Struggling with declining profits in your compounding pharmacy? Here’s how to boost revenue and stay competitive in today’s challenging market:

• Expand Clinical Services: Offer specialized services like pediatric compounding, veterinary medications, or hormone replacement therapy.

• Leverage Technology: Invest in automation tools to improve efficiency, reduce errors, and meet regulatory standards.

• Build Local Partnerships: Collaborate with healthcare providers and veterinarians to tap into new patient groups.

• Diversify Offerings: Add front-end sales strategies, health education programs, and medication therapy management.

• Upgrade Facilities: Consider transitioning to a 503B facility to unlock larger-scale opportunities.

Why it matters: With gross profit margins dropping to 19.7% in 2024, pharmacies must diversify income sources to remain viable. Start by evaluating your current operations, identifying market gaps, and aligning your strengths with unmet needs. Even small changes, like targeting local demands, can create significant growth opportunities.

This guide covers actionable steps to help you thrive in a shifting pharmacy landscape.

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Review Your Current Business

Take a close look at how your pharmacy operates and where it stands in the market. This evaluation helps uncover areas where you can grow and improve, setting the stage for boosting revenue in the ways discussed later.

Check Your Services and Customers

Dive into your pharmacy's performance data and customer habits. Look at sales patterns, customer demographics, and how often your services are used. This will help you spot what's working well and where there's room for improvement.

"The greatest personal service that we can offer our patients is ourselves".

Key areas to focus on:

• Sales Performance: Track monthly and quarterly revenue trends to understand your financial trajectory.

• Customer Demographics: Study prescription patterns and buying behaviors to see who your core customers are.

• Service Utilization: Identify which compounding services are performing the best and why.

You can also gather useful insights by asking patients specific questions about their needs, like issues with anxiety, sleep, or supplements.

Study Local Market Needs

"Understanding your audience is the easiest path to success and can eliminate wasted time and money".

For example, if local veterinary clinics are sending compounding medication requests to out-of-town pharmacies, offering these services locally could attract immediate business.

Steps to uncover market gaps:

• Connect with Healthcare Providers: Build relationships with local doctors to understand what they and their patients need.

• Track Patient Requests: Keep a record of any prescriptions or services patients request that you currently don’t offer.

• Spot Market Gaps: Analyze your patient base to find unmet needs in your community.

Once you identify these gaps, match them with your pharmacy’s strengths to take advantage of new opportunities.

List Your Advantages

To get a deeper understanding of your position, consider doing a SWOT analysis. This will help you evaluate your internal strengths and weaknesses while spotting external opportunities and challenges.

Niche Compounding Services

Leverage your current business strengths to offer specialized compounding services that cater to underserved markets.

Special Medications for Specific Groups

Pediatric compounding addresses the unique needs of young patients by creating custom, easy-to-take medications. Some key services include:

• Transforming adult medications into child-friendly formats

• Adding flavors to improve taste in suspensions and solutions

• Crafting alternatives like lozenges or gummies

• Developing allergen-free formulations (e.g., removing gluten, lactose, or artificial dyes)

• Preserving medication effectiveness while enhancing its appeal

In addition to pediatric formulations, compounding for animals opens up another lucrative opportunity.

"If you're a community pharmacy getting involved in veterinary practice, you need to have one-on-ones with vets so they know you're qualified and that it's something you're investing in. You need to go to their practice and sit and talk to them there about what you can do to help them." – Donnie Calhoun, CEO of the American College of Apothecaries (ACA) and the American College of Veterinary Pharmacists (ACVP)

Pet and Animal Medicine

The veterinary medication market shows strong potential, with pet healthcare spending continuing to grow.

To tap into this market:

• Collaborate with local veterinarians to understand their specific needs

• Offer flavored medications to simplify administration for pet owners

• Focus on species that are common in your area

• Address medication challenges, as over one-third of pet owners report difficulties administering treatments

Another way to diversify your offerings is through custom hormone therapies.

Custom Hormone Therapy

Bioidentical hormone replacement therapy (BHRT) presents a growing opportunity, with 1.0 to 2.5 million U.S. women aged 40 and older currently using compounded hormone treatments.

