Let’s Chat – Tradeshow Season, DIR Fees, ERTC and MORE!
Join us as we share our experiences from recent tradeshows and dive into trending pharmacy topics. From DIR fees and ERTC updates to revenue diversification and cash flow management, we discuss real-world challenges and innovative solutions that pharmacy owners need to know.
If you prefer to read this content, the video transcript is below.
Bonnie: Welcome, everyone, to another episode of the Sykes Bottom Line Pharmacy Podcast. It’s been a while, guys. We’ve been on the road for the last few weeks hitting up tradeshows already in June, not sure when this podcast will hit, but we’ve hit two already. Busy few weeks.
Kendell: And we have these recorded in the can. So even though they’re coming out every two weeks, it’s been a little while since we’ve recorded a fresh one. So we’re excited to get back at recording some new ones. I got a question for you. We just hit a couple of tradeshows. So far, what kind of feedback have you heard about the podcast from people that you’ve spoken to in person?
Bonnie: I’m getting a lot of feedback that people are watching the podcast. Which, I mean, is positive.
Scotty: I’m getting a lot of feedback on the podcast. One of the feedback I have is, Bonnie, don’t be typing when we’re talking to guests because then all you hear is, *typing* …
Bonnie: I don’t usually do that.
Scotty: Bonnie’s over here in like, another world, you know, our guest is like, “Yeah, you know, DIR fees…”
Bonnie: I have worked for Ollin Sykes for 20 years at this point. And as of the recording date of the show, I have become a master at multitasking, but I will refrain from that moving forward.
Kendell: You know what I’m proud of? There’s been several times where I’m speaking to someone at a booth and they bring up a topic and I can say, I’ll send you the podcast on that exact topic once I get back. So that makes me feel like, okay, we’re actually doing some relevant information. And a big one is the DIR fees. People are like, “Well, what do we do about DIR fees? How can we solve the whole DIR fee problem that’s coming up?” And immediately I’m like, “I got about three DIR fee podcasts that I can send you.”
Bonnie: And ERTC.
Kendell: And ERTC, exactly.
Scotty: There’s a lot of hot topics and DIR by far is the biggest one. I mean, we’re talking, we’ve been going to these tradeshows, we’ve been speaking about DIR fees. If you watched our previous podcasts, you know where we stand on that. You’ve got to get your financial house in order. Got to know your cash flow, got to have the fundamentals revenue side is important expense managing those expenses, understanding your expenses. Debt is cash flow going out of the pharmacy, but it’s not showing on the P&L. Distributions or personal draws on the pharmacy, that’s not on the P&L, but that’s money going out of the pharmacy. And just knowing your PSAO and understanding your contracts and getting that into your script system so you can see those DIR fees in real time, those estimates. And then when we talk about what kind of cash flow do pharmacies need going into the end of the year. Our method right now is to the Caremark January through May 23, DIR fees, and then multiply by two and a half, and then that’s a cushion, a starting point for getting that cash flow where you think where it needs to be. Now, that’s just kind of where we are now with it today. But that could change. But if you’re a numbers guy looking to get a target out there of what kind of cash flow am I looking for here to build up my current ratio, I think that’s a good start.
Bonnie: Yeah. And we’ve hit let’s see, in June, we did McKesson tradeshow, we did Apex, and we also did the ownership workshop. That was for NCPA. That was prior to a few days before the McKesson show. And definitely, I was at all three of them.
Scotty: And Pioneer.
Bonnie: And Pioneer, absolutely. I know the majority of the conversations I had during that period of time were dealing around people’s worries with DIR fees, for sure, in all the classes, even in the ownership workshops, which I also found interesting. Some of those participants of the ownership workshop who were actually some are still students, someone actually asked the group, did they all even know what a DIR fee was? And there were some that did not even know what that is.
Kendell: Oh, wow. They’re going to find out pretty soon now.
Bonnie: That was interesting, though. They were like, Wait, what is that? What are y’all talking about? That was kind of mind blowing. I mean, I get it, but it was just hard to believe. Maybe by the time they have a store it’ll be all worked out.
Scotty: The ownership workshop, man, they’re coming in like, I want to own a pharmacy. And then boom.
Kendell: So the story that got Ollin going, he got a good laugh out of this. An accountant came and sends me an email about an account we used to take care of. And he says, do you mind breaking down the director fees for me?
Bonnie: The director fees?
