DIR Fees, DIR Fees 2024, Independent Pharmacy Accounting, Buying a Pharmacy, Pharmacy Growth, Selling a Pharmacy, Startup Pharmacies, Tax

Trends in Independent Pharmacy Ownership – Live from NCPA 2023: The Sykes Bottom Line Pharmacy Podcast

Are you looking to stay up to date on the latest trends in independent pharmacy ownership?  

In this episode of The Sykes Bottom Line Pharmacy Podcast, we’re coming to you live from the NCPA conference for our first ever live podcast!  

Sit down with Kendell Harris, Bonnie Bond, and Scotty Sykes as they cover new developments in pharmacy ownership from adding revenue streams with services like long term care at home to minimizing DIR fees and more!  

The Bottom Line Pharmacy Podcast is your regular dose of pharmacy CPA advice to fuel your bottom line, featuring pharmacists, key vendors, and other innovators.

Like, subscribe and share wherever you listen to podcasts.


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

Kendell: Yeah, we’re live. We made it. First live podcast together.  

Bonnie: We promised.  

Kendell: First one together.  

Bonnie: We’re together and we’re live.  

Scotty: Lounge here. Hanging out. We’re recapping the show so far. Bonnie, you started off with the… NCPA ownership workshop  

Bonnie: We did, we had the ownership workshop came in Wednesday night. We did it all day Thursday and Friday, great group of attendees. 

Kendell: For anybody thinking about buying a pharmacy and does not know what it is, or selling, or a startup, what is it and why? 

Bonnie: Pharmacy ownership workshop, if you’ve not owned a pharmacy. Unfortunately, pharmacy schools do not usually teach business classes and that sort of thing. So, the  NCPA, every trimester they have an ownership workshop. It’s a two-day crash course on everything you need to know about owning your own pharmacy. So, if you’re looking to do that, that’s the first place to go. We’ve got lots of clients that have come to us that that’s we met them there 10 years ago when we were doing it. And they’ll tell you it’s the best thing they ever did. So yeah, so we had lots of fun. Lots of good information.  

Kendell: What’s the ratio startups compared to buying?  

Bonnie: It was 50-50 day one. And then after Ollin was done with them, you know, his motto is go and find, I mean he’s talking to 25-year-olds in there, go and find the most expensive store. The biggest, most expensive store you can find and buy that one. Don’t do a startup. He’s not against startups but that’s what he would do. An established store that already has patients coming in. So, I don’t know by the end of it, everybody was kind of like “ehhhh.” 

Kendell: I can see where he’s coming from though because margins are not like they used to be. He probably wants that volume out the door. So that makes sense.  

Scotty: He wants volume. He wants volume. Big man wants volume. If you’re buying a store, you want that volume coming in on day one. You don’t want to startup and on day two, you’ve only got three prescriptions. So, that’s what he’s after and he wants that money coming in the door right away.  

Bonnie: Yeah, but we’re not against startups. Some of our most successful clients were startups. But you’ve got to have the eye of the tiger.  

Kendell: You got to be knocking on people’s doors. Handing out brochures, making relationships.  

Bonnie: Relationships are huge with providers, with that community.  

Kendell: It’s not because they count pills the fastest once they’re a startup, that’s not it. 

Scotty: And you get all kinds of people at the workshop. You got people who already own pharmacies, but they go there because the value that you’re getting is just something you can’t get anywhere else in the industry. So, it’s extremely valuable.  

Bonnie: Oh yeah. I mean, you have your pharmacy niche, lenders are there, we’re there talking about accounting and corporate structure, how to get going. You’ve got regulatory. Gabe Trahan. We’ve got Jeff Baird speaking. Scott Weaver. We had Hashim, who was great, and then Jonathan.  

Bonnie: So also successful  

Kendell: multistore owners, multi, multi, multi store owners 

Bonnie: That have done startups and also purchases. Talking about their experiences. And so, I mean, it’s just a full day from, you know, eight to six. Both days of everything you can learn about it, so it’s the place to be, for sure. 

