currently very little evidence to suggest that locally owned pharmacies are becoming extinct.

Even though total revenues for this dispensing format have been reasonably consistent, independents have been seeing a decline in their overall market share. Based on an examination of data provided by IQVIA, DCI discovered that the overall number of independent pharmacy sites has remained essentially unchanged over the course of the previous 20 years.

However, during the course of the last five years, the overall number of retail pharmacy locations in the United States, in addition to the number of independent pharmacies, has been on the decline. (For more information, please refer to Section 2.3.3 of our pharmacy/PBM report.) NOT TOADALLY BAD Readers of the yearly economic analyses published by the Drug Channels Institute shouldn’t be surprised to learn about the tough nature of retail pharmacy.

There is now a period of high rivalry in the retail pharmacy industry, which continues to put pressure on prescription profit margins. After being relatively constant for several years, the number of pharmacies in the United States, in all of their various configurations, is now on the decline.

In the report titled “10 Industry Trends,” published by CVS Pharmacy Downsizes In my last article, “Driving the Retail Shakeout,” I discussed the numerous strong headwinds that are now confronting the retail pharmacy industry. However, there are several tailwinds that improve the economics of pharmacies, including the following: The COVID-19 immunizations have resulted in considerable revenues for retail pharmacies, earnings that are fully justified.

The Federal Retail Pharmacy Program for COVID-19 Vaccination includes around 41,000 retail pharmacy sites across the US as participants. It covers the majority of small pharmacy networks together with all of the main retail chains. As of the beginning of February, pharmacies in the United States had already delivered around 227 million doses, accounting for more than forty percent of the total COVID-19 vaccine doses that were distributed in 2021.

At this time, pharmacies make $40 from each dosage that is provided. Because there is no cost of goods involved in providing a COVID-19 vaccination, a pharmacy’s total earnings are the same as the administrative fees they charge. For instance, the administration of a two-dose immunization regimen results in a gross profit of $80 for the pharmacy doing the service.

Because of this, the COVID-19 vaccinations and tests offered by CVS Health’s retail pharmacy division contributed to more nearly $1.8 billion in operational earnings for the company in 2021. All pharmacy DIR price concessions will be applied to the negotiated price under Part D, according to the new regulation that has been proposed by the Centers for Medicare and Medicaid Services (CMS).

  • The CMS regulation would have a number of consequences on the expenditures associated with Part D, including a marginally beneficial influence on the economics of pharmacies.
  • The Centers for Medicare and Medicaid Services (CMS) anticipates that the net Part D payments to pharmacists will rise by only 0.1% to 0.2% if the DIR is implemented as suggested.

I have been writing and publishing reviews of the economics of independent pharmacies for more than ten years. My advice to proprietors of pharmacies has been straightforward: Expand your business, narrow your specialty, or sell. To compete successfully in today’s increasingly consolidated drug channel, a small pharmacy requires either size or distinctiveness to achieve their goals.

  • If that’s not possible, bow out with class.
  • I continue to be of the opinion that some independent pharmacies will thrive, but not all of them by any means.
  • Last but not least, a polite reminder to my readers who own their own independent pharmacies that I am not a magic magician.
  • These developments are not due to my actions.

I’m not doing anything more than reporting the facts and watching what’s going on. Instead of becoming really angry at me on Twitter, I think it would be better if you reflected about the many business methods that you would need in order to thrive in an environment that is really hard.

Do small pharmacies make money?

It is time to bring the unique look into the business economics of independent pharmacy operators that Drug Channels has been providing up to date. In spite of what you may have heard, there are still a significant number of independent pharmacies operating in today’s extremely competitive retail climate, as our data once again demonstrates.

  1. While there was no change in the amount of money made from prescription sales, pharmacy owners saw an increase in their salaries for a second consecutive year.
  2. Continue reading for more on the finances.
  3. The retail pharmacy sector in the United States is being buffeted by a number of strong headwinds.
  4. DIR reform and income from COVID-19 immunizations are two examples of the developing good trends; nevertheless, there are also other emerging positive tendencies.
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You can count on the fact that independents will keep fighting. CONFORM TO THE RECORDS Once more, we make use of the information provided by the National Community Pharmacists Association (NCPA) Digest, which is sponsored by Cardinal Health. You can read the news release by clicking here.

  • The digest provides a selection of the 2020 financial and operating data that was supplied by owners of pharmacies.
  • These statistics have a number of advantages and disadvantages.
  • However, they do offer the only routinely reported and accessible to the public look into the financial state of independent pharmacies.

