Navigating the Pharmacy Marketplace Featuring Wade Hinkle, Founder and CEO of Pharmacy Market Place

Buying from primary vs. Secondary wholesalers, when is it best for your pharmacy and how does it impact your bottom line?  

In this episode of The Bottom Line Pharmacy Podcast, Scotty Sykes, CPA, CFP, Bonnie Bond, CPA, and Ollin Sykes, CPA, CITP, CMA sit down with Wade Hinkle, Founder and CEO of Pharmacy Market Place to discuss:  

• Optimizing pharmacy operations through technology 
• inefficiencies in traditional pharmacy purchasing methods 
• importance of balancing primary vendor agreements with secondary market opportunities 

And more! 

Join the discussion with us.

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More resources about this topic:  

Schedule an Rx Assessment

Podcast – Improving Cash Flow With Inventory Management

Webinar – Maximizing Your Largest Expense: Inventory

Webinar – Inventory Management: Keep Cash In the Bank, Not on Your Shelf

Webinar – Improving Cash Flow Inventory Management Best Practices

Podcast – Master The Margin: Understanding the Pharmacy Balance Sheet: A Snapshot in Time

If you prefer to read this content, the video transcript is below:

Scotty Sykes, CPA, CFP®: We appreciate you getting on. Wade Hinkle with PharmacyMarketplace.com. Pharmacy, used to be a pharmacy owner, no longer, right? But what we do here is we just shoot the breeze. So, no agenda, nothing. So…With that… 

Ollin B Sykes, CPA, CITP, CMA: Well, let me start it out then. 

Scotty Sykes, CPA, CFP®: You start it out, shoot away. 

Ollin B Sykes, CPA, CITP, CMA: Well, we’re certainly happy to have Wade Hinkle with us today with PharmacyMarketplace.com. And Wade, I know there’s a lot of questions out there about what Pharmacy Marketplace is doing or not doing, what sources of information you have. Give us an education about what you’re doing, please, sir. 

Wade Hinkle: To give you a little brief of a background here, so I was really raised in pharmacy since I was a kid. My dad was an independent pharmacy owner and we were raised in it our entire lives. And so we really didn’t have any intention of being in pharmacy, but we knew that the business of pharmacy in general was pretty inefficient. And so we went to Auburn University and basically we looked at finance and so we got really ingrained in investments and, you know, returns, et cetera. And we basically started looking at the logistical concepts of pharmacy and we realized how inefficient it is. And we came back to really try to help our dad because we saw, you know, how the pharmacy business itself operated. And we thought, you know, there’s definitely, this is definitely an industry that’s ripe for disruption. And, the more we dug into it, the more we realized how inefficient that it was. And so we started off with inventory IQ where we, we installed a perpetual inventory system for 700 different pharmacies across the nation. That really got our, broadened our horizon to all the different possibilities of how people operate and run their pharmacies. And so once we saw that we realized we really needed to build software to try to help us because these purchasing decisions that we’re making is really all of your P&L. That’s where you spend all of your money and the purchasing decisions themselves were not intelligent whatsoever. A lot of them are guestimations, just ordering what you need, lot of sticker methods, et cetera. And so, we built pharmacy marketplace, really trying to streamline and build transparency to what should we actually do? Because that’s, that’s inevitably what we’re trying to decide is who should we buy from and how much. And so, we built pharmacy marketplace trying to solve our own problems at our own pharmacy. 

Bonnie Bond, CPA: Yeah, that’s awesome. 

Scotty Sykes, CPA, CFP®: So it’s really about, I mean, it comes to mind, you know, a pharmacy owner out there that doesn’t have any technology, not using their perpetual system, knows their patients, knows what they need, you know, in the back of their head from doing it for 30, 40 years. Tell me, you know, what can this, you know, what can perpetual inventory, what can, you know, efficient ordering do for those owners? I mean, what are they missing out on? 

Ollin B Sykes, CPA, CITP, CMA: What can it do to their bottom line? 