Kendell: Director fees. And I replied I don’t think there was any director fees on the account. Ollin got kicked out of it. He was like, oh, my God, they’re going to be in for some education. They need some education bad. If the accountant’s emailing us and saying, director fees. Ollin got a good laugh out of that for quite some time but go ahead.
Bonnie: No, I was just going to say definitely. And you saw it Kendell, too, at McKesson especially. I’m sure it was the same at Pioneer. I wasn’t there. But a lot of the classes, and even the kind of the classes they were doing sort of in the tradeshow that you could just walk up and listen to, had to do with finding different ways to have revenue, to bring in revenue during this crazy time. Diversifying your revenue. So that was definitely a topic directly related to DIR fees because it’s doing anything you can to bring in other streams of revenue, definitely cash revenue during this period of time.
Kendell: What I’m seeing is, speaking to people, I think they’re feeling it, is their gross revenue has increased, or if it hasn’t increased, has stayed the same in 2023 compared to year to date, 2022. So, the total amount of revenue coming in is about the same. But looking, I have some clients where their gross profit is 75% of the prior year, 60% of the prior year. Their gross profit has kind of went down significantly. And I think some people are feeling it. Just talking to people, they’re kind of feeling the change of what’s going on with that. These Scotty, you’re probably, going to probably tee you up for this one.
Scotty: Oh, man, I’m ready for this.
Kendell: The high-dollar injectables and the high-dollar prescriptions that are going out, you can go ahead and dive. I threw you a softball, so go ahead and run with that one.
Scotty: Well, we’re seeing a lot of pharmacies that are not aware of what they’re filling. They’re getting these injectables and they’re coming in like crazy. And this is where if you’re not paying attention to DIR fee on the front end, a month later, you look back like holy cow, what have I been doing? So those injectables are high-dollar drugs, but when you’re filling those prescriptions, the DIR fees coming out, and you’re actually probably losing money on this. So your revenue is real high. Your cost of goods is real high. Your cash flow is taking a big hit because of that additional cost of goods, but you’re actually losing money on the back end, so that can drive your pharmacy straight down quick.
Kendell: So, I had a pharmacist well, those are the Mounjaros and Ozempics. Listen, there’s people looking beautiful because of all this weight loss is going on. It’s doing wonders for people’s bodies, but not for their P&Ls. But I had a pharmacist who said, well, I’m spending $2,000 or whatever on this prescription, but I’m making 100 here, 100 there. Isn’t that good? And we did the calculation. It’s like, well, you’re making like 5% margin and your DIR fees is averaging five and a half percent prescription. So they’re like, I didn’t take that into consideration. I don’t know the DIR fee that was their average for all their prescriptions, but if it’s in line with their average, that means they were not only tying up that kind of cash flow, but they’re also losing money. It’s like, man, you might as well put it in a high-interest yield savings account or something like that. You can get 4% nowadays with a business account if you really want to, as opposed to losing 4% or half a percent. It’s a better way to spend your money.
Bonnie: I think a prior episode that we had with RetailMyMeds, just one thing to bring up. I don’t know if we can link that actual podcast here you could search through, but that’s just one possibilityof maybe something to look into, of a different way to handle these prescriptions that you’re losing money on, being able to still keep that patient.
Kendell: We saw Arica Collins with RetailMyMeds there at the show, and I heard some pharmacists talk about what that could do for them in theory. And some faces lit up. That’s something that they would like to pursue. So interested to see. But we have that podcast, we’ll definitely try to link that to this with her about ways to get those high-dollar prescriptions out of your pharmacy, but still keeping the customer, keeping the patient, and coordinating that script. That way you’re not losing money or tying up a ton of cash flow. So, no, I definitely look forward to hearing how that works out for them.
Scotty: I know some pharmacies are doing a couple of those Ozempics obviously, but they’re looking at the whole family as a unit, as a profitability unit, and saying, alright, we’ll fill this, but we got all this other coming in. I have seen that. But on the other end of all this Ozempic high-dollar stuff, I’ve seen pharmacists and pharmacies, they’re aware of the high-dollar prescriptions, that they’re losing money on them, and I’ve seen margins higher than they’ve ever had. I got some pharmacists that have- I got a pharmacy that was struggling with around a 22% gross profit for all the prior years. Now he’s at 32% this year. One of the key drivers of what he did there was the COVID test through Medicare. And so there was a window period of time there where you could bill for those for those patients, and he was cranking them out. He’s building up that cash flow. Talk about building up cash flow. He’s doing it.
