The Business Case for Offering Veterinary Compounding Services
Mar 5, 2025
Veterinary compounding is a growing opportunity for pharmacies to boost revenue while meeting the unique needs of animal healthcare. Here's why it's worth considering:
Market Growth: The global veterinary compounding market is projected to grow from $1.52 billion in 2024 to $2.45 billion by 2030, with an annual growth rate of 8.29%.
High Margins: Most prescriptions are cash-based, allowing pharmacies to set their own prices and avoid third-party pricing restrictions.
Custom Solutions: Tailored medications improve compliance and effectiveness for pets, addressing challenges like taste sensitivity, dosage accuracy, and administration difficulties.
Veterinary Partnerships: Building relationships with local vets can establish a steady flow of prescriptions and strengthen community ties.
Financial Potential: A veterinary client can generate $1,300 over three years, with setup costs like clean rooms and equipment offset by long-term profitability.
Key Benefits for Pharmacies:
Increase revenue through specialized services.
Address medication shortages and create custom formulations.
Build trust with local veterinarians and pet owners.
This article outlines the financial advantages, setup requirements, and strategies for starting a veterinary compounding service, along with tips for managing costs and ensuring compliance with regulations.
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Financial Analysis
Income and Profit Analysis
Veterinary compounding offers a strong revenue stream for pharmacies, largely due to cash-based prescriptions that allow pharmacies to control pricing.
Service Category | Typical Revenue Share |
|---|---|
Pharmaceuticals | 57% |
Oral Formulations | 74% |
In-house Pharmacy | 10–20% |
Preventative Care | 10–15% |
Surgical Services | 10–20% |
"Right there is a substantial amount of revenue that will offset losses that retail pharmacies are experiencing in human meds."
Irwin Rashkover, CEO of Animal Med Express
On average, a veterinary client generates $1,300 over three years and $2,300 over six years. These figures provide a clear picture of the potential financial returns, helping pharmacies assess the required operational investments.
Setup and Running Costs
Launching veterinary compounding services involves upfront investments in key areas:
Investment Category | Estimated Cost |
|---|---|
Clean Room Setup | $50,000 |
Basic Equipment | $25,000 |
PCCA Membership | $13,000 |
Software Systems | $10,000 |
Initial Inventory | $50,000 |
Ongoing monthly expenses include costs like storefront rent ($1,250–$3,500), utilities (up to $1,000), software subscriptions ($75–$175), and inventory restocking.
"You can work with your vets to free them up to do things that are more profitable for them, which in turn is more profitable for your pharmacy."
Donnie Calhoun, CEO of the American College of Apothecaries (ACA) and the American College of Veterinary Pharmacists (ACVP)
Managing these costs effectively ensures higher profitability and smooth operations.
Return on Investment Guide
Using tools like the MAZ mixer system can cut compounding costs significantly - from $5,000 to $800 per month for 50 daily prescriptions. Key metrics to monitor include client retention rates, average prescription value, daily prescription volume, and labor efficiency.
"If you can do one prescription from each vet office, you're doing probably 15 to 20 vet prescriptions a day, which would be huge from a profit standpoint. That's how you have to think about it. It's not that you want all the prescriptions; you just want one or two every day from every practice. And you would be well on your way to becoming that pharmacy expert in your community."
Donnie Calhoun, CEO of the American College of Apothecaries (ACA) and the American College of Veterinary Pharmacists (ACVP)
Keep labor costs under 40% of revenue and regularly review pricing and supplier agreements to maintain competitive margins. Building strong partnerships with local veterinarians can help ensure a steady flow of prescriptions, driving consistent revenue. These strategies not only improve profitability but also create a framework for efficient operations.
Custom Medicine Solutions for Animals
Top Requested Compounds
Veterinary compounding focuses on creating medications tailored to the unique needs of various animal species. According to the FDA, around 75,000 pharmacies in the U.S. handle over 6.35 million compounded prescriptions for animals each year. Common conditions requiring these customized treatments include ear infections, hyperthyroidism, chronic pain, and dry eye.
Condition | Compound Solution | Benefits |
|---|---|---|
Ear Infections | ScriptWorks' Bi-Phasic Gel | Weekly application, deep penetration |
Hyperthyroidism | Methimazole (transdermal/oral) | 90% response rate in cats |
Chronic Pain | Flavored Script Tabs (Tramadol/Gabapentin) | Easier administration |
Dry Eye | Tacrolimus drops/ointments | Supports tear production |
"Veterinary compounding is the customization of animal medications to meet their specific needs, often by altering the form or dosage to make the medication more suitable and effective - one size does not fit all."
– SaveWay Pharmacy
Customized compounds address specific health issues, but ensuring a steady supply of medications is just as important.
Managing Drug Availability
In addition to creating tailored compounds, pharmacies must ensure a reliable supply of medications to meet ongoing needs. Compounding pharmacies are essential in bridging the gap for non-human species, especially with the limited number of FDA-approved veterinary drugs available. This ensures animals receive continuous care for various conditions.