Wade Hinkle: Right. So perpetual inventory and then actual purchasing are kind of two separate things in a way. Perpetual inventory, automating everything that you have actually in your pharmacy. And so that you can try to make your ordering a little bit more streamlined, come up with how much you should actually stock, right? And then the actual purchasing side of things, there’s a lot more that goes into this because you have to think about the aggregate because you may have agreements with your primaries, most pharmacies do. And so when they look at something, if it’s discounted or not versus the secondary market, you know, they’re looking at that sticker difference and they’re saying, okay, I can buy it for $50 from my primary versus $25 from the secondary. I’m going to make 25 bucks. Well, if they’re not thinking about the aggregate from their primary vendor agreement, they may cost themself $5,000, $6,000 that month, just from that $25 difference. I’ve seen it before. And so you think you’re making 25 bucks when you’re costing yourself, you know, $5,975. And so the aggregate of what you’re doing matters a tremendous amount. So knowing how that purchase will affect all of your other purchases is paramount to be, to be able to actually generate a lot of profitability. And as far as your bottom line, we’ve seen, there’s definitely a place for the secondary market. I mean, even the big primaries that’ll have 30,000, 50,000 SKUs those guys will still run out of things because we’re talking about logistics here, right? We’re talking about being able to provide thousands of different products to patients. And so the primaries even run out of products. So there is, there’s definitely a place for the secondary market, just for product availability and then discounts. And that’s really the only two reasons that you buy from the secondary market is the product availability or the discounts themselves. Sometimes, I mean, you’ll even pay more for an item just so you can be able to service the client. And now most of the time we’re trying to actually get discounts instead of paying more, but we’re in healthcare, so we’re going to do what we have to do, right? And so basically if you do work your primary vendor agreement compared to the secondary market, an average pharmacy doing 250 prescriptions a day, there’s no reason why they can’t make another $2,000 to $3,000 a month. I think that’s a pretty low number. We’ve got people that are making $10,000 and $20,000 a month off this. So $2,000 – $3,000 I think is very conservative, but I think that’s kind of where the averages really play out. And  that’s somebody that is working it, but not spending all of their time doing it, because they’re using a tool like this, because anybody can buy from the secondary market, that’s not hard. I mean these guys are going to email you, they’re going to fax you, they’re going to text you, et cetera. They’re going to call you nonstop. It’s one thing that we actually put a stop to. So finding discounts is not difficult, but finding the biggest discounts in an efficient manner to be able to, you know, so that you can actually get back to what matters  in servicing the patient. That’s  where the big value piece is. And that’s what we were trying to solve with Pharmacy Marketplace. 

Scotty Sykes, CPA, CFP®: So, you’re taking technology to the ordering side and you’re using that technology to maximize your PVA to make sure you’re hitting the metrics on your PVA to get the highest rebates and so forth. But you’re also shopping around on the secondaries to maximize those discounts and options that are available for pharmacy owners. And it’s all using technology behind the scenes to kind of do it like that. 

Wade Hinkle: Yeah, I mean, There are certain items that have bigger discounts than others, right? But there are also certain items that hurt your PVA metrics more than others. And so you have to figure out, I mean, it’s a, it’s a crazy system. Honestly, it’s not just, you can’t just look at, Hey, this is what the price is over here versus the price over here. There are different, every item has a different effect on that PVA. And I’ve definitely seen over the past probably five years or so a lot of people are moving away from primaries and they’re going heavily into the secondaries. Well, we’ve done the math on it. We represent the secondary market and you know, we’re in, we really represent the pharmacies, but we have the secondary market available to the pharmacies. But what we’re finding out is 99% of the time it makes sense, the most sense for the pharmacies to be compliant with their primary vendor agreement and then shop a little bit on the secondaries. So yes, take advantage of the product availability. Absolutely. For healthcare reasons and for discounts. Yes. But maximize your primary vendor agreement first and then go to the secondary and 99% of the time that is the best case scenario. And so there’s a, there’s a big movement right now for people to buy everything from secondaries. And yes, you can definitely find huge discounts there, but you have to think about the aggregate of your brands and your generics. And then the BPR, the GCR, the GPR, which is a specialty items, non-specialty brand generic, right? You’ve got all these different variables come into play. You have to think about all of them before you ever even buy an item and where you buy it from. Because all of that will impact your primary vendor agreement at end of the day. So we were trying to basically come in and help people decide, should they be buying a ton of stuff from the secondaries or should they be more stuff from the actual primaries and being a secondary provider to the actual pharmacies, what we’ve seen is that it’s a split. It very much depends on the pharmacy themselves. Every pharmacy is unique. So we have to look and see which one, what should you do? And then we basically, we’re agnostic in this situation. We try to basically just help this pharmacy as if we are independent pharmacy. So we try to help them. Whatever’s gonna make them the most profitable is what we basically say, look, here’s what the math is dictating. This is what you should do. We inevitably let the user decide. Some people decide to go different routes, but basically we’re just trying to basically improve the bottom line as much as possible.  

