Current Pharmacy Industry Market Conditions in Rhode Island

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 and independent drug stores in the state of Rhode Island (RI). These factors are affecting the amount a pharmacy owner can receive when seeking a business loan due to these factors driving down the business value of pharmacies all across the U.S.

Local demographics:

The valuation process will include 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 Rhode Island:

Pharmacies in Rhode Island 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 pharmacy industry roll up. 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 Rhode Island pharmacy business values drop. There are many factors which contribute toward 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 who claim grand outcomes while overstating pharmacy business values, which are not based on realistic market conditions.

With the pharmacy industry consolidation that has been happening for several years, several new brokers are entering the market to broker pharmacy acquisitions. Most brokers don't have any pharmacy-related experience and they do not rely on current market conditions when they value a pharmacy. Most of them use simple accounting formulas that have no sound basis for the value when faced with current pharmacy market conditions. Due to this many brokers are valuing Rhode Island 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 Requirements:

Some insurance companies are designating a noticeable amount of pharmacy patients as “long-term medications” and require they only purchase the medications from mail order pharmacy companies who provide products at lower prices. This results in local RI pharmacies not only missing out on prescription sales, but front-end sales will also decline since the customer is not entering the store. Pharmacy mail order sales have now surpassed sales from independent retail pharmacies.