Pharmacy Industry in Florida: Current Market Conditions

By Brad MacLiver
Authorship and profile at Google


Currently there are a number of factors that are impacting the current market conditions of the U.S. pharmacy industry. These factors are affecting the pharmacy business valuations of pharmacies in FL and drug stores all across the U.S.

Local demographics:

The valuation process also includes local market conditions and local demographics. Smaller communities have less growth potential and with the declining profits a buyer will need to purchase at a lower value because they will have to service the debt from a business loan and still try to make a living. The same is true for communities that have lost population due to economic conditions, or have a high rate of unemployment. Fewer people, or fewer customers with the ability to purchase, will mean fewer sales and less chance of any substantial improvement in the near term. This results in a lower Florida pharmacy business value.

Pharmacists Shortage in FL:

Florida pharmacies across the country have had difficulties in finding pharmacists.  This shortage of pharmacists not only affects employee opportunities it also affects the number of potential independent buyers. 

Fewer Buyers:

There are also fewer corporate buyers. Some of the largest pharmacy chains have been purchased and consolidated in the Florida pharmacy industry roll up. Many smaller chains have run into financial difficulties and have stopped their expansion. It is more difficult to drive a price higher when there are fewer willing, or capable, to purchase.

Current Market Conditions Requires Industry Roll-up:

The consolidation of the pharmacy industry is required to get more traffic into a single store.  Due to simple economics, when any business has a reduction in profits they are less attractive to a buyer and pharmacy business values drop. Several factors have contributed to the downward pressure of Florida pharmacy values and there is no expectation of a turn around. Pharmacy owners steer clear of inexperienced Brokers claiming grand outcomes and over stating pharmacy business values not based on current market conditions.

With the pharmacy industry consolidation that has been happening for several years, many new brokers are entering the market to broker pharmacy acquisitions. Most brokers do not have experience related to pharmacy nor do they use current market conditions when they value them. Most brokers use simple accounting formulas that hold no sound reasoning for the value when considering the current pharmacy market conditions. Many brokers are valuing Florida pharmacies 2 to 3 times more than what the market is really willing to pay due to this. Anybody can quote a high value to capture a listing, but that does not mean the over inflated asking price is what the business will actually sell for.

Mail Order:

Some insurance companies are designating a noticeable amount of pharmacy patients as “long-term medications” and require they only purchase the medications from mail order pharmacy companies who provide products at lower prices. This results in local pharmacies in FL not only missing out on prescription sales, but front-end sales will also decline since the customer is not entering the store. Pharmacy mail order sales have now surpassed sales from independent retail pharmacies.

Choose a firm that provides pharmacy business valuations in Florida based on real market conditions and does not use a simple formula for calculating the value of a pharmacy. Complex methods are used to derive the value of a pharmacy.

It is best to use a company that specializes in pharmacy and has extensive and current industry data.  Choose pharmacy specialists who have been working in the pharmacy industry long enough to have extensive Florida pharmacy experience and an excellent reputation.  A company with good credentials possesses large amounts of national data.  The largest financial institutions, national chain pharmacies, regional pharmacy chains, independently owned drug stores, and pharmacy equity investment groups use the services of companies fitting this description.

 

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