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Pharmacy Business Analysis

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Published: Wed, 13 Sep 2017

All Star Pharmacy will operate as a Subchapter S organization. The corporate officials will be two members – both will act as co-presidents. Both will be the two shareholders of the organization – each owning 50 % of the organization. (Welker, J, 2011)

Products: All Star Pharmacy will offer the following products to customers at competitive prices:

1) Prescription drugs, also including generic brands

2) Over the Counter products including:

a. Nutritional Foods

b. Herbal Medicines

c. Vitamins and minerals

d. Diabetic testing kits and accessories – lancets and strips

e. Peak flow meters, spacers and other devices for asthma management (Welker, J, 2011)

Services:

All Star Pharmacy will offer the following services to our customers:

  1. Diabetes education and management – working and dealing with the distributor to develop All Star Pharmacy as an official Diabetes Shop – which gives us with better rates on diabetes testing instruments. (Welker, J, 2011).
  2. Asthma education and management.
  3. HIV wellness assessment which includes working with local physicians and medical professionals to get maximize optimal therapeutic final result while reducing adverse effects of HIV drugs.
  4. Community consultation services – working and dealing with local community service center to provide brown bag checkup, general understanding, and question and answer sessions to develop customer relations (Welker, J, 2011).
  5. Immunization services.
  6. Compounding medications.
  7. Blister pack service – All Star pharmacy will provide sealed blister packs for older people to make well-timed medication administration more simple process. Blister packs will also simplify the medication administration process by allowing elderly people to get access to medications without having to unscrew prescription vial caps. (Welker, J, 2011).

The purpose of the business is to help people on their path to better health and happier lives. We will accomplish this by

  • Providing the best customer service to our internal and external customers.
  • Offering innovative means of providing pharmacy care with knowledgeable, educated and compassionate pharmacists. (Elabed A, 2016)

The All-Star pharmacy’s mission is to provide our customers with the best prices for their prescription drugs. Our convenience and services will go beyond the expectations of our customers. (Covello J, 1995)

All Star Pharmacy aims to provide services in Phillipsburg area by creating long term relations with customers through superior consultative services and by regularly looking at patients’ use of medicines to identify and resolve drug-related problems and to improve patients’ medical and financial outcomes. (Rolls C, 2015)

The business objectives for the first three years include:

  • Exceed customer expectations with better rates
  • Increase the number of customers by more than 35% per year.
  • Develop a business that survive and expands on its own cash flow. (Rolls C, 2015)

All Star pharmacy will be based on S-corporation ownership. Ownership will be equally shared between members of pharmacy who are also major stock holders. S-Corporation is a framework that combines a C-Corporation and a LLC. S-Corporation restricts the liability and responsibility of the owners; the owners are only liable to the extent of their investment. With an S-Corporation we can avoid the dual taxation, only the incomes of the S Corporation shareholder who is an employee are subject to employment tax. The remaining income is paid to the owner as a distribution, which is taxed at a less rate. In addition, the profits and losses are recorded on the owners’ individual tax returns. (Elabed A, 2016)

All Star Pharmacy will be in Phillipsburg mall in Phillipsburg NJ which will offer OTC products as well as prescription drugs at discount prices to our customers by mail order or at the store front-side. The suggested site for All-Star Pharmacy will be 1200 Memorial parkway. Traffic flow around and leading into the parking lot is enough. Along with the recently completed construction of the apartments besides shopping mall, there is a significant amount of foot traffic and temporary OTC drug consumers not from the trade area who will be visiting. The age composition of our area is an average age of 37.8 years old with median household income $45,000. Organizational framework and management of All Star Pharmacy will have co-presidents, Jim Burton and Urmi, with Jim Burton serving as store manager and Urmi serving as pharmacy manager.       

During the first year, a full time clerk will serve as the only other staff. As sales increase, additional staff will be added. Insurance required Fireplace, Earthquake, and fraud will be guaranteed for the inventory, and instrument. Furthermore, liability insurance will be taken for the pharmacy and the individual pharmacists who work in the pharmacy. Security In addition to general safety in design and lighting, special precautions will be taken to provide for the safety of employees and security of property. A burglary alarm will be installed for protection. The alarm will be audible as well as also notify the local police. A silent alarm connected to the pharmacy and central register will notify the local police when activated. A sprinkler system will also be installed that will help in the situation of a fire. Further, a roll down steel door will be installed as front door for the burglary protection while the pharmacy is closed. Lastly, the rear delivery door will have a buzzer and modern lock system with code. (Elabed A, 2016)

