How To Start A Pharmacy & Open A Pharmacy Business

How to open a pharmacy business?

Start your pharmacy business journey today! Be your own boss, help your community.

Are you thinking of starting a pharmacy? Knowing the requirements to open a pharmacy helps. The independent pharmacy world offers a lot of opportunities for pharmacy owners. You can be your own boss. No more 60 hour work weeks for a large pharmacy chain. Actually serve customers and help them take control of their health.

This all sounds great but the truth is.. it’s a lot of work to start a pharmacy. No matter what you read, it’s a long journey from start to finish. You will encounter issues along the way. For example: City permits are always a pain. Finding a GC (general contractor) who actually cares about your project. Dealing with your state board of pharmacy, oh and expect a lot of delays. Our pharmacy consultants can ease out these procedures for you with their experience and expertise.

I personally have been involved in the opening of over 50+ pharmacies across the country. I am writing this article based on my personal experiences. Remember every state is different and some are easier than others to open a pharmacy.

Key Takeaways

• Gain an understanding of the different types of pharmacy businesses and their services.

• Conduct market research to identify target demographics, analyze competition, and gather customer feedback.

• Create a business plan with legal/financial considerations in mind, choose ideal location, set up pharmacy w/ software & supplies. Market & promote effectively for successful opening day & ongoing success.

20 Steps To Open a Pharmacy Business

Here are the 20 steps for running a pharmacy store

1. Create a Business Plan:
   • Define your business goals, mission, and vision.
   • Outline your pharmacy’s services, target market, and competitive advantage.
2. Legal Structure and Registration:
   • Choose a legal structure (e.g., LLC, Corporation) and register your business with the appropriate state and federal authorities.
3. Secure Financing:
   • Determine your startup costs and secure funding through personal savings, loans, investors, or grants.
4. Location Selection:
   • Find a suitable location for your pharmacy that meets zoning requirements and has good visibility and accessibility.
5. Licensing and Permits:
   • Apply for the necessary state and local licenses and permits to operate a pharmacy legally.
6. Build Relationships with Suppliers:
   • Establish partnerships with pharmaceutical wholesalers and distributors.
7. Pharmacy Design and Layout:
   • Design your pharmacy’s interior layout for efficiency and customer flow, complying with accessibility regulations.
8. Hire and Train Staff:
   • Recruit licensed pharmacists and support staff. Ensure they are properly trained and certified.
9. Inventory Management:
   • Set up inventory management systems to track medications, supplies, and expiration dates.
10. Pharmacy Software:
    • Invest in pharmacy management software for prescription processing, billing, and record-keeping.
11. Insurance and Liability:
    • Obtain business insurance, including liability and professional indemnity coverage.
12. Compliance and Regulations:
    • Comply with state and federal regulations, including the Drug Enforcement Administration (DEA) requirements.
13. Marketing and Branding:
    • Develop a marketing strategy to promote your pharmacy in the local community.
14. Secure Contracts with Payers:
    • Negotiate contracts with insurance providers and pharmacy benefit managers (PBMs) to accept prescription plans.
15. HIPAA Compliance:
    • Implement measures to ensure patient data privacy and comply with Health Insurance Portability and Accountability Act (HIPAA) regulations.
16. Build Relationships with Healthcare Providers:
    • Network with local healthcare providers to establish referral relationships and enhance your pharmacy’s reputation.
17. Stock Non-Prescription Items:
    • Offer over-the-counter (OTC) products, vitamins, and other health-related merchandise to increase revenue.
18. Customer Service Excellence:
    • Focus on excellent customer service to build a loyal customer base.
19. Marketing and Advertising:
    • Develop marketing campaigns to attract new customers and retain existing ones.
20. Continuous Improvement:
    • Continuously evaluate and improve your pharmacy’s operations, services, and inventory based on customer feedback and industry trends.

Remember that opening and running an independent pharmacy is a long-term commitment that involves a combination of business acumen, healthcare expertise, and regulatory compliance. Seek legal, financial, and pharmaceutical advice when necessary to navigate the complexities of the industry successfully.

What areas should you be familiar with when starting a independent pharmacy?