Kendell: And, Scotty, just five minutes ago, you ran to the booth, fired up. L.T.C. What did you learn?  

Scotty: Yeah, you know, being here at the conference. Well, first of all, we did the RX safe panel with compliance packaging and the tax impacts with that. Most notably, you can pretty much write off the full piece of equipment. You’re talking about a $180,000 compliance packaging system. 30-40 percent tax rate. You’re looking at $60,000 – $70,000 of tax savings. If you have to put that product into use this year, you can finance it and make those monthly payments, but still get that write off. So, you’re talking a good chunk of change of tax savings going into the end of the year, in addition to all the other tax planning opportunities that are out there. And of course, I mentioned fundamental accounting as being a key component of all this, because you have to have those fundamental numbers. You got to know where you stand. You got to be able to proactively tax plan with those numbers. And it allows you to know your cash flow. Every pharmacy is a little different with cash flow. You’ve got to understand your cash flow. Where does it go? How does it move? Your debt, your expenses, your revenue, distributions, taxes.  

Bonnie: Did they mention timing? As we tape this, it’s October. Did they think that they’d be able to get them out? 

Scotty: I spoke to Darren at ScriptPro, and he said no issue. No issue. No problem with ScriptPro.  

Kendell: One thing that was interesting is that tax savings that you get, obviously you’re financing it, so you just sign a piece of paper, you get the tax savings. The DIR fee hangover obviously is coming so that’s a little bit of extra cash there. And a lot of people are speaking about how much it’s going to cost to get techs and pharmacists to stay people are walking out of the big boxes. I don’t know if you guys saw this, but I was like 1 a. m. Don’t tell anybody. I was up reading. Rite Aid just filed for bankruptcy.  

Scotty: Yeah, I saw that. 

Bonnie: Yeah, I read about the walkouts. 

Kendell: So, you know, pharmacy wages, tech wages might increase.  

Scotty: Well, let me get into that. That opens the next thing that I’ve been noticing here at this trade show. When you read the Rite Aid issue, it talks about the CVS and Walgreens of the world, and how they’re branching into more medical services. You know, clinics in the pharmacies, some of them are buying primary care practice groups, so, that’s definitely a trend you’re seeing here. You’re seeing medical billing at the trade show, you’ve got Big Tree Medical that’s out there with that nurse practitioner kind of primary clinic in your pharmacy. But in addition to that, you’re seeing every, every program they have here at NCPA is on other revenue sources for your pharmacy. 

Bonnie: Absolutely  

Scotty: And one most notably is long term care. That is not going to go away. Every pharmacy is going to have that long term care component in their pharmacy. They’re working hard, I know NCPA is to get reimbursements for that, in a long term care at home setting. But long-term care is definitely something that’s going to be expanding in the future and pharmacy, I believe, for all pharmacies. 

*Chef on a segway drives by*  

Bonnie: Well sorry, the chef on the scooter kind of took my eye, sorry.  

Kendell: There’s a chef, they got a little, what do they call them? Vespa type thing was he was gone, man.  

Scotty: He’s gotta go check that oven, make sure he ain’t burning that quiche.  

Kendell: Oh yeah. Look what we got. Digest just came out. We’re looking, I don’t know. Were you done with that thought on the LTC?  

Scotty: I’m done with the thought. So, let’s switch gears to that.  

Bonnie: Let’s look. We always look forward to this coming out. 

Kendell: So, there’s one page. Yeah, there’s one page we, I gotta, I can’t wait to get back to the office and really look at it, but they have a little chart, page seven of the digest. And this one is something we always keep track of for all of our clients. We have their data and look at what’s going on. Now we can see some trends, 2022 from 2021 gross revenue or annual sales went up from 4 million, basically to 4.8 million for each pharmacy.  

Bonnie: And we expected that. 

