How to Start an Independent Pharmacy

Setting up any business is a challenge and in the field of medicine it can be especially hard, but healthcare is futureproof. It will always be needed, and should you be able to provide a premium service, a cost-effective service and one that brings benefit to the community, setting up an independent pharmacy could be your route to success.

Of course, you should not head into this industry purely to make yourself wealthy. Being clouded by the lure of the $ will be the first obstacle to overcome. If you only focus on that, you will not make it a success. Our CEO, Kunal Vyas was born into a family full of healthcare experts and independent pharmacists and spent time learning from each. He could see the benefit this knowledge brought to his community. Through improving healthcare, he found people living happier lives and with the improved sense of community the independent pharmacies were bringing, he also found friendships with customers were forged too. Naturally, as a result of building relationships and delivering personal service, success followed.

So, in this month’s blog, we dedicate it to those that want to become successful but also make a difference in their community. We are going to explain how you can start an independent pharmacy in the USA.

Starting an independent pharmacy in the USA

There are, of course, several things necessary to get an independent pharmacy set up and it isn’t always going to be easy. With legislation varying from state to state, as well as the need for recruitment drives, staff training, insurance, inventory, and more, it can be a lot of hard work. Hopefully, we have got you fully covered with our guide so that you can move from step to step and have the business fully compliant, fully functioning and an asset to your community.

Have a genuine passion for healthcare

As we touched upon in the introduction, do not just believe that setting up an independent pharmacy is a path to success and untold riches. The key to eventually getting those is to genuinely want to help the community. Having a true desire to help will give you a huge advantage over those that aim to set up fast and then close just as quickly once they have made a fast buck.

If you have that passion, then let’s move on to the next steps.

How much does it cost to set up an independent pharmacy?

Before committing to anything, you will need to have an idea of the costs associated with your new venture. This can be much higher than you may have initially anticipated, and chances are you will need to look at financing to help make your independent pharmacy come to fruition. Depending on your location and the size of the building will play a large part in how much money you may need to borrow. Typically, an independent pharmacy in the USA can cost anything from $500,000-$800,000 to set up. Now, you can secure this cash through your own finances, angel investors or a bank loan and it should cover your running costs too, but you may need to use additional funding to keep staff paid, bills up to date and stock levels sufficient.

This means that you could easily be waiting more than a year for the business to break even.

Luckily, some lenders specialize in loans for pharmacies and businesses of that nature so they understand that the repayment may take longer than for other types of loans. Just ensure you have a detailed business plan ready so they can see how you plan to operate.

Key points:

• Research loans specific to the pharmacy industry
• Understand you may not break even for more than a year
• Have a business plan drawn up

Creating a business plan for an independent pharmacy

It may look like we got ahead of ourselves by referencing the costs before even advising you of the business plan you will need, but many people waste time drawing up the business plan only to realize the associated costs and decide it is no longer a venture they wish to pursue. So, we thought, let’s lay it out in numbers first.

Prior to completing a business plan, the first thing you need to do is find a location. This can be a valuable part of your business plan as you will be able to outline to the lender or any investors how competitive the market may be in your area.

When looking for a location, look for what competition you have, conduct market research to see if the community would welcome a new pharmacy, study the rates, find out what specific licenses you may need to be there and whether there are any restrictions on operating hours. In addition, see whether the location offers you anything that can make it more practical for customers. Is car parking available, are other amenities nearby, and is footfall likely to be high? Once considerations are taken care of, you can move forward with your business plan.

A strong business plan for an independent pharmacy should include:

• A statement of your intentions. This should include something that helps you stand out. Perhaps the offer of a delivery service for independent pharmacists allows for enhanced customer service or the introduction of weekly meet-up groups for people helps bring the community together.
• The services you are providing. Not just limiting them to what is stated in your mission statement but showing what is on offer in your pharmacy and why it benefits the community.
• A location analysis. That first step you carried out before writing your business plan now comes into its own as you can show the lender why the area is beneficial and what you can achieve through being based there.
• A marketing plan. You cannot run an independent business with a, “If you build it, they will come” philosophy. So you need to plan how you are going to promote your business, retain customers, snare them from the competition and keep your brand in the minds of the community. Consider social media, leaflets, posters, pop-up displays, open days and much more. A lender will feel much more confident in assisting you if you show how you plan to make money and ultimately, pay them back.
• A financial outline. Showing the lender how you will use their money, how you aim to pay it back, how long it should take and why it’s being used the way it is, is a must. You will need to break down costings in enough detail to show a lender how and why the money will be used. This could include equipment, storage, utilities and much more. Be thorough so you can answer any questions should they arise.
• Profit projections. You have shown how much money you are planning to spend but you should also show how much you plan to make and of that, how much is profit. It’s not good having a huge turnover if you are operating at a loss!

