Wholesalers, Buying Groups & Franchises–More Choices, More Headaches

Choosing a wholesaler can be a daunting task for a new pharmacy owner.  Prices, services and special offerings are all factors to consider in your choice of a wholesaler, but the most important factor is your comfort level in building a working relationship with your wholesaler.   Therefore, you must carefully consider all the factors that are important to you and interview the potential wholesaler candidates to make sure they are equipped to help you succeed in your endeavor.

Wholesalers offer a gambit of services and products including prescription and over-the-counter medications and products, third-party contracting, franchise opportunities, buying groups, training resources and technology bundles. In effect, a wholesaler can be a one-stop shop for all the products and services you may need to run your pharmacy.  The NCPA guide to “Opening a Pharmacy: a “How to” Guide” offers a list of questions to ask while interviewing your wholesaler candidates.

Franchises offer a cookie cutter approach where a pharmacy entrepreneur uses an established business model offered by the wholesaler or franchisers to open a new pharmacy under the franchise banner.  An example of this is the HealthMart brand offered by McKesson Pharmaceuticals.  The franchiser either sells you a business model with a comprehensive marketing plan, third-party program, and signage in exchange for royalty fees based on a percentage of your gross sales, or charges a fee for the business model and requires you to purchase all your supplies and products from the franchiser’s company or parent wholesaler exclusively.  Although this approach may offer more structure and guidance to a novice owner, it takes away the freedom to customize your practice to your vision of what a perfect pharmacy should be.  For a complete discussion on pharmacy franchises please see “Pharmacy Franchises:  Should you join one?” in the September 4, 2006 issue of Drug Topics.

Another option for an independent pharmacy owner is to join a buying group also known as Independent Pharmacy Organizations (IPO) or Group Purchasing Organizations (GPO).  Think of these groups as a co-operative, where the GPO or IPO uses the purchasing power of their member businesses to obtain discounts and rebates from vendors and manufacturers.   Although some GPOs and IPOs have their own warehouses, they usually contract with a specific wholesaler to provide products and services not available through the buying group.  The main consideration in joining a buying group is cost of membership and the level of discounts or rebates available from the GPO.  As with wholesalers you should interview the buying groups to see if they are a good fit for your pharmacy.  Again, the NCPA guide to “Opening a Pharmacy: a “How to” Guide” offers a list of questions for GPO interviews.

Your relationship with your wholesaler, buying group, or franchiser is an important one and may last the duration of your business, therefore, choose carefully. A wholesaler or buying group can be changed if they cannot meet your needs or expectations after opening your store, but it is much harder to move away from your franchise agreement.

About Ali

I have been a pharmacist since 1986. I have practiced in the community pharmacy setting since 1989. During this time I have learned a great deal about the challenges pharmacists must overcome to provide quality service and patient care. Forging relationships with patients, physicians, pharmacy organizations, other pharmacists, and pharmacy personnel have offered me a unique perspective in how to own and operate a successful pharmacy. I constantly strive to learn new avenues to advance the profession as well as the business of pharmacy. I graduated from University of Washington in 1986 with a Bachelor of Science in Pharmacy, and again in 1989 with a Master in Business Administration. I continued on to Willamette University College of Law, where I earned my Certificate in Dispute Resolution and Juris Doctor in 1992. I hold pharmacy licenses in Washington, Oregon (Retired), and California, and am a member of the California Bar.
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