Lets first go over some essential pharmacy terms needed to create a successful pharmacy operation. Understanding each of these key terms and how they relate to each other will require a bit of research. Be sure you have a solid understanding of these terms before you decide to move forward with your pharmacy project. We will cover a few of these items later in the post.

• Pharmacy Systems – Which is best for my services and workflow?
• Location – Is my location clearly visible to potential patients?
• Construction – I need a contractor who is familiar with HIPAA/HITECH regulation?
• Inventory – What’s a good starting inventory to have?
• Financing/loans – How do I secure my loan or do I even need a loan?
• Technology – How can I use technology to better reach my patients?
• Marketing – What works in the pharmacy world in terms of marketing?

How to initiate the development of a pharmacy business plan for starting a pharmacy?

Any savvy business owner will create a business plan for their idea. A startup pharmacy needs a solid business plan that clearly defines the business. You will need to present your business plan to investors, banks and others. Your pharmacy business plan should clearly layout your goals for opening a pharmacy today. For example: Most pharmacies business plans include a mission statement about caring for patients by offering free delivery, one on one counseling and more. Pretty much offer something they can’t get at a large chain pharmacy. Separate yourself and give customers a reason to choose you over a chain.

In addition to the overall goals of the pharmacy there are additional items to include in the plan. Some other items to include in your pharmacy business plan:

• Services offered: Is your pharmacy more of a retail community pharmacy that focuses on it’s patients? Perhaps you offer in-home or delivery services with home medical items? There are many different services a pharmacy can offer. We suggest finding out what could the community benefit most from by looking at the competition and demographic in the area
• Financing: In this section you will need to state if you are working with a bank, self financing,  etc.. You also will need to layout your total budget and banks usually want these items as line items. Be sure to include your building renovations, contractors, cabinets, drug inventory, technology, marketing etc.. These can easily go over $500k+
• Marketing: A good marketing plan is a must for any pharmacy. How you will grow your pharmacy is of interest to investors and banks. What is your plan to acquire new patients and keep them? You can include items like direct mail, signage, grand openings, meeting prescribers face to face and more. Marketing is key to growing your pharmacy and you must have a sound marketing plan for your pharmacy to survive.

Financing options, how much money is needed to kick off a pharmacy ?

Don’t expect it to be cheap: You can easily spend at least $450,000 for a small pharmacy. Loan officers will request you are willing to add your own cash as well. This tells the loan provider you are serious about your project. Be ready to have your background checked, credit and work history. These banks are dealing with you directly. Talk to a financial advisor if you have any concerns about financing your pharmacy.

Obtaining an EIN (Employer Identification Number): Any business needs an EIN to operate a business and hire employees. Be sure to get your EIN from the IRS. You will want to fill out an SS-4 form that you can download from irs.gov

Finding the right bank for your loan: There are few pharmacy specific banks that provide loans to pharmacy owners. The first two off the top of my head are Live Oak Bank and First Financial Bank. These banks know the loan process for a pharmacy start up better than most banks. We recommend you give them a call to discuss a loan for your start up pharmacy. Don’t forget the check the SBA (Small Business Administration) for loan options as well.

Starting your pharmacy is going to cost you some money. You need to be able to know how to apply for business loans with banks within the pharmacy industry to get approved. Once you open you will need to speak the language of business. That means understanding your cash flow. Balancing a budget for your pharmacy. Managing expenses and bringing in new revenue to keep your pharmacy breathing.

How to navigate the loan process when opening a pharmacy?
Have your business plan and documents ready: We recommend you are well prepared and ready to submit any document asked. A business plan will be required. This is a well thought out presentation that includes: Projections, projected revenue, all costs associated with your business, how you will make money and more.  To obtain a business plan we recommend following this guide from the SBA. You may also reach out to pharmacy advice consultants such as ConfigRX.

Have enough money to get you through a few years: Most pharmacies will not turn a profit the first year or two. You need to account for this in your loan. Be sure to have enough money to pay your bills, employees, insurances etc.. If needed there are plenty of financial advisors you can consult with.

Location of your pharmacy is tied to the success of your pharmacy. I cannot stress this enough. Your pharmacy location must be thoroughly researched. Many pharmacies fail simply because nobody even knew it existed.