Source: https://creately.com/diagram/example/hr07831z1/SWOT%20Pharmacy

The Discount pharmacy Nov-2001; Copyright Palo Alto Software, Inc., 1995-2002

E: Competition analysis

The competition for All Star Pharmacy will come from 3 chain drug stores (Shoprite, Rite-Aid and Walmart), 2 Supermarket Pharmacies (Ralphs), and 1 Independent Pharmacy (Farmer’s Market Pharmacy). All the competition will come from these 6 pharmacies. 3 of the above listed stores are located on the west end of the Phillipsburg area memorial highway. Most of the competition will come from Walmart, Farmer’s Market, and Shoprite located on Memorial Parkway. (Mckay, 1991)

Name

Location

Type

Rite Aid

Memorial Parkway

Chain

Shoprite

Memorial Parkway

Chain

Walmart

Memorial Parkway

Chain

Farmers Market Pharmacy

Memorial Parkway

Independent

Ralph Pharmacy

Memorial Parkway

Chain

Ralph Pharmacy

James Blvd

Chain

Table 1: Established Pharmacies in Primary Trade Area

Estimated sales will be captured by the existing pharmacies in the area is approximately $ 9,389,200. This whole amount is not only generated by residents within the area. Listed in table 2 is an estimate of total sales/revenue for each pharmacy within the area and the amount (%) of that sales figure that is generated by residents in the area. The figure below shows the level to which competitor drug stores competes within the area of our proposed pharmacy.

Annual sales for each pharmacy was estimated by visiting each pharmacy and noting down the number and type of each employee, estimating their annual salaries, summing them and multiplying by 10. Employee wages in a retail pharmacy make up about 10% of annual sales, therefore 10 times total wages approximate annual sales. (Cella C, 2014)

Name

Annual Sales – in Dollars

Overlap

Amount in

Dollars

Rite Aid

2,435,700

100%

2,435,700

Shoprite

1,331,400

100%

1,331,400

Walmart

1,231,400

50%

615,700

Farmers Market Pharmacy

1,044,100

50%

522,050

Ralph Pharmacy

1,231,400

50%

615,700

Ralph Pharmacy

1,231,400

50%

615,700

Totals

8,505,400

6,136,250

Table 2: Survey of Competitive Drug Stores

Reduction of the total pharmacy expenses ($ 7,073,200) generated in the area by this amount ($ 6,236,250) produces an estimate of the market share that could be captured by a perfect pharmacy in this location. This figure for All Star Pharmacy is approximately $ 1,364,900. The estimated efficiency of the suggested pharmacy is approximately 90 %. The expected potential sales for the proposed pharmacy are, therefore, $ 1,228,410. From this figure, it is expected that first year sales will be approximately $ 985,474. (Steiber D, 2006)

Based on evaluation of each of the following:

1) Parking

2) Size

3) Close to new resident buildings and bus stop

4) Near to traffic pulling merchants

5) Foot and Auto Traffic

F: Stake holders: internal, external

C:UsersurmiDownloadsstakeholders.tiff

Source: William G.Nickels, James M. McHugh, Susan, M. McHugh, Understanding business, Eleventh edition; Mc Graw hill education; 2016

Internal Stakeholders:

Owner:
He has great responsibility in managing and controlling the business. His responsibility as the business owner is to make sure that the business is running successfully, effectively and that a profit is being made on the products sold and the cash flow stays positive. (Steiber D, 2006)
Employees:
The business needs to make sure a safe working environment to the employees. The business will identify and appreciates employee’s work and effort to the business. This will motivate pharmacy staff and their interest in the business is maintained. It is also important that the employees are trained enough to ensure they know how exactly the business runs and their responsibilities as an employee of the business. (Steiber D, 2006)
Location:
The pharmacy is on the corner of the street where there are traffic lights and pedestrian crossing making it safe for the public to access it safely and easily. The location has affected the success of the business. It has captured the market and positioned itself well making by visibility to all that drive way or walk path. (Steiber D, 2006)

External Stakeholders
Government:
The pharmacy helps the government in providing employment to other people of society. It is expected by the government that the pharmacists continue their education and ongoing training otherwise their license will not be reinstated and they will also have the responsibility to attend conferences. The pharmacy also works with Medicare to help people with the cost of their medication, letting patients claim their money due to expensive medicines. (Steiber D, 2006)
Suppliers:
It is important that the pharmacy acts honestly to their suppliers. Occasionally if pharmacy buys a specific amount of products form a specific company they would reward the pharmacy by giving them a present such as electronic items. This guarantees continuing loyalty between the pharmacy and the suppliers. (Steiber D, 2006)
Environment:
The pharmacy has a special bin to dispose of any expired medicines or ones that patients have been taken off. Pharmacy has to make sure that the medications are destroyed correctly by avoiding any harmful effects to the environment, and society which is an environmental responsibility. The pharmacy helps out the society by taking the medication for free to dispose of. (Steiber D, 2006)

Customers:
The business has a responsibility to customers to make sure that they are served and offered with high standards of the business. They also must maintain customer loyalty and honesty which motivates customers to return to the same business. The business also needs to make sure that they are selling quality products to customers at fair and reasonable prices. (Steiber D, 2006)

A: Market Research

Market Analysis Summary

All Star Pharmacy’s target market consists of two different groups, local customers or walk-ins, and mail order customers. All Star Pharmacy will implement two different strategies to reach these two different market groups.