Kendell: So, I mean, what is that? Like almost 25 percent close. It’s gotta be over 20 percent increase right there. And we expected that. Why? We expected that, we’ve seen those with our clients.  

Bonnie: The brands that everyone is doing right now. 

Kendell: Yeah. The brand names.  

Bonnie: Sales are up.  

Kendell: Sales are up. So, with brands,  

Bonnie: gross profits down.  

Kendell: That’s the issue. Gross profit goes down. So gross profit percentage from 2021 is 23.3, on average. 2022, 21%.  

Bonnie: That’s right.  

Kendell: So that’s down. And you’re thinking, I mean that makes, that’s a big hit. 2% is a big hit. Because that goes straight down to the bottom, bottom line.  

Scotty: Yeah. Market’s took a hit. You got those brands out there especially in 2023 if you weren’t careful.  

Kendell: I don’t even wanna imagine what 2023 is. Because if it’s dropped that much without them fixing things. 

Scotty: Yeah 

Kendell: What’s 2023 gonna look like?  

Scotty: Well, I mean, we have our own data in-house and we see margins, still in that 23 to 25% range. I guess 22 to 24% on average. So, we’re still seeing that out there. But also, you’ll notice on there, the wages dropped. So, you are seeing wages drop, which is kind of surprising to me because wage pressure has increased. 

Kendell: I feel like it might be, it’s a brand name drug. So, the gross number goes up, so then even if your wages stay steady, the percentage 

Bonnie: Right.  It’s gonna go down. 

Kendell: of revenue is gonna, because gross went up 2%, and then wages and payroll expenses go down too. But yeah.  

Bonnie: Is our math correct on that maybe? Sounds right.  

Kendell: It’s reasonable.  

Scotty: It’s a reasonable assumption.  

Kendell: But yeah, you gotta get a copy of this. 

Scotty: You gotta get the digest. Speaking of the digest, you know, we have our own data in-house, and we might be doing our own digest in the future.  

Kendell: Yes, we just hired somebody. Austin. 

Bonnie: Yeah he’s behind the camera.  

Kendell: He’s working the camera.  

Bonnie: (waving) Hi, Austin! 

Kendell: Usually, it’s funny, every time, I’m so used to being behind the camera with at least the good shots. So, it feels really good to have Austin onboard. Thank you, Austin. Doing the camera work. This might be our first live one because we have someone.  

Bonnie: Can we tell the story though? When did we hire Austin? It doesn’t matter when this comes out. Let’s just talk a bit. We hired him. Thursday? 

Scotty: I think we hired him on Wednesday or Thursday.  

Bonnie: Was it,Tyler? Thursday? 

Kendell: Interviewed him on like a Wednesday.  

Bonnie: Thursday.  

Scotty: Shout out to Tyler over there.  

Bonnie Yes, HR finding us a great person, Thursday, and I was already here. I mean we did the interview. I was already here.  

Kendell: He did the interview. You did the interview from the workshop.  

Bonnie: Yes, and then 

Kendell: In a break 

Bonnie: We hired him and then we’re like, do you want to come to the, to the show? I mean, why not?  

Scotty: What better place to learn?  

Bonnie: And so he’s here. So, you know, it’s like a quick turnaround time. We did do a background check. I mean, no offense, but we just wanted to make sure.  

Kendell: Yeah, yeah, yeah. Everybody looks good on LinkedIn, right? Nah, he’s just as good looking in person, so it’s all good.  

Bonnie: So funny. 

Kendell: So, my one thing. 

Scotty: Oh, wait, wait, wait, wait. Went to the general session?  

Kendell: Yes.  

Scotty: And the lawsuit that, is out there, it’s very interesting, I thought.  

Kendell: Yes. 

Scotty: Mission Wellness, and there was another, group, but what came to light out of those, arbitration and then CVS not paying, which brought it into the court system, which allowed others to see what actually happened in the arbitration, which kicked off what we’re seeing now, which is, a class action with three law firms behind it.  

Kendell: Yes. 