Bonnie: I mean, folks have to get creative at this point, and it’s a day-by-day thing. Figure it out, ways to change, bring in different revenues and it could change. Some of these things only last for three months, six months, and then it’s kind of on to the next thing. We also saw a lot of talk and discussion about bringing in nurse practitioners into the pharmacy to drive people to be able to be seen there in your pharmacy for different issues they’re having and having their scripts filled there at the pharmacy. Just anything to change up revenue that doesn’t include DIR fees.
Scotty: Now, we did get a question on DIR fee escrow in particular. I think someone wanted us to mention that. Here’s my thought on DIR fee escrow. I don’t want anybody holding my money anymore, than I have to, so no on the DIR fee escrow. And DIR fees are deducted when they actuallyoccur through those 835s. So doesn’t make a difference in that respect. But no, don’t be holding my money.
Bonnie: Unless you were just somebody who absolutely cannot that’s what somebody told me at the show. They were like, unless you were someone who just absolutely cannot control yourself to spendthe money that you’re trying to put away, I just don’t see a point letting someone else hold your money for you.
Scotty: Yeah, a common theme you see out there is the legislative piece to all this. As a pharmacy owner, and I think we talked about this with Cole, not only are you a pharmacy owner, a manager of your pharmacy, a pharmacist, so on and so forth, I mean, you got to add to the list. You got to be active in the politics of your area or just in general to put pressure on what’s going on. I mean, the NCPA and others have been doing, I think, a good job of bringing that heat, and it’s starting to gain some traction. So, keeping the pedal to the metal on that couldn’t be more important. So, you have to get out there.
Bonnie: It’s another part of the job description for sure.
Scotty: It really is
Bonnie: One other topic that was brought up maybe once, and I’m being funny, it’s my favorite topic. I think I got asked about it a few times, some of the shows. Would anybody like to guess what that is?
Kendell: Starts with an E?
Bonnie: Starts with an E R T C.
Kendell: Yeah, I was thinking the same exact thing.
Scotty: Actually, I do have some updates. I do have some updates. The IRS has released numerous news releases on it now, to be wary of those third-party promoters. Just about every other week they’re pushing out a new one, so they’re fully aware of what’s going on there. There was one court case, and it was a big ERTC and it was a third party prepared the package. They had a government order supply issue or something, and it was a 20-page document on why they qualified. Well, the court and the IRS agreed and said you got nothing here man. You said you got the government order, you were suspended, partially suspended, but you’re not showing any data on how that impacted you. You didn’t get into the nominal impact, and if you’ve looked at our previous podcast on that, that’s an important key part. And it came into play here in this court case where’s the more the nominal impact that you had in your pharmacy or in your business, this was not a pharmacy, so it didn’t work. They were like, you’re not showing any data, and it was a 20-page report, mind you, andthere was nothing in there but fluff, and so it didn’t pass. So, we’re going to see, there’s going to be more of these coming out. Just be careful with that ERTC and those third-party promoters, definitely talk to your tax advisors on those.
Kendell: Yeah, I mean, the IRS is basically saying like I’m looking at one of the notices right now, and it’s lookout for third parties who are charging upfront fees contingent on the amount on the refund. And basically, that seems too good to be true. They’re very aware of they’re going out there and just promoting things and getting people to claim refunds. And I mean, I get it. Basically, I know some people’s attitude is, if everybody else is applying, I want to apply, too. They have the, what is it? FOMO, fear of missing out. They have FOMO syndrome. They’re like, I can’t miss out on this. I got thePPP.
Scotty: It’s so easy. Fill this out and you’re getting some money.
Bonnie: The one thing that I’ve had a couple of clients say to me that I think is the misconception is people think they’ll say, well, so and so did it, and they got approved. It’s not really an approval. Just because you get the money doesn’t mean that someone dove into it and believes that you qualify.
Scotty: Yeah, they don’t approve them on the fly.
Bonnie: Because you get the money does not mean that you’re set and everything’s great.
Scotty: They approve it when you get audited, that’s when you’ll get the approval test.
Bonnie: So, I’ve had to that said to me a couple of times, well, so and so did it, and they got their money. They passed the test. And I’m like, that’s not what that means, so I kind of want to clear that up.
Scotty: But by all means, pharmacies need to look at it. There’s no reason you shouldn’t be looking at it. Look at our prior podcast on that. And if you can get in there, get in there. It’s a good program, a good opportunity.