Ollin B Sykes, CPA, CITP, CMA: What differentiates you from your competition Wade? 

Wade Hinkle: Well, one of the big things is our competition. We’re doing one of the most important KPIs that our competition is not. And so, whenever you, especially when you look at like GPR, In addition to that, our UI is way more streamlined. I think anybody would agree with that, that basically gets in there and actually experiences it. So, we’re, we’re providing more comprehensive approach to actual compliance and we’re helping guide the user. So we basically get in there and we look at whatever their situation is. Cause everybody’s unique, right? Like whatever their situation is. Get in there and figure out what is the most efficient path forward for them to become compliant. Because again, every product has a different effect on the actual calculations. So, you have to figure out what is the most efficient path forward to get these people compliant if they’re non-compliant and then basically what is their budget for a secondary market versus not and you have to do that every time you fill a prescription or every time you buy something that number actually changes in every primary vendor agreement so it’s super complex but basically you have to go in there and find a unique path for every single one of them we do that we come in and show them exactly what they should do to be as efficient and as profitable as possible and we do that on a customized basis, we do it on a monthly basis. In addition to that, we can actually calculate all these different metrics in real time. Once the user is actually, this is our new product that we’re launching right now. Once the user actually puts something in their cart, they can see how it’s gonna affect their primary vendor agreement. That’s what’s so different about all of our different competitors and things like that. It’s not about whenever you submit something in the cart, you’re just hoping and praying that you get a next above that next tier. Well, what is the math behind what you’re actually doing? Should that product actually count towards your primary vendor agreement? Maybe it’s a brand, maybe it’s a generic, maybe it shifts the percentages a little bit. Maybe it’s calculated in the GPR. Maybe it’s not. You need to know these different types of things and how it affects those numbers before we ever even order the drug. And so what we’re doing right now, as soon as you put it in the cart, it’s telling you what your numbers should actually go to because you could be on that threshold. You’d be right there where if you order one more item, you spend another hundred bucks and it can yield you another $500 in rebates or it’d be the difference when you go the other way, right? So you need to know that and  that’s one of the big differentiators that we have. And then in addition to that, we’re auditing all the data that’s coming in to make sure that what is being calculated from the actual primaries compared to what you actually have, we’re auditing it to make sure that they match up as well. So we’re continuously looking at it because we’re talking about big systems here that have a tremendous amount of data going back and forth between the two systems. There have been a lot of changes, especially this year with like change healthcare, et cetera, of different things that have disrupted, you know, data flows and so and whatnot. And so we’re continuously looking at is the calculation that they’re holding you to, is it actually right as well? So we’re not only are we telling you where you’re at, we’re auditing where you’re at, and then we’re helping you decide where you need to go. 

Bonnie Bond: And you’re doing that in real time as you’re adding to the cart, taking away from the cart. You can see where you are. That’s amazing. That’s huge. Yes. 

Wade Hinkle: Yes, exactly. And that’s what you need. Yeah, that’s what you got to know. And we put in there estimated because maybe you go and order something and then 

Bonnie Bond, CPA: It could change. 

Wade Hinkle: Right. Maybe the wholesaler says they have it, but they don’t have it. When they go to pick it, they don’t have it. And so it’s always estimated when you do that, right? But in theory, assuming the product arrives, this is what it should go to. Having that level of intelligence can be the difference between you making a few thousand dollars that month versus not. I think that at the end of the month, whenever you’re trying to, if you’re trying to make a little bit more extra money and you’re trying to decide who to buy from, get over that, you know, your primary is $300 more it doesn’t matter. In certain cases, that can actually be a good thing. It’s $300 more, but if it yields you a higher rebate on everything else and you make $1,000, who cares if it’s $300 more? You’ve actually got a huge discount on that item. And so if you think about it from an aggregate perspective, and that happens all the time. And having that level of intelligence, it just doesn’t exist. so knowing, and we do have customization, by the way, for all these different levels, like everybody has different buying arrangements, different volume tiers, different GCR tiers, et cetera. You can customize that completely into the software as well. So it can accommodate any type of specific customization, anything excluding, including items that are in the calculation at not. We’ve had to build it where it’s robust to, it can accommodate for any type of specific buying patterns or buying arrangements that these stores actually have. 

Scotty Sykes, CPA, CFP®: So, it’s on a whole other level than what someone that would just be doing this day in and day out could do. I mean, it’s real time taking all that data and putting it right in front of you. I mean, it’s kind of automatic, it sounds like. 