Key strategies include:

• Gaining expertise in hormone therapy through personalized formulations and consultations

• Using targeted digital marketing to reach potential patients

• Building strong relationships with healthcare providers

• Offering thorough patient education programs

The global hormone replacement therapy market is forecasted to hit $6.3 billion by 2024.

"It's not for everybody, not for every setup. You really have to be in it with your heart. As a pharmacist, you can always make a drug. But can you make an impact in your community?" – Farzana Kennedy, R.Ph., FACA, owner of Alexandria Compounding Pharmacy

These specialized services not only expand your offerings but also create additional revenue streams for your business.

Equipment and Technology Updates

Modern compounding tools are transforming how pharmacies operate by improving both efficiency and safety.

New Equipment Options

Automated compounding systems are changing the game by increasing accuracy and productivity. Take the Diana™ Compounding Workflow System, for instance. It features wireless notifications for pharmacists and high-definition cameras for remote verification, allowing pharmacies to handle more work without compromising safety.

Other advanced equipment includes:

• ExactaMix Pro: This system offers certified cybersecurity, volumetric pumps accurate to 0.2 mL, barcode verification for source containers, and load cell validation to ensure final product weight.

• FagronLab™ InvoMatic: An automated mixing device designed to create highly uniform mixtures.

"New technologies in laboratory devices uphold the twin pillars of reproducibility and quality for compound formulations. By automating the compounding process, these systems optimize operations, minimizing the risk of human error and elevating reproducibility." – Fagron

Investing in new equipment is also a step toward meeting stricter regulatory standards.

503B Facility Requirements

Upgrading to a 503B facility can unlock new market opportunities. The U.S. 503B compounding pharmacy market, valued at about $1.08 billion in 2023, is expected to grow to $2.25 billion by 2033, with an annual growth rate of 7.63%.

Key requirements for 503B facilities include:

• Quality Control Systems: Implement robust quality assurance programs with regular testing, inspections, and detailed electronic batch records (EBR) to meet compliance standards.

• Advanced Technology: Use automated systems and robotic equipment to ensure consistent production quality. Initial investments typically range from $1–2 million.

• Regulatory Compliance: Follow Current Good Manufacturing Practice (CGMP) standards, which allow for extended beyond-use dates and better inventory management.

Automation Benefits

Automation isn't just about efficiency - it also saves money. Research shows automated IV preparation can prevent 5,420 medication errors annually, saving about $288,350 per facility. For example, producing a 100 mL potassium phosphate IV bag in-house reduces costs from $21 to $2, while sodium bicarbonate syringes drop from $15 to $3.25 per dose. Over five years, these savings can add up to $2.3 million per facility.

The Equashield® Pro system highlights the benefits of modern automation with its compact design, efficient motion paths, and precise, patient-specific dosing.

These technological advancements not only reduce errors and costs but also increase capacity, making them smart investments for pharmacies looking to grow.

Extra Services for Patients

Adding more services to your pharmacy can open up new income opportunities while also improving the care you provide to your patients. Here’s how you can make these services both effective and profitable.

Health Education Programs

Providing health education isn’t just about helping patients - it can also boost your revenue. For example, MediVera Compounding Pharmacy has shown how offering detailed educational resources can make a difference. Their approach includes:

• Instructional videos that teach patients how to perform treatments like subcutaneous injections.

• Multilingual PDF guides tailored to specific medications.

• Regular blog posts that share updates on pharmaceutical advancements.

"Patient education isn't just a service; it's a commitment to empowering individuals with the knowledge they need for better health." - MediVera Compounding Pharmacy™

Focus on topics that patients are eager to learn about, such as managing diabetes, quitting smoking, or weight loss strategies. Pairing these programs with improved medication management can amplify your pharmacy’s role in patient care.

Medication Management Services

Medication Therapy Management (MTM) is a service that not only improves patient outcomes but also creates an additional revenue stream. Since Medicare Part D introduced MTM in 2006, it has become a key offering for pharmacies.