Additionally, the NCPA gathers more specific financials; however, it does not make this data available to independent experts. As a result of the fact that I do not have access to the full financial report, some of the data that are provided below are estimations.

  • Nevertheless, the National Community Pharmacists Association (NCPA) has, for the very first time, generously disclosed information on prescription revenues.
  • As a result of these findings, we have revised the historical numbers that were discussed in earlier articles by making some very small adjustments to them.

PROFIT PRIMER The sale of prescription medications, over-the-counter items, vitamins, cosmetics, food, and other types of commodities all contribute to the earnings of a pharmacy. The filling of prescriptions accounts for more than ninety percent of the average independent pharmacy’s income. The revenues of a pharmacy are subtracted by the cost of items (net of discounts and returns) purchased from a manufacturer or a wholesaler to determine the gross profit of the pharmacy. The gross margin is the proportion of total revenues that corresponds to the gross profit.

The amount of money left over after deducting operating costs and calculating operational profit is referred to as the “gross profit.” Operating expenses consist of the following: (1) payroll expenses, which include the wages, taxes, and benefits paid to the pharmacy’s staff, including the owners of the business; and (2) general business expenses, which include everything else that is required to run the pharmacy, such as rent, utilities, license fees, insurance, advertising, and other business costs.

Gross earnings minus operating expenditures are the components that make up operational income. In order for a pharmacy to turn a profit, its total operating expenditures must be lower than its gross earnings. For instance, a pharmacist-owned drugstore may record an apparent “net loss” if the owner of the pharmacy decided to give themselves a bigger salary rather than declaring a positive net profit.

  • This would be the case even if the business was actually profitable.
  • The owner’s salary and the pharmacy’s operational revenue are added together to arrive at the owner’s discretionary profit, abbreviated as ODP.
  • In previous years, the ODP was included in the NCPA digest; however, in more recent times, it has been omitted.

Please refer to our yearly Economic Report on U.S. Pharmacies and Pharmacy Benefit Managers for further information on the economics of pharmacies and prescriptions. FAB FIVE The following are five reflections on the most recent data: 1) The profit margins of independent pharmacies, on average, have not changed.

  • In the year 2020, the overall gross margin that independent pharmacies achieved from both prescription and non-prescription items was 21.9%.
  • That is within the range of the numbers that were recorded in the preceding four years, which varied from 21.8% to 22.0%.
  • The figures from this year are not entirely consistent with the numbers provided by the United States government, which indicate that both chain and independent drugstores had larger total gross margins.

According to the findings of the United States Census Bureau for the year 2020, the total average gross margin for the pharmacy business was 24.4%. (source) The total industry margin is larger than the margin of independent pharmacies due to the fact that front-end non-prescription items sold in chain pharmacies account for a greater percentage of sales and have higher gross margins than those sold in independent pharmacies.2) The profit margins for prescription sales at independent pharmacies are likewise consistent.

  1. The gross margins on sales of prescription drugs were 21.2% for the year 2020.
  2. The graphic that follows demonstrates that gross margins on prescriptions have been fairly consistent throughout the course of the previous five years.
  3. The NCPA sample reported an average revenue of $55.96 per prescription in the year 2020, which is relatively equal to the figure of $55.86 per prescription reported for 2019.

Between $11.50 and $12.00 was the range of annual gross earnings from each prescription for the years 2016-2020.3) The rates of generic medication dispensing in independent pharmacies trailed behind those of the entire market. An unexpected difference has been recorded many times in the NCPA digest.

The generic dispensing rate, often known as the GDR, is the percentage of prescriptions that are filled with a generic medicine rather than a branded drug. The generic dispensing rate for independent pharmacies has trailed behind that of the broader market. According to the findings of IQVIA’s research, the GDR for unbranded generics in the entire market was 88.5% in the year 2020.

According to the findings of the NCPA Digest, the GDR for independent pharmacies was just 86% for the year 2020.4) In the year 2020, the median annual income for a pharmacist who ran a single drugstore was around $158,000. According to our best estimates, the owner’s discretionary profit (ODP) for each individual drugstore dropped from around $200,000 in the year 2015 to just $129,000 in the year 2018.

  1. Since then, remuneration has improved, and now stands at an expected 141,000 dollars for the year 2019 and 158,000 dollars for the year 2020.
  2. The rise was not the result of a larger prescription volume but rather of improved expenditure control.
  3. The NCPA sample found that the average number of yearly prescriptions filled by each pharmacy was decreased in the year 2020 compared to the figure for 2015.
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However, overall non-owner payroll expenditures decreased as well, which helped to compensate for the reduced gross profit that each pharmacy in the NCPA sample generated as a result of the lower prescription volume. In recent years, there has been a narrowing in the pay difference between self-employed pharmacists and those hired by other pharmacies.

