Thoughts on Pharmacies?

September 20, 2023

by a searcher in Cleveland, OH, USA

Does anyone here have any thoughts about acquiring pharmacy businesses? They seem to be surprisingly unregulated, with a lot of fragmentation on the table up for grabs. The only weakness seems to be industry-wide low margins, although in a $500+B market, there are certainly outliers. What do you all think would be the pros and cons of a pharmacy roll-up?

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Reply by a searcher
from Harvard University in Miami, FL, USA

Hi Kleigh! I did some very preliminary research. My thoughts were that pharmacies were really at the mercy of the whole insurance system, primarily PBMs (pharmacy benefits managers), and if you are not one of the giants (Wallgreens, CVS) you don't have much say. It didn't look very promising, unless you have some sort of niche market or could capitalize on some sort of additional service.

Here are some articles I found (not as recent as I would want):
https://www.drugchannels.net/2022/02/five-things-to-know-about-state-of.html
https://www.drugchannels.net/2021/12/cvs-pharmacy-downsizes-10-industry.html
https://healthpolicy.usc.edu/research/flow-of-money-through-the-pharmaceutical-distribution-system/

Reply by a searcher
from University of California, Berkeley in Denver, CO, USA

Hi all, I’d first off be careful to generalize pharmacies as one industry. Retail, mail order, LTC (which my pharmacy is), compounding and specialty are all basically different industries with very different dynamics and margins. Retail is pretty tough and I personally stayed away but plenty of opportunities in the broader space. When considering roll up, it is more difficult to execute vs other industries for a variety of reasons but certainly possible

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