Scotty: And I’ll say I was impressed with the firms I saw on, on stage at the NCPA, general session there.  

Kendell: Yes.  

Scotty: So, you know, we’ll see what happens, but maybe they’ll clawback the clawbacks.  

Kendell: Yeah, that was the theme. So, this is all related to the DIR fees, clawbacking the clawbacks, and saying basically the contracts that are being written are unconscionable, meaning they, they can’t be enforceable contracts. They’re pinning people to do something that they don’t want to do. And some pharmacies have already won.  

Scotty: Well, there’s contingencies in those contracts. To do this, you have to do that, and that.  

Kendell: Yeah, so they’re saying it could be several years for this to be a win. But if it is a win,  

Bonnie: So there’s hope. 

Kendell: the goal is to claw back the DIR. fees that have been clawed back. And this is my feeling. Five years ago, DIR fees were a concern. I’d say three years ago, DIR fees were talking to pharmacists. It was on notice, there was a little bit of confusion. What’s going on? What do you see? And you know, now people are fire, hot, they are on fire, hot, mad. I mean, it’s unbelievable what’s going on, and honestly, the lawyers, it seems like they were just as fired up also as the pharmacists.  

Bonnie: That’s great. So, there’s hope. There’s hope.  

Kendell: Definitely.  

Scotty: Looks like this show is starting up.  

Kendell: Yes.  

Bonnie: Looks like lunch is being served.  

Scotty: You and your food.  

Bonnie: I’m hungry. 

Kendell: Yeah so.  

Bonnie: I don’t wanna get hangry. 

Kendell: Yeah, so let’s let’s wrap it up with a bottom line. Let’s wrap it up with a bottom line before we get you know, I don’t wanna get hit by Bonnie.  

Scotty: I think bottom line, my bottom line is Diversified revenue is key. It’s here, it’s now, you have to be finding something, you got to get into it. We saw a big crowd at 340B for example, a big crowd of people have not done it, never looked into it maybe, but they were interested in it. So, it’s time. The time is now to get into some diversified revenue, and I think the NCPA has done a great job presenting multiple options from what I’ve seen looking at the agenda on doing just that. 

Bonnie: You stole mine, but I’ll just add to it. We spoke to a lady, at the ownership workshop. We normally tell people if you’re a startup, don’t start up until you get all your contracts in place because you don’t want to turn revenue sources away. They may not come back, but she kind of stopped us. We were kind of telling her that and she was like, “no, no”, and she brought out a piece of paper. She had like 10 different other revenue sources that she had gotten qualifications for to be able to do and she’s like, “I’m doing all these things, because this is what I want the majority of my business to be.” 

Kendell: Oh, wow 

Bonnie: “And so, filling scripts is just, yeah, I’ll do that when I get my, you know, all my stuff, all my approvals in. But for now, I’m going to do all these things.” And it was impressive. I didn’t even understand. We had to ask her what some of those things were, because they were so new, but they were amazing. So. that was an awesome approach. I was like, “okay, well that makes complete sense.” So, she said, “by the time I can fill scripts, I’m going to already have this other business model in place with all these other revenue streams and that’s going to be like secondary.” So, it’s an interesting approach to it.  

Kendell: My bottom line is I think pharmacists have always, in my view, been the smartest people. Now I feel like they’re the smartest and the most motivated people that I know because they’re motivated to do different things, different revenue streams, and they’re motivated to keep what’s theirs with the DIR fee issue. So, you got to be motivated, can’t just fill scripts, can’t just be smart. And, as an industry, these people are doing it. So, that’s the bottom line. Be motivated, be smart, and intelligent. They’re accomplishing it. It’s amazing. 

Scotty: Pharmacy is clearly shifting to being the health care center of the community with a variety of services to meet the needs of the community and your patients. So, it’s going that way. The days just filling scripts are, are gone. 

Bonnie: For sure.  

Kendell: That’s the bottom line. Zoom in on the NCPA sign to finish this thing off. 



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