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How Much Does a Specialty Pharmacy Make Yearly? [Profit Margin]

A specialty pharmacy makes approximately $3,000,000 – $4,000,000 yearly. A profit margin of between 2% – 7% is considered normal in the industry after costs, including salaries for the pharmacist and staff; and taxes have been deducted.

Note that specialty pharmacy refers to distribution channels designed to handle specialty drugs — pharmaceutical therapies that are either high cost, high complexity and/or high touch.

High touch refers to higher degree of complexity in terms of distribution, administration, or patient management which drives up the cost of the drugs.

The truth is that there is no one-mold-fits-all when it comes to how much a specialty pharmacy is expected to make. There are some factors that we are going to look into before giving an estimate of how much an average specialty pharmacy can make yearly and these factors are;

8 Factors That Determine How Much Specialty Pharmacy Make Yearly

1. The Size of the Specialty Pharmacy

One cannot conveniently state the amount a specialty pharmacy is expected to make if you do not know the size of the pharmacy.

The amount a small road-side specialty pharmacy is expected to make annually will be far different from the amount a standard specialty pharmacy franchise with several outlets will make annually even if they operate in same location.

Of course, the amount invested in a small road side specialty pharmacy is different from the amount invested in a large one.

2. The Location of the Specialty Pharmacy

When it comes to setting up a new business, location plays a major role; which is why feasibility studies and market survey are essential before settling for a location.

Usually, if your specialty pharmacy is located in an area with good human and vehicular traffic, you may not have to struggle to get people to visit your store and make purchase.

Note that the amount a specialty pharmacy that is located in a low traffic area will make yearly will be far lower when compared to the amount a specialty pharmacy that is located in a high – traffic area will make.

So, if you want to make it big with your specialty pharmacy business, then you must be ready to rent a store in a high traffic area, a location with the right demography of people with the purchasing power to buy from you.

3. The Brands and Types of Specialty Drugs Retailed in The Store

A specialty pharmacy mainly retails “Specialty” medications and these medications are defined as high-cost oral or injectable medications used to treat complex chronic conditions. Specialty drugs are grouped in High Cost, High Complexity and High Touch.

High-cost medications are typically priced at more than $1,000 per 30-day supply; including self-administered injectables, professionally administered† injectables/infusions, and oral medications

High Complexity are Biotechnology products, Orphan or Ultra-Orphan drugs, Medications that are included in a specialty therapeutic drug class strategy.

High Touch are Medications that require temperature control or other special, handling/shipping requirements (i.e., refrigerated or frozen shipping).

Medications that require focused, in-depth member education, compliance monitoring, side effect management and, often, injection technique education.

A standard specialty pharmacy that retails all of the above is sure going to make more money that a specialty pharmacy that only retails one or two of the above listed medications.

4. Other Related Products and Services Offered by the Specialty Pharmacy Store

Aside from retailing a wide range of specialty drugs, if you offer additional services such as delivery for your clients, it will position you to earn more money from higher profit margin.

5. The Management Style of the Specialty Pharmacy

The results you will get when you have a good manager will be far greater than what an average or bad manager will get; definitely their results will be obvious and different. Even if you give the managers same conditions to work and same products to retail.

6. The Business Model of the Specialty Pharmacy

There are different Business models that a specialty pharmacy can adopt and these business model offers different results.

For example, the amount a specialty pharmacy that also run an online store make yearly will be different from the amount a strictly brick and mortar specialty pharmacy will make yearly.

The amount a specialty pharmacy that also sells franchise will make yearly will be far different from the amount a strictly one location walk-in specialty pharmacy will make.

7. The Advertising and Marketing Strategies Adopted by the Specialty Pharmacy

There are several advertising and marketing strategies that can help a business increase their earnings but you may be expected to spend more.

But the results you will make will far outweigh the amount you spent on advertising and marketing. Of course, you don’t expect a specialty pharmacy that is engaging in aggressive advertising and marketing to make same amount yearly with a specialty pharmacy that is passive with its advertising and marketing.

8. The Number of Years the Business is in Existence

In business, the number of years you are in existence will go a long way to determine the amount you will make especially if the business is properly managed. This is because you would have over the years won loyal customers.

For example, in your first fiscal year (FY1) you might make two hundred thousand dollars ($250,000), in your second fiscal year (FY2) you might make three hundred thousand dollars ($300,000) and in your third fiscal year (FY3) you might make five hundred and fifty thousand dollars ($550,000). Interestingly, most businesses including specialty pharmacy usually breakeven from the third year of operations.

Estimated Profit Margin for a Specialty Pharmacy

In order to have a view of what a specialty pharmacy is expected to make, you should first understand that Gross Profit equals the spread between a pharmacy’s revenues and the cost of goods (COGS) sold to generate those revenues.

Take for instance, in 2016, the average revenue for independent pharmacies was $3,619,000. That makes the average independent pharmacy profit $796,180. But these numbers are averages. Your profit as a pharmacy owner may range far below or beyond it, depending on how you run your business.

Note that a pharmacy’s revenues come from prescription drugs, over-the-counter products, vitamins, cosmetics, groceries, and other merchandise. A typical independent pharmacy generates more than 90 percent of its revenues from prescriptions.

Pharmacies are paid around 90p by the regulating body for each item dispensed, so the income of independent pharmacists varies, and depends partly on how many prescriptions are processed, although the average is around 2,000 a month.

In order to maximize profits, most specialty pharmacies, especially chain stores, are not going to negotiate a discount of more than 20 or 25 percent on any non-clearance item (and some stores where you buy the entire room for one price will not negotiate at all).