Market Segmentation

Potential Market: The Phillipsburg area described above currently has an estimated population of 18,000. Due to three major construction projects, the population is expected to increase by 2000 new residents. Projected annual prescription spending in the area is expected to increase by approximately $ 600,000. Considering that two of the three new projects, which will be totaling 1600, new residents are located within two blocks of the projected site. This closeness of location gives us greater access and visibility to these new residents compared to the large chains. (McDonough R, 2007)

All Star Pharmacy’s customers can be divided into two different groups, mail order customers and walk-in customers:

  • Mail order customers. This group of customers’ saves money by ordering their medication through mail/email. In general, the mail order customers are older in age, normally over 60. In general, older people use more medication compared to younger people. The mail order customer will mostly purchase maintenance medications – prescriptions for an ongoing regular treatment. This group of customers will also be more likely to purchase several months of medicine at the same time. (Palo Alto Software, Nov-2001)
  • Walk-in customers. These groups of customers are also looking for the cheapest prices for their medicines. However, they are more likely to purchase medications each month at local pharmacy, sometimes even at a higher price. There is not a common group of people, other than living in the Phillipsburg area. Some of these customers will pay for the medications up front and some will submit a claim to their insurance company for reimbursement later on. (Palo Alto Software, Nov-2001)

B: Target Group

Target Market Segment Strategy

The target market for All Star Pharmacy will be those customers in the community who need to get their pharmacy services from a Pharmacy which gives importance to a higher level of customer service rather than price. The community focused has an average income high enough to expect residents to be price sensitive. Since our focus is on services and quality of care, our market focus will be extended to include those customers of other chain stores who have become separate due to lack of customer service and long waiting lines in chain drug stores. A prospective target market that All-Star Pharmacy will target is high HIV population in the area. As these customers use a large amount of high end drugs, and need drug therapy services, they can be a profitable target market. Furthermore, the service related nature of All Star Pharmacy fits well with the type of drug therapy required for an HIV population because patients with HIV take more interest in their pharmacy care. Another group within our target market that will advertise greatly is the 21-35-year-old young people in the community with an average income of $ 58,500. These customers who are more interested in preventive and alternative methods of health care and they will be attracted to All Star Pharmacy which will provide them more selection of nutritional supplements, herbal medicines, vitamins, and homeopathic medications. Elder people living in the community will be our last target market. Since there are 20 % or more individuals over 65 years of age, we will try to attract and get their business. (Palo Alto Software, Nov-2001)

All Star Pharmacy will try to attract two different groups of customers so we have two plans to attract them. We believe our largest group of customers will be those who order through the mail. These customers will be focused through advertising in magazines, news-papers and online that have an older people who need medicines regularly and know in advance of their requirement. Walk-in customers will be focused through advertisements in the local paper. Advertisements will increase awareness for the All Star Pharmacy and our low prices. (Palo Alto Software, Nov-2001)
 C: Communication (Methods)

Communication is one of the most important factors which include verbal and body language, written documents and presentation. Pharmacist or pharmacy technician will be responsible to communicate information about drugs to patients through email, verbal communication or printed paper documents especially critical prescription drugs and to the patients who are new to such medicines. (Elabed A, 2016) D: Principles of Marketing

To reach customer needs and wants while providing maximum value at the same time, companies use different kind of activities to make their marketing and sales more effective. All Star pharmacy will interact with patients on regular basis as well as get the feedback through online email marketing to achieve strategy on meeting customer needs. (Elabed A, 2016)

A: Business Structure

If customer wants to purchase medications through mail, they will have to first contact All Star Pharmacy over the phone. The customer then requires to either mail the prescription, email it or fax it. Once it is received by pharmacy and payment plan arrangements/installments are complete, the medicines will be sent out to the customer via courier through U.S.P.S. or U.P.S. Local customers can stop by the store pharmacy to pick up their medicines.

All Star Pharmacy will only provide services to customers who pay by themselves. The self-pay customers will be attracted to Pharmacy because of its better prices. For many Americans who do not have medical insurance plans, including the majority of Americans over 65, a discount on drugs is always welcome in today’s increasingly tight monthly budgets. (Rolls C, 2015)

All Star Pharmacy will be able to survive on low profit margins due to working efficiencies gained through nationwide mail order procedures and not accepting insurance policy plans which effects cash flow. All Star Pharmacy will also save money by not paying for customer’s unlimited access to a pharmacist. If a customer has a question about any medication, the pharmacy technician will try to answer it. As a last resource, the pharmacist will provide the answer. Generally, the technician or the printed material along with medicines will answer the question.

