ONE OF THE KEY ISSUES facing independent community pharmacy is ownership transition. And with more than 35% of current pharmacy owners age 55 or older, it seems likely that many independent pharmacies will be sold in the next few years.
Experts estimate that between 500 and 600 independently owned pharmacies were sold to another independent last year, and experience indicates that many others will continue to be sold to chains, hospitals, or other entities.
Charlie Le Bon, director of pharmacy ownership services for AmerisourceBergen, says, “Good Neighbor Pharmacy and AmerisourceBergen got involved in pharmacy ownership transition to make sure buyers and sellers could be brought together to ensure that independent pharmacies are sold to other like-minded pharmacists who will keep the pharmacy open as a pillar of the community.”
Jean Ly, Pharm. D., is a partner in a small chain in southern California. His company recently worked with Le Bon to buy its eighth location, Carson Pharmacy, in Torrance, Calif. Ly says that he has been through the process of finding and buying existing pharmacies before, but found working with Le Bon to be advantageous.
“First off,” he says, “buying a pharmacy takes a lot of time.” Having the Good Neighbor Pharmacy team manage the process allowed him to focus on running his pharmacies. Ly says the list of tasks associated with selling a pharmacy includes many things everyone would expect, like finding a buyer, preparing financial documents, helping establish a realistic selling price, and arranging financing.
But, as Charlie Le Bon says, closing a sale also requires a lot of coordination that a first-time seller might not consider. He lists details such as tax issues, the transfer of leases, and utility hookups. He notes that a successful sale must also involve the transfer of title for capital equipment and making sure that pharmacy, DEA, and other licenses are obtained and third-party vendors are in place.
Jim Morisoli, R.Ph., worked with Le Bon to purchase a pharmacy in Carlsbad, Calif., and sell one in San Bernardino, Calif., in 2015. He says that among the most impressive things he encountered during the process was the detailed plan the Good Neighbor Pharmacy team used to help navigate the transaction.
One factor that emerged in talking with brokers, buyers, sellers, bankers, and industry observers is the variety of ways in which buyers and sellers can be introduced. Le Bon adds that he does not see his team as competing with brokers, as they often find themselves working side by side to conclude a successful sale.
Kurt Proctor, Ph. D., R.Ph., senior VP for strategic initiatives for NCPA (National Community Pharmacists Association) says, “For more than a decade NCPA has helped our members understand the benefits of having a plan for the sale of their pharmacy. By approaching the transfer in an orderly and informed manner, they are more likely to realize an attractive price and ensure the best possible outcome for their employees and patients.”
Among the programs NCPA supports are the Good Neighbor Pharmacy NCPA Pruitt-Schutte Student Business Plan Competition. Invited pharmacy school students form teams and create plans for opening an independent pharmacy.
It was through the business competition program that Amanda Miller, Pharm. D., while a student at Ohio Northern University, first contemplated becoming a pharmacy owner. She says that while not a presenter, she was involved in helping her school prepare its ownership plan for competition in 2008.
Upon graduation, Miller took a position with a nuclear pharmacy in Ohio but couldn’t suppress the urge to own her own pharmacy. So a little over a year ago she contacted John Pross, the Good Neighbor Pharmacy transition advisor in her region, and started looking for a store that met her professional and personal characteristics. In December 2017, she closed on Antwerp Pharmacy, a 5,000-square-foot pharmacy in Antwerp, Ohio.
In addition to all the technical support she received, Miller says, she was impressed with the personal attention and support she and the seller received through the process. Miller and the previous owner arranged an orderly transition by allowing her to continue her work at her previous pharmacy while working part-time at the new pharmacy, to begin familiarizing herself with customers and the new business.
KNOW THE MARKET
Miller says she was pleased with how Pross was able to “go beyond the numbers” when helping evaluate the value of the pharmacy, looking at factors such as location, community demographics, and the types of doctors in the community. They also did an extensive evaluation of the mix of prescriptions and third-party contracts. “All of this,” she says, “helped my husband and I get comfortable with the decision to buy.”
Jean Ly says that one other benefit he found in working with Good Neighbor Pharmacy’s ownership transition service is its continued interest in the success of the pharmacy. To help with the transition, Ly brought in his Good Neighbor Pharmacy business coach to help train employees and implement innovative marketing plans.
Immediately upon taking over the pharmacy, Ly replaced the previous owner’s pharmacy management system with the same PioneerRx system he uses to run his other stores. With a common platform for all eight locations, Ly says, he can leverage the benefits of owning multiple stores to reduce operational costs such as bookkeeping and human resources.
Key Things to Consider When Buying or Selling a Pharmacy
Start Early. A successful sale can take years.
Have an NDA (non-disclosure agreement). And have everyone you work with on the sale sign one. Confidentiality is critical.
Have a plan. If buying, know what your personal, professional, and financial goals are. If selling, carefully consider if you want to leave a legacy, simply get out, or perhaps even help finance the sale and stay involved.
Look at the numbers. Make sure all financial documents have been adjusted to reflect “real world” profitability. Have an accurate valuation of your business.
Get help. Certified public accountants, lawyers, brokers, and coaches who have done this before can prevent a lot of problems.
Make it better. If buying, have some ideas on technology, marketing, or clinical offerings and other changes you can make. If selling, clean up, fix up, and throw out. In real estate, they call it staging, and it makes a huge difference in finding a buyer.
Unlike Ly, Miller plans to take a slower approach to change. She says, “Since I have worked for months with the staff, I am confident in their ability.” Miller says the one major change she does plan to make will be to start letting customers know that flu shots and other immunization services will be offered, with the hope that, by flu season next year, this will be a profitable new addition to her pharmacy.
Charlie Le Bon says the biggest piece of advice he can provide anyone contemplating buying or selling a pharmacy is to start planning now. He says the process is usually measured in years, not months. This is not because of all the paperwork or legal details, but because of all the personal issues and business complications that happen. Jim Morisoli says, “The most important thing that Good Neighbor Pharmacy did for me was talking with the buyer when problems
Because of the continued challenges facing independent community pharmacies, it is anticipated that even more pharmacies will change hands in the coming years. We hope the suggestions mentioned here will help many more of you take a serious look to see if the time is right for you to buy or sell a pharmacy. CT