Pharmacy Industry: Current Market Conditions in Georgia

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 GA 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 pharmacy business value.

Pharmacists Shortage in Georgia:

Pharmacies across the country have had difficulties in finding pharmacists.  This shortage of pharmacists in GA 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 pharmacy industry roll up in Georgia. 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 Georgia 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 fooled by inexperienced Brokers claiming grand outcomes and over stating pharmacy business values not based 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 Georgia pharmacy market conditions. Due to this many brokers are valuing 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.  However, that does not mean the over inflated asking price is what the business will actually sell for.

Mail Order:

Some insurance companies have started designating a significant number of pharmacy patients as “long-term medications”, requiring that they only purchase the medications from mail order pharmacy companies who provide products at lower prices. Local pharmacies are impacted by not only missing out on prescription sales, but front-end sales will also decline because those customers are not entering the store. Pharmacy mail order sales have currently eclipsed sales from independent retail Georgia pharmacies.

Consult a firm that provides pharmacy business valuations that are based on real market conditions.  These companies do not use a simple formula for calculating the value of a pharmacy. Complex methods are used to derive the value of a Georgia pharmacy.

It is wisest to consult a company that specializes in pharmacy along with extensive and current industry data.  Choose pharmacy specialists who have worked in the pharmacy industry in Georgia long enough to have thorough pharmacy experience as well as an excellent reputation.  Companies with good credentials possess large amounts of national data and the largest financial institutions, national chain pharmacies, regional pharmacy chains, independently owned drug stores, and pharmacy equity investment groups rely on the services of companies fitting this description.

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