This model of saving costs by not giving access to the pharmacist will be successful because most customers who have been taking regular medicines for a while, as opposite to a new prescription drugs, and will not require their hand to be held during the transaction. They are interested in the Pharmacy as a cheaper source for their medication. (Rolls C, 2015; Elabed A, 2016)

With each order, a printout will be given with the medications which will explain on how to take the medications, other drugs that should be avoided with the medication, and other useful information. All Star Pharmacy will be using electronic print outs to reduce the cost of providing this information. (Rolls C, 2015; Elabed A, 2016)

Here the word “self-pay” is normally related with the belief that the customer is paying for the medication out of pocket without insurance, it is used in this context as the customer paying for the medications in advance regardless of if they have insurance or not. They may be paying out of pocket, or they may be paying beforehand and then submitting to their insurance company’s drug plan to reimburse them later. (Rolls C, 2015; Elabed A, 2016)

B: Job Description / Needed Staff

All Star Pharmacy will hire the following people:

  • Phone representatives: one at month three, an additional person at month sixth.
  • Pharmacy technicians: one at month two, a third at month six.
  • Pharmacists: month two.
  • Order fulfillment agent: one for month five.
  • Counter person: one at month three.

All Star Pharmacy’s main advantage is better pricing. To do that we have to maintain our position as the lower cost pharmacy service provider by ensuring that costs are kept low throughout operation procedure. We will be able to do that by removing some of the traditional services offered by pharmacies. For example, we will hire only one pharmacist and use pharmacy technicians to fill the other position. As long as a pharmacist is in the pharmacy during the hours of working hours, we can use the pharmacy technician for all other positions where other pharmacies use pharmacists. Other efficiencies are created by having only a small store front and doing most of our business through mail order. (Rolls C, 2015; Elabed A, 2016)

Finally, The All-Star Pharmacy is not made to contain the patient’s hand during their purchase. We believe that the majority of our customers will already be informed on how to take the medication, and any side effects that needs to be avoided. We will simply provide each patient with a print out of all the related information on how exactly they need to take medication. (Rolls C, 2015; Elabed A, 2016)

Assuming the size of the store is 1500 SQ FT.

  • For lease: Store deposit on a lease ($6,000)
  • Architect/ Building, plumbing and electrical expense: $2,000
  • Pharmacy cost – approximate $20,000
  • Cost of building material & supplies (construction) – approximate $25,000
  • Security Expense:

Alarm: $3,000-5,000.

Camera system ($4,000 to 7,000).

Gates ($2,500- 7,000).

Pharmacy store Glass ($7,000 to $10,000).

  • Phones, Fax and Printers, computer(s), fridges, chairs, trash cans, cash register, office supplies ($5,000 to 8,000)

Pharmacy Merchandise

  • $65,000-$80,000 is good start up inventory -Legally only needs to have a minimum of $5,000 startup inventory

Advertising:

  • Business cards, flyers: $2,500

Pharmacy insurance:

  • Once you get the keys to the store, you need to get a commercial insurance policy to protect the investment before you begin any work.
  • Minimum requirement by most Third Party Plans is $1 million per case coverage with $3 million aggregate coverage.
  • Get coverage for the labor expense invested in the store.
  • Get coverage for the store equipment investment
  • Obtain coverage for the computer software investment
  • Obtain coverage for unemployment policy

ITEM

DESCRIPTION

COST($)

Building

Lease

Store Deposit

6000

Permits

Construction including electrical, plumbing, Architect drawing/building, cost of building material and supplies

2,000

Construction

Bathroom refresh, drywall, electrical, plumbing, pharmacy and clinic sink, paint

25,000

Pharmacy/clinic outfit

Cabinetry, countertops, Shelving, storage, medication fridge

20,000

controlled med safe

purchase and bolted to floor

5,000

Shelving

store perimeter wall

10,000

Signage

For exterior – marketing and interior (location of products) pharmacy drop off/pickup, outside boxed sign, in store signage

5,000

Inventory

Rx and OTC

Brand and generic

80,000

Front end inventory

Household goods, food/drink, seasonal goods

40,000

Furniture

waiting area

2,000

Pharmacy supplies

vials, labeling, stationary, compounding supplies, paper

2,000

Electronic

Electronic items

computer, cash register, phone, TV, fax machine, dispensing system, ATM machines

15,000

Cable Services

Internet, phone and TV service connection

500

Other

Insurance

building, workers compensation, professional liability

250

Security

gates for pharmacy, blinds for clinic, remote alarm, camera system

15,000

Advertising/Printing

multi-language promo material, business cards, leaflets, patients education, newspaper advertisements, calendars/mugs etc.

4,000


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