Bonnie: Yeah, we’re not anti-ERTC, I want to be clear, although it’s a topic that I despise. I just don’t like all the third parties coming out of the woodwork telling everybody 100% that they qualify.
Scott: Yeah, it’s the scams that I don’t like. Let’s see what other updates do we have? So, the tradeshows were good. I heard Pioneer was a very great show from some pharmacy owners where it was just a good group of movers and shakers there that are like, this is what I’m doing. This is how I’m looking at the future. So, very positive outlook, people who are ready to take on what’s ahead. So got some good feedback on Pioneer. Apex is always a good show. Had that DIR fee talk there. And then, of course, McKesson.
Bonnie: I had the best dessert of my life at Apex. Can I just throw that out there? It was the best dessert that I’ve ever had at the show. They made it there at the show, on the show floor
Kendell: What was it?
Scotty: So, it was berries and fruit with sugar.
Bonnie: And I mean, they cooked it right there on a pan, and then they plopped it on a piece of, like, pound cake and a scoop of ice cream. And then it caramelized, and it was crunchy. Anyway, just throwing that in.
Scotty: I liked the steak. The steak was good. Any travel bloopers come up and did we have any travel bloopers?
Kendell: Oh, my goodness.
Scotty: I’m sure we did.
Bonnie: I had a rough trip at McKesson.
Scotty: I had a travel blooper because we had the CPA conference.
Scotty: Not a pharmacy. This is our industry. Dad picks me up at like, 4:00 a.m. Crack of dawn. We’re going to be there 4 hours early.
Bonnie: I took a different flight.
Scotty: He’s running red lights. Four in the morning. He ain’t waiting for that light to change. There’s no cars coming. He’s running red lights, not even running. He goes around like he’s turning. Then he goes around.
Kendell: Like a bicyclist does? That’s how bicyclists do. Oh, that’s hilarious.
Bonnie: Well, sometimes when it’s really early, those things have set times.
Scotty: You know, it’s funny, I don’t care, but it’s just like we’re 4 hours early, I think we’re good.
Kendell: We had the great debate on flying home from Vegas from the McKesson show. And it was, is it better to get a red eye and then you have your next day to take naps and kind of get caught up on Sunday? Or is it better to sleep at the hotel all night and then wake up at 4:00 a.m. and fly home?
Bonnie: That’s right. Kendell did the red eye.
Kendell: So, I tell you, I was like, hey, I could sleep on the plane, get home, and if I’m tired, I can still nap the next day. What’s the point? And I kind of regretted it. I kind of regretted it because I didn’t think about it. You sleep soundly in the hotel room, and then the next day, you can nap as needed. But on the red eye, you’re not sleeping soundly.
Bonnie: Was that a full flight, Kendell?
Kendell: I don’t know. I don’t think it was full. I don’t think it was full. No. There were some spots, but you’re getting woken up every time they come by to give drinks, they had this bright light on. So, I had my sunglasses on. Then you’ve got to wake up for your connections. But I did get home. Then there was a new bed delivered. So, I slept soundly the next day. I was knocked out.
Scotty: What a way to break in a new bed. Good gracious.
Kendell: It was perfect.
Scotty: Stay up all night traveling.
Kendell: I felt good, though. I felt good. But no, I think I’m passing on the red eyes. I’m going to go ahead and sleep at the hotel, nap during the day on the plane and then get at it.
Bonnie: I wouldn’t say mine was a blooper, but I did not. Vegas was not good to me this last trip.
Kendell: No, I’m about to cry just thinking about your experience, getting home.
Bonnie: I mean not even getting home. I ended up dehydrated with vertigo.
Scotty: Let’s just say this, if you’re going to travel a lot and then end up in Vegas after all that traveling, you better be drinking some water.
Bonnie: I was in the ER, which was a whole reality show in itself. We should have had a podcast when I was there.
Kendell: ER in Vegas.
Scotty: Live from the ER.
Bonnie: It was amazing. Anyway, didn’t get home, my flight got canceled. My connection.
Scotty: So, yeah, we had a good tradeshow season. Good June, busy, a lot of good stuff. So, we got another month of- we’ve got Cardinal coming up. We got Amerisource coming up. We’ll have some good updates from there, I’m sure. And we appreciate everybody listening in and hope everybody has a great 4th of July. We’re recording this before the 4th of July. We hope you had a great 4th of July when this drops. So best take care, everybody. Thanks for listening.