Pharmacy Trends Update

With the urgent need for additional pharmacy services during the pandemic, successful independent pharmacies are realizing the potential value of going beyond scripts and adding new patient services and products. This diversification of revenue can support your pharmacy’s bottom line IF you also manage key expenses.

In this video, Scotty Sykes, CPA, CFP^® with Sykes & Company, P.A. pharmacy advisors discusses these trends, offering some average ratios to compare in your pharmacy for DIR fees and payroll expenses as a percentage of revenue.

Have you added new products and services over the past year? Scotty Sykes shares what he’s seen with other pharmacy clients in this recent pharmacy podcast interview.

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

Scotty Sykes: Pharmacies have really been able to push the envelope with expanding service offerings, vaccinations, point-of-care testings, so on. So what we’re seeing is we’re seeing more pharmacies really venture out into other than prescription revenue. They’re venturing out into other revenue sources, diversified revenue, to bring in hopefully a lot of cash sales as well, and high margin sales.

An updated trend we’re seeing with DIR fees is that for 2020, we saw about two and a half to three and a half percent was the average DIR fee as a percent of revenue in a pharmacy, and for 2021 so far, we’re really seeing that higher. We’re seeing it from three to four to four and a half percent, maybe in the average right now. Still kind of early on, we’re still compiling data, but it’s definitely trending higher in 2021. And we’ve seen some as high as we’ve ever seen, seven, eight percent plus of total revenue for the period. So it’s definitely trending in the wrong direction, and so that puts even more emphasis on that. Looking to other revenue sources, looking to expand your margin in other areas, rather than relying on PBM and just filling scripts.

You’re just not gonna be able to maximize your opportunities doing that in your community. You know, as margins kind of get tighter and tighter with these DIR fees creeping up and up, managing payroll and your workflow is gonna be vital, because every percentage point of your revenue is gonna feed to that bottom line. And there’s not a lot of margin for error, there’s not a lot of wiggle room here. So managing your payroll, managing your hours, managing your workflow as best you can is a trend that’s gonna get you to hopefully maximize your bottom line, maximize your cash flow and perform at your best.

So we’re seeing pharmacies pushing to get payroll as a percent of revenue in that 10% or under mark. Usually it’s around 10 and a half, 11 and a half percent for average pharmacies. We want to see that mark at 10% or under. And if you are a pharmacy in that case with some healthy margin of 24, 23, 25 percent, you should have a nice decent bottom line in your pharmacy. And so that’s the trends we’re seeing currently so far in 2021, is just continuing to evolve the pharmacy into that healthcare center, continue to do everything you can to manage those DIR fees, and then manage your payroll and workflow as best you can, automate what you can, and streamline what you can, to feed your bottom line.