Bonnie Bond, CPA: That’s what I was thinking, this is kind of a no-brainer, right? 

Ollin B Sykes, CPA,CITP, CMA: So, what would be the downside, if any? If I’m a pharmacist, I’m a member of a buying group, one of the major wholesalers, what would be the potential downside? 

Wade Hinkle: You would definitely sign up. I would say that’s probably the biggest barrier to entry is signing up. If you know your information, you can sign up for 15 minutes. We actually automated all of that too. We had some competitors that I used to be a part of to basically, you know, at our store, because we were always looking for solutions for this and it would take forever to register. And so we automated our own boarding to basically make that as streamlined as possible. So signing up is definitely one of the downsides. And then changing your purchasing habits is the other downside, I would say, because you may have your technicians maybe used to buying a certain way. Maybe they’re used to taking the phone calls from some sales rep or something you got some kind of relationship with or some, you know, maybe they’re still taking faxes. That’s very possible. I still see that. so, and it’s 

Ollin B Sykes, CPA, CITP, CMA: What was that word, Fax? 

Wade Hinkle: And that used to be our business. I used to go through a ton of paper and still do labels at least, but we killed a lot of trees, that’s for sure. 

Scotty Sykes, CPA, CFP®: The IRS still uses faxes. I got a little quick tidbit here on why we’re on faxes. Dad is rumored to be the first person in Edenton to have a fax machine. 

Ollin B Sykes, CPA, CITP, CMA: That is correct. That is correct. That was about 1982 or 3. Yeah. Yeah. 

Wade Hinkle: Whoa! Wow. 

Scotty Sykes, CPA, CFP®: So Mr. Technology over here, he’s always ahead of the curve. 

Wade Hinkle: Now he’s got microphones and yeah, he’s ready now. 

Scotty Sykes, CPA, CFP®: It’s ingrained in our culture here. 

Wade Hinkle: Well, that’s the way we got a lot of information, and it would actually irritate me because I’d be in the store. I would find a great deal on something, and it would be 50% off or something from my primary and I’d buy six months of it. Then I’d get a fax the next day from somebody I don’t even know who it is, and it would be 75% off that same product. And so, it was so irritating because I’m sitting there going, I just bought six months of this, you know, and I could have gotten X amount more. And so, being able to centralize all that information from all those different price points and then being able to look at what are you actually dispensing to? Because everybody’s got products. They’ve got all this different stuff, but like, does it actually match up with what you’re dispensing? Every pharmacy is different. You know, our top 200 are relatively the same, but besides that, it gets very different. And so, you need to be able to look at the items that are, you’re actually dispensing with some type of historical trend that’s consistent, some magnitude, then therefore you can actually buy, you know, in the future buy some items to be able to meet demand. I’d say about 50% of the market is not on perpetual still, and that’s where the Inventory IQ plug comes in. For sure, I mean, if you’re going to do anything, if you’re running your store and you’re not on perpetual, do that. You’re going to make a ton of money and you’re going to go, never, you know, I can’t believe I used to run my form and see any different. I don’t know, the number’s changing. It’s gotta be, it used to be like 70. So it shifted pretty dramatically over the past like 10 years. But I mean, it’s honestly the pharmacy management systems don’t help us that much with it. And so It’s a very manually intensive process to get it up and going. That’s obviously why inventory IQ exists. But I think it’s one of the most crucial things. It is definitely a starting point. If you were trying to do something in like 2025 or even to the end of 2024, I think that that is something you absolutely have to do that. Now, you don’t have to do that to do pharmacy marketplace. We understand the industry that a lot of people don’t do that because there are limitations in their software. Some of the software systems create more headache than they do by actually setting up their perpetual systems. It’s very true. So it depends on which one you’re on. It depends on how the software is going to react. And we’ve rejected a lot of business because we’re like, look, you’re going to set up the system. It’s going to create more nightmares for you than your current layout. And unless they update to one of the newer ones, then we won’t even set it up or we won’t suggest they will. 

Scotty Sykes, CPA, CFP®: You said something interesting a little bit ago about one of the pain points being ordering habits are changing as a struggle, which to me tells me that the way they’re currently ordering is not optimized and this system is optimizing that and it’s completely different. So kind of really highlights to me the difference in the opportunity adding technology here on this process. Is that fair to say? 