Setting up the business entity for an independent pharmacy

Assuming your business plan was accepted, and the finance secured, you can start the process of acquiring the property. The redevelopment of it can come after this step though.  Obtain the property quickly so then you can move on to registering your business.

You need to set up your business as a registered enterprise that can hire employees and operate.  To do this you will need to get a FEIN from the IRS. You can opt to do this yourself or hire a firm to do it for you. This will also have you registered for any taxes too.

Licenses and permits needed for an independent pharmacy

Before being able to have the pharmacy designed and set in your vision, you may need to secure certain licenses and permits to be able to trade.  Rules can vary from state to state so it is worth your while checking with the local authority to find out which documentation you may need. The FDA has detailed information regarding the licensing of pharmacies that is worth checking.

Firstly, investigate if you will need to obtain a State Controlled Substance Regulation. In some cases, this is issued with your pharmacy permit, and in others it is separate. You find out whether it will be required before starting work on the pharmacy.

Next, contact the DEA for your area. Find out what is needed to obtain your DEA registration certificate. They may want to inspect your property first so factor this into your timeline for opening.

You will also need an NPI. This is the National Provider Identifier and will need to be applied for. It can take up to 15 working days to for enrollment to be completed.

Next up is the NCPDP identifier. This helps your pharmacy to engage with third-party payers and claims handlers. This can also take 15 days to obtain. Until it is obtained, you cannot enroll with any third-party payers.

Once the NCPDP is granted and any other licenses have been issued, you can enroll in any third-party contracts. This can take some time to finalize so be prepared for a long wait of as long as 3-4 months.

For total compliance, there will also be some specific laws or contractual requirements you must fulfill for your pharmacy. Check with the FDA, CDC, OSHA and HIPPA to double-check everything you may need.

Insurance for your pharmacy

Secure business insurance and workers’ compensation insurance. There are a variety of policies so find what works for a pharmacy like yours. General liability insurance is normally the best way to start. Also, check whether you need a certificate of occupancy. In some cases, these are organized by your landlord but should you have bought the property, this will be your responsibility.

Designing the property for your pharmacy

Now you have the financing, you have registered the business and got the property, you can start creating the building in your vision. Look for ease of movement for customers as a priority, there should be an easy route of access taking into account accessibility concerns that could be raised by people with disabilities.

Look at how your products will be set out, do certain items need to be stored at height? are there others that benefit from a lower reach? Do you also need to consider refrigeration? If so, where will it go?

Once you have created a design for the customer areas, look at where and how your team will work. Do you need a large front desk area to serve customers? How much storage behind this counter do you need?

This will be one of the largest expenses of the creation of your independent pharmacy so it can often be wise to plan this in advance of submitting your business plan. That way a lender can see exactly how the money will be spent.

With the design process, to ensure you are following all the relevant rules, make sure you comply with both HIPAA and ADA guidelines.

A proper design that helps with the fluidity of your pharmacy will also help you avoid some of the common medication errors made by independent pharmacies.

Secure your wholesale and suppliers

When working out costs and assessing what you need for the business, you will no doubt have been looking at the stockists you will use for stock, consumables, and other items you may need to purchase. It can be more cost-effective to investigate the possibility of a buying group where all member pharmacies come together. The buying group is then able to negotiate better prices that then give you a great saving. Rules vary per buying group so research these in advance to get a selection you can choose from. Don’t just rush into a buying group though. Some may not align with what you need for your pharmacy, and you could find yourself then having to source stock elsewhere too in order to match your business need.

Organize the tech for your pharmacy

Tills, reporting systems, visual displays and more are all important. You want systems that are easy for you and your team to use but in-depth enough to store vast data and handle lots of transactions. You may want some of the tech to integrate with other systems too, especially if you are considering outsourcing medicine deliveries to a pharmacy courier service.

You may even want to run a pharmacy delivery service direct from your pharmacy and with RxMile you can do both. We'll even offer you a free trial. Our tech provides both new and existing independent pharmacies with fully compliant, fully compatible and safe technology that allows for real-time tracking of prescriptions, captured proof of delivery and route optimization amongst many other key benefits any pharmacy can benefit from. What’s more, this tech allows you to remain focused on the people that matter in your pharmacy, giving them more of your time, your passion and your knowledge.

With all the above you are almost ready to go, just start advertising for staff with a detailed job description and use your marketing plan to put together your launch announcements!

How long will it take to set up my independent pharmacy?

The timescale is varied but you can be looking at 6 months to well over a year. The varying permits, the issues with builders and the delays in financing can slow the process down but rest assured. If you have your business plan, if you have your finance, and secured your licenses and permits, you can move much quicker. Just don’t try opening it until everything is in place. If this still holds an allure for you, speak to our team at RxMile. Our pharmacy experts can help you become fully integrated with revolutionary technology that puts you at the front of the line for independent pharmacies. Why not book a free demo today and see how we can help shape your business so you develop your business and your community?