Pharmacy Industry: Current Market Conditions in Utah

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 in Utah (UT). These factors are affecting the pharmacy business valuations of pharmacies, Utah drug stores, and pharmacies all across the U.S.

Local demographics:

The valuation process 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 is a lower pharmacy business value for your UT drug store.

Utah Pharmacists Shortage:

Pharmacies in Utah and 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 Utah pharmacy industry roll up. Many smaller chains have run into financial difficulties and have stopped their expansion or themselves have been acquired by the larger chains. It is more difficult to drive a business price higher when there are fewer willing, or capable, to purchase the pharmacy.

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 Utah pharmacy business values drop. There are many factors contributing to the downward pressure of pharmacy values and there is not any expectation of a turn around.  Pharmacy owners should not be tricked by inexperienced brokers that are claiming grand outcomes with overstated pharmacy business values not grounded on realistic market conditions.

With the consolidation of the pharmacy industry that has been happening for several years, many new brokers have entered the market to broker pharmacy acquisitions. Most brokers do not have pharmacy related experience, nor do they use current market conditions when they value a pharmacy. Most are using simple accounting formulas that hold no sound reasoning for the value when faced with current pharmacy market conditions. Due to this many brokers are valuing Utah pharmacies 2 to 3 times more than what the market is really willing to pay. Any inexperienced person can quote a high value to capture a listing. So beware... an over inflated asking price is NOT what the business will actually sell for.

Mail Order:

Some insurance companies are classifying a noticeable amount of pharmacy patients as “long-term” and these patients are required to only purchase their medications from mail order pharmacy companies who provide products at lower prices. The result of this in local Utah pharmacies is that they are not only missing out on prescription sales, but front-end sales will also decline because customers are not entering the store. Pharmacy mail order sales have currently surpassed the sales from independent retail pharmacies.

Choose a firm that provides Utah pharmacy business valuations based on real market conditions and does not use a simple formula for calculating the value of a pharmacy. Complex methods are necessary to accurately 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 a pharmacy specialists who has been working in the pharmacy industry long enough to have extensive pharmacy experience and an excellent reputation. A company with good credentials possesses large amounts of national data and it is this data that can support the valuation's conclusions.

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