Pharmacies achieve this by:
Developing alternative dosage forms for discontinued drugs
Creating allergy-friendly options without unnecessary fillers or dyes
Combining compatible medications into single doses
Building strong relationships with suppliers
"It's very difficult to give an oral dosage to a cat. There are special things that compounders do that can really help the vets get the medication in."
– Donnie Calhoun, CEO of the American College of Apothecaries (ACA) and the American College of Veterinary Pharmacists (ACVP)
Improving Pet Medicine Success
A steady supply of medications, combined with personalized formulations, plays a crucial role in improving treatment success. Medication compliance is often a challenge in veterinary care, but compounding pharmacies help overcome this with solutions designed to meet specific needs.
Challenge | Solution | Impact |
|---|---|---|
Taste Sensitivity | Flavored medications | Better compliance |
Size/Weight Variations | Custom dosages | More accurate treatment |
Multiple Medications | Combination formulas | Simplified regimens |
Administration Issues | Alternative forms | Less stress for pets |
For example, buprenorphine has been formulated as a "tasteless" oral medication for different species. This approach not only improves treatment outcomes but also ensures patient safety. By addressing common challenges, compounding pharmacies strengthen their role as trusted partners in veterinary care.
Rules and Quality Standards
Government Regulations
The FDA oversees veterinary compounding under the Federal Food, Drug, and Cosmetic Act (FD&C Act). One key rule requires that compounded medications primarily use FDA-approved drugs as active ingredients, not bulk substances. However, the agency's Guidance for Industry (GFI) #256 allows the use of bulk drug substances in specific cases, such as:
Prescriptions for individual nonfood-producing animals
Office stock for nonfood-producing animals
Antidotes for food-producing animals
Sedatives and anesthetics for free-ranging wildlife
Using bulk substances for compounded animal drugs is generally prohibited because these substances lack FDA approval and don't meet CGMP requirements. The FDA focuses enforcement efforts on compounds that pose particular risks, as outlined below:
Priority Enforcement Areas | Key Concerns |
|---|---|
Health Risk Compounds | Pose direct risks to human or animal health |
Food Animal Products | Medications for food-producing animals |
FDA Duplicates | Copies of approved or indexed products |
Non-Prescription Stock | Office stock distributed without patient-specific prescriptions |
Compliance with these rules requires strict adherence to quality control measures outlined in USP guidelines.
Quality Control Standards
To ensure safety and compliance, rigorous quality control based on updated USP guidelines is essential. These standards, effective November 1, 2023, emphasize:
Advances in compounding science
Risk-based beyond-use dates
Facility and equipment standards
Thorough cleaning protocols
The importance of quality control is underscored by past incidents. For example, three horses died after receiving a compounded drug that contained about 20 times the intended dosage of the active ingredient.
"Veterinarians should contact their state board of veterinary medicine to understand how the USP compounding standards might apply to them." - Dr. Dharati Szymanski, Assistant Director, AVMA's Division of Animal and Public Health
Maintaining both quality and compliance also relies on the specialized training and credentials of compounding pharmacists.
Professional Credentials
Pharmacists involved in veterinary compounding must have specialized credentials and ongoing training to meet regulatory and quality standards. The American College of Apothecaries (ACA) offers accredited programs designed for veterinary compounding. These programs cover critical areas such as:
Training Component | Focus Area |
|---|---|
Technical Skills | Safe preparation and handling of compounds |
Species Knowledge | Appropriate dosing and reactions for different animals |
Safety Protocols | Adherence to USP standards |
Marketing Expertise | Building strong relationships with veterinarians |
Pharmacists are required to notify the FDA within 15 days of any adverse events or product defects tied to compounded medications. Veterinarians should confirm that their compounding pharmacists have the necessary training in veterinary medicine. This is especially important given findings from a Missouri Board of Pharmacy study, which revealed that up to 20% of randomly tested compounds from licensed pharmacies contained incorrect amounts of active ingredients - ranging from 0% to 450% of the intended dose.
Starting Veterinary Compounding
Equipment and Space Needs
To set up a veterinary compounding facility, you'll need specific equipment to handle both non-sterile and sterile compounding while adhering to USP standards. Key items include:
Powder containment hood for safe handling of powders
Electronic balance for accurate measurements
Ointment mill to ensure consistent particle size
Temperature-controlled storage to preserve ingredients
Automated formulation systems for precise and efficient compounding
It's also essential to consult industry experts and review local regulations to meet all requirements. Beyond the tools, having a skilled and knowledgeable team is just as critical for running the facility effectively.
Employee Skills and Training
Staff working in veterinary compounding must have specialized expertise. Training should cover veterinary pharmacology, animal physiology, and dosing tailored to different species. Pharmacy technicians should pursue national certification and hands-on training, while pharmacists should obtain advanced credentials in veterinary compounding to ensure they meet industry standards.
Daily Operations Guide
Once you have the