Buying a pharmacy in Florida

An independent pharmacy earns most of its money filling prescriptions, and someone other than the patient pays for most of them. Pharmacy benefit managers (the companies that run drug plans for insurers and employers), Medicare Part D plans and Florida Medicaid pay the bulk of each claim at a rate they set, and the patient pays a copay. The pharmacy's margin is the gap between that payment and what it paid the wholesaler for the drug, plus a small dispensing fee. The front of the store (over-the-counter medicine, supplies, gifts) adds revenue at a better margin but in smaller amounts.

The work is steady and recurring: the same patients refill every month. Many independents add services that depend less on plan rates, such as compounding (mixing custom medications), vaccinations, free delivery, medication packaging for assisted living facilities and group homes, and medical equipment. A typical team is one or two pharmacists, several pharmacy technicians, a cashier and a delivery driver.

• Patients who refill on schedule, with prescriptions coming from many prescribers rather than one clinic down the hall.
• Income beyond plain retail prescriptions: compounding, facility accounts, vaccinations, medication synchronization (lining up a patient's refills on one day).
• Careful buying. What the store pays for generic drugs has a large effect on its margin.
• A pharmacist who will stay on as prescription department manager, and technicians who know the patients by name.
• A pharmacy system that shows what each plan pays, claim by claim, so you can see which claims lose money.
• A clean audit history with the plans, and inventory that matches the books.
• A drive-through window, easy parking and a location near the doctors' offices that send it patients.

Pharmacies hold permits from the Department of Health, under the Board of Pharmacy (chapter 465). You don't have to be a pharmacist to own one: a permit can go to a person 18 or older or to a business registered with the Department of State (section 465.022). But a community pharmacy permit requires a licensed pharmacist designated as the prescription department manager (section 465.018). Anyone who owns 5 percent or more, or manages the operation, is fingerprinted. The board must deny a permit if any of them has certain fraud or drug convictions or is on the federal exclusion list.

Permits can't be transferred. If a sale changes the permit holder (the test is whether its federal employer ID number survives), the buyer needs a new permit and number, an onsite inspection and new records. If you instead buy the company that holds the permit, tell the board within 15 days of closing (rules 64B16-28.2021 and 64B16-28.100). Sterile compounding needs its own special permit.

DEA registrations can't be assigned without the DEA's written consent. The seller gives the DEA 14 days' notice, and the controlled substances are counted on the day of transfer (21 CFR 1301.52). Confirm each step with the board, the DEA and your attorney.

• Payer mix. Ask for a year or more of claims by plan. If a few plans carry most of the volume, a cut in one contract hits hard.
• Contracts after a sale. Florida Medicaid wants notice from the seller and your enrollment application at least 60 days before closing, and it can hold you liable for overpayments it has already identified (section 409.907(6)). Each drug plan network has its own process for a change of ownership. Ask early how long each takes, because a gap sends patients elsewhere.
• Audits and clawbacks. Plans audit prescriptions and can take back payment for paperwork errors. Look for pending recoveries and fees charged after claims were paid.
• Inventory. Count it at closing, leave out stock that has expired or will soon, and make sure the controlled substance records match the count.
• The pharmacist question. If the owner is the main pharmacist, budget for hiring a replacement.
• Competition. Mail order and nearby chains pull away maintenance prescriptions (regular refills for ongoing conditions); facility and compounding work is harder for them to take.

• Which plans make up most of your prescriptions, and are any of them paying below cost on common generics?
• Are you the prescription department manager today, and who would run the counter after you step back?
• What audits have you had from plans or the board in the last few years, and how did they turn out?
• How do you buy your drugs: one main wholesaler, other sources, a buying group? And how often do you compare generic prices?
• Do you serve any assisted living facilities or group homes, and is that work under contract?
• Which services beyond retail prescriptions are growing, and which would you add if you were staying?
• How much of the front-of-store stock is current and still sells?