  1. On the other hand, this chasm has grown wider over the course of the previous several years.
  2. In the year 2020, a pharmacist working in a retail, postal, long-term care, or specialty pharmacy made around $124,000 gross per year as their typical base income.
  3. See the Job Market for Pharmacists in 2020: Increases in Retail Wages, but Increases in Hospital Employment In other words, owning a pharmacy, with all of the headaches and responsibilities that come along with it, has once more become more lucrative than working for someone else.5) The number of independent pharmacies represented by the NCPA has decreased.

The NCPA has adopted a new approach to measuring the overall number of community pharmacies that are independently owned. The number 21,683 locations of independent pharmacies was arrived at by the NCPA using “NCPA analysis of NCPDP data and NCPA research” for the year 2019.

  • However, beginning with the 2021 edition, NCPA began utilizing IQVIA’s data on retail pharmacy locations throughout the United States.
  • More than one-third of all retail pharmacy outlets are expected to be owned and operated by independent pharmacies in 2020, according to the NCPA’s projections.
  • There is currently very little evidence to suggest that locally owned pharmacies are becoming extinct.

Even though total revenues for this dispensing format have been reasonably consistent, independents have been seeing a decline in their overall market share. Based on an examination of data provided by IQVIA, DCI discovered that the overall number of independent pharmacy sites has remained essentially unchanged over the course of the previous 20 years.

However, during the course of the last five years, the overall number of retail pharmacy locations in the United States, in addition to the number of independent pharmacies, has been on the decline. (For more information, please refer to Section 2.3.3 of our pharmacy/PBM report.) NOT TOADALLY BAD Readers of the yearly economic analyses published by the Drug Channels Institute shouldn’t be surprised to learn about the tough nature of retail pharmacy.

There is now a period of high rivalry in the retail pharmacy industry, which continues to put pressure on prescription profit margins. After being relatively constant for several years, the number of pharmacies in the United States, in all of their various configurations, is now on the decline. The COVID-19 immunizations have resulted in considerable revenues for retail pharmacies, earnings that are fully justified. The Federal Retail Pharmacy Program for COVID-19 Vaccination includes around 41,000 retail pharmacy sites across the US as participants.

  1. It covers the majority of small pharmacy networks together with all of the main retail chains.
  2. As of the beginning of February, pharmacies in the United States had already delivered around 227 million doses, accounting for more than forty percent of the total COVID-19 vaccine doses that were distributed in 2021.

At this time, pharmacies make $40 from each dosage that is provided. Because there is no cost of goods involved in providing a COVID-19 vaccination, a pharmacy’s total earnings are the same as the administrative fees they charge. For instance, the administration of a two-dose immunization regimen results in a gross profit of $80 for the pharmacy doing the service.

  • Because of this, the COVID-19 vaccinations and tests offered by CVS Health’s retail pharmacy division contributed to more nearly $1.8 billion in operational earnings for the company in 2021.
  • All pharmacy DIR price concessions will be applied to the negotiated price under Part D, according to the new regulation that has been proposed by the Centers for Medicare and Medicaid Services (CMS).

The CMS regulation would have a number of consequences on the expenditures associated with Part D, including a marginally beneficial influence on the economics of pharmacies. The Centers for Medicare and Medicaid Services (CMS) anticipates that the net Part D payments to pharmacists will rise by only 0.1% to 0.2% if the DIR is implemented as suggested.

  • I have been writing and publishing reviews of the economics of independent pharmacies for more than ten years.
  • My advice to proprietors of pharmacies has been straightforward: Expand your business, narrow your specialty, or sell.
  • To compete successfully in today’s increasingly consolidated drug channel, a small pharmacy requires either size or distinctiveness to achieve their goals.

If that’s not possible, bow out with class. I continue to be of the opinion that some independent pharmacies will thrive, but not all of them by any means. Last but not least, a polite reminder to my readers who own their own independent pharmacies that I am not a magic magician.

Do pharmacists make 6 figures?

1. You’ll have a decent income – Even when they’re just beginning out, pharmacists can very much count on bringing in a respectable wage for themselves and their families. According to Moss, “You start out at a relatively decent pay compared to other occupations” when you enter this field.

  • “The negative aspect is that there isn’t much of an increase in your salary from then on out.” According to data provided by the BLS, pharmacists make a yearly median wage of $121,500.
  • The worst 10 percent of earners bring in an average of $89,790 annually, while the top 10 percent bring in more than $154,040.

For further information, consult the 2016 Pharmacist Salary Guide.