Patrick Chancy, PharmD, from Chancy Drugs, highlights the importance of MTM: "Conducting MTM allows pharmacists to leverage their expertise, especially when they have a comprehensive view of all medications a patient is taking".

Here are some tips to make MTM work for your pharmacy:

• Schedule consultations during medication synchronization pick-ups.

• Delegate preparation tasks to pharmacy technicians.

• Use MTM platforms to ensure proper compensation from payers.

• Keep detailed records of interventions and patient outcomes.

Legislation in certain states has made MTM more profitable. For instance, California now allows pharmacists to bill insurance providers for approved services, and West Virginia mandates that health plans include pharmacists in their provider networks.

Healthcare Provider Networks

Building strong connections with healthcare providers can help you reach more patients and grow your business. Brad Harmon, owner of Harmon's Pharmacy, explains how point-of-care testing has been a game-changer: "We can do testing like COVID, strep, and the flu, that you'd otherwise have to have done at a doctor's office. This has become a new revenue stream for most independent pharmacies".

Here’s how to strengthen your provider network:

• Regular Provider Outreach: Visit physician groups quarterly to introduce your services and maintain relationships. Take advantage of hospital events for networking.

• Service Integration: Offer complementary services such as immunizations, point-of-care testing, specialized compounding, or partnerships with long-term care facilities.

• Communication Systems: Invest in tools like referral management systems and electronic health records to make coordination with providers seamless. These systems can help establish trust and reliability within your referral network.

Conclusion

Main Points Review

The pharmacy industry is shifting, making it critical for businesses to explore new revenue streams. Paige Clark, RPh, from Prescryptive Health, highlights the challenge:

"In the changing landscape accentuated by pharmacy benefit managers, the profit margins that have previously supported pharmacists' salaries and the cost of running independent retail pharmacies have been borne on the spread of the product... That reimbursement model, in many cases, can no longer support independent pharmacies."

We’ve discussed several strategies to help pharmacies adapt and thrive:

• Expanding Clinical Services: Offering specialized services like sterile compounding, which provides strong cash-based revenue opportunities and meets growing demand.

• Integrating Technology: Using automation and modern equipment to boost efficiency and service quality.

• Building Healthcare Partnerships: Collaborating with providers and facilities to create steady income streams.

These approaches provide a solid foundation for future growth.

Keep Growing Your Business

Shelley Roberts, PharmD, owner of Grassroots Pharmacy, emphasizes the importance of standing out:

"To be successful, you either have to be unique or do the same thing better than everyone else. With the big boxes' hold on the market, it is hard to beat them on price, so we don't try to."

By focusing on specialized services, leveraging advanced tools, and fostering strong partnerships, your pharmacy can remain competitive. Consider these focus areas:

• Use Clinical Expertise: Offer niche services like hormone replacement therapy consultations and medication therapy management to attract specific patient needs.

• Improve Patient Care: Create private consultation areas and introduce point-of-care testing to enhance the patient experience.

• Streamline Front-End Operations: Regularly assess product placement and sales trends to drive revenue growth.

These steps can help position your business for long-term success.

Start Your Plan Today

Take action to diversify your revenue with these steps:

1. Assess Current Operations: Examine your existing services, identify areas for improvement, and use platforms like social media to highlight your compounding expertise.

2. Develop Strategic Partnerships: Jennifer Donovan, PharmD, underscores the importance of collaboration:

   "Finding alternative ways to generate revenue is necessary to ensure all patients have access to high-quality health care."

3. Invest in Staff Training: Equip your team to deliver new services effectively. As one expert notes:

   "The greatest personal service that we can offer our patients is ourselves. If you do it well, revenue's going to follow and you're going to have people come to you. Our store is our product, and we have to sell that product and our service to them. I'd rather look at the business as a product rather than the merchandise on the shelves as the product."

Select one initiative that aligns with your strengths, execute it well, and expand as you see results.

Related posts

• The Ultimate Guide to Building a Profitable Compounding Pharmacy Business

• Building a Referral Network: How to Partner with Physicians for Business Growth

• How to run a profitable compounding pharmacy

• Financial Pitfalls to Avoid When Running a Compounding Pharmacy