Wade Hinkle: Yeah, I mean, If you think about just the package size calculator of things, whenever you’re buying stuff, especially if you’re trying to buy from really any secondary or really anyone, they want you to buy  the most amount of the product as possible. We’re looking at it from a we’re looking at the dispensing. We’re looking at the actual pack sizes and we’re saying, yes, you’ve got you’ve just been dispensing 30 of this tablet or the capsule, whatever it is per month for the past six months. We’re looking at a 500 count bottle. That’s going to be, you know, what is that 15 months, 14 months of dispensing or stock that you’re about to buy  to, be able to buy this discount. Does that make sense? We consider, what are the, how long are you actually gonna have to hold that inventory? Because there’s a carrying cost associated with buying all that inventory. You’re gonna invest dollars that are gonna sit there for long periods of time that you could have put elsewhere. You could put them in T-bills or the market or et cetera, right? And receive some type of return. So you’re investing, every purchasing decision is an investment. And so we have to look at how long are you gonna be holding that investment versus the actual returns that are coming back from it. Now, maybe the discount makes the most sense and you should buy that item, but you need to be looking at that before you ever even purchase the product whatsoever. And to give you just a simple rule of thumb, if you’re not getting at least a 2% discount per month that you’re holding the inventory, then you shouldn’t be holding the inventory whatsoever. Cause there’s a carrying costs associated with investing your dollars into inventory. You’re going to be paying in taxes. You’re going to be paying in waste. You’re going to be paying your technicians to put the items up and to manage it, expirations, et cetera. NCPA did a study about, it’s probably been 15 years now. It’s anywhere from 20 to 30% per year of carrying costs that you’re enduring to basically hold excess inventory. And so if you break that up, it’s about 2% per month. We go with about 24 % in the middle. So you’re absorbing about a 2 % fee essentially for holding that item in your inventory for excess periods of time. So knowing, yes, you have a discount, but how long are you having to hold that? What? What are you going to have to pay in a penalty to be able to absorb that discount? Maybe it’s not an actual discount. Maybe the answer is you should be buying a 30 count or 60 count or a 90 count or something like that to shrink the cycle that you’re going to have for the product to be on the shelf. Knowing all those little things can make a huge difference in how much inventory that you’re at or how much cash flow you’re investing into your inventory, which will yield you dollars at the end of the day. So all of those little things can massively impactful to your bottom line. 

Scotty Sykes, CPA, CFP®: Giant puzzle. 

Wade Hinkle: It is. It is a giant puzzle. 

Scotty Sykes, CPA, CFP®: Giant puzzle and you gotta have technology 

Ollin B Sykes, CPA, CITP CMA: So, Wade, if somebody has an interest in watching this, how can they best get up with you, watch a demo, whatever the case may be? 

Wade Hinkle: Well, you can go to pharmacymarketplace.com and you can request a demo directly on the actual website and or you can contact me directly and I’ll definitely, you know, respond back. Just [email protected] is my email. Just contact us through either one of those channels and we’ll, you know, we’ll make sure we give you a demo. I think you’ll be very pleased with how we set this up. And I’ll high, highly encourage everyone get on a perpetual inventory system. But again, we know everybody’s not on it, and there are software limitations. So, you don’t have to be on it, to basically be able to do the purchasing the right way. 

Scotty Sykes, CPA, CFP®: Plug in IQ. We’ve had IQ, inventory IQ. Good friend Jared. 

Scotty Sykes, CPA, CFP®: Anything else Wade you wanna add that we didn’t ask or you wanna plug or? 

Wade Hinkle: This is my favorite accounting firm, and the best in the industry.  You guys really are amazing. I’ve heard nothing but great things and, y’all, have been super wonderful to work with as well. So I know y’all have, y’all deal with, and I’ve had bad accountants too, by the way. And it’s actually cost me a lot of money. So getting a good accountant. Yes. It thinks you may pay for what you get but I’ve seen it and I’ve actually felt it myself. So having high quality accounts that actually know what they’re doing and stay up with this stuff, it matters a lot. 

Ollin B Sykes, CPA, CITP, CMA: Wade as they say, cost is what you pay, value is what you receive. 

Wade Hinkle: That’s it. That’s very true. And I’ve been on the other side of that and it’s, you know, you live and learn. That’s for sure. 

Scotty Sykes, CPA, CFP®: Words of wisdom. 

Bonnie Bond, CPA: For sure. 

Scotty Sykes, CPA, CFP®: Wade, we appreciate you getting on and sharing a little bit about Pharmacy Marketplace and the technology that’s now or that you guys have in this space. So look forward to having you back on and maybe Jared in the near future with Inventory IQ. But hope you have a great Christmas season here and appreciate you again.