Location and Market Research is vital

Finding the right location: Look for other pharmacies in the area. Are they independents or large chain pharmacies? Just because there is a CVS in the town doesn’t mean there isn’t opportunity. Large chains have plenty of angry patients that are ready to switch for one reason or another.

Choose a cabinet company: There are a few pharmacy specific cabinetry companies. A few that I personally have worked with are Pharmacy Design Services and Pharmacy Design Group. A good cabinet company will work with you to come up with a design that fits your workflow and layout space. Often, these cabinetry companies will visit your pharmacy on-site to get a better idea.

Be ready to expect a hefty price tag for your cabinetry. Most pharmacy cabinet projects are at least $30,000 and easily go above $150,000 for larger pharmacies.

Comply with ADA and HIPAA: You will want to be sure your pharmacy is compliant and easily accessible for everyone. We recommend following the guidelines from the ADA checklist here. A great read at The Pharmacy Times here talks about why your pharmacy needs to be ADA compliant.

Do you know how to make a hipaa compliant website? HIPAA guidelines should also be considered. A good cabinet designer will know these guidelines and apply them to your project. Usually after the cabinets are installed you can apply for your state license and DEA number.

What are the Licenses Required?

Every emerging business necessitates documentation, and this holds especially accurate for pharmacies, given their substantial regulation. To begin, initiate the process by enrolling your business as a legal entity within your state, securing your federal Employer Identification Number (EIN), and inaugurating your initial business bank account.

Once you’ve tackled the foundational aspects of your business, make sure to review the state and federal prerequisites for pharmacy operations, including licenses and permits. Keep in mind that these requirements can differ based on your specific location.

Typical requirements include:

• State pharmacy license or permit
• Controlled substance registration
• National Council for Prescription Drug Programs (NABP/NCPDP) number
• Drug Enforcement Agency (DEA) number
• National Provider Identifier (NPI) number

Keep in mind that if you also plan to practice in your own location, you need to meet state requirements for pharmacists as well.

How Long Does It Take To Open A Pharmacy?

Most people start out thinking it will take a few months to open a pharmacy. Reality is it takes 8+ months or even years to open a pharmacy. Be ready to be delayed by landlords, city permits, insurances, state boards, bank loans and more.

A good piece of advice is do not open until you have ALL of your important contracts. The last thing you want is a new customer to come into the pharmacy just to find out you can’t accept his/her insurance. Odds are that customer isn’t coming back.

You can often research to see which insurance is popular in your area. Do everything you can to have this contract before you open.

Pharmacy Marketing and Designing Your Brand

Just like any other business, pharmacies need precision marketing to reach new patients and prescribers. Most pharmacies think they only need to market to patients and forget about the prescribers who can send you patients! Having a good and trustworthy brand will certainly help. Your marketing goal should be to find and keep loyal customers.

Be sure people know you exist, including prescribers. Have unique and customizable services that will benefit your patients. Let’s go over some key details about marketing and designing your brand.

Pharmacy Name and Brand Design: Choosing a pharmacy name is a lot more difficult than most think. You can choose a traditional name or go for a more modern short name. Take a look at our article on choosing a pharmacy name. Once you pick your name be sure to register your domain with GoDaddy, BlueHost or another Internet domain registrar.

Pharmacy Hardware: When it comes to computers, printers, scanners, tablets etc.. You have a few options. Purchasing directly from the pharmacy system or buying items yourself. If you decide to purchase directly from your pharmacy system, expect to overpay because their equipment is outdated and overpriced. Pharmacy systems make money off the hardware you purchase from them,

If you are looking to save some money however, purchase the equipment yourself. Often doing this will result in newer equipment at a better price. To make it easier for you, we created a list of the popular hardware in pharmacies. Take a look at our list of hardware and pharmacy networking items to save some cash purchasing items yourself.

Note: Certain items for example, the pharmacy server and POS items we recommend purchasing from the pharmacy system.

Start the hiring process

If you’re at this stage congratulations! You’re almost finished and can open your pharmacy soon. It is important to hire the right employees for your pharmacy. There are rules involved with hiring and you want to make sure you stay within those rules. Get advice on tax forms, government regulations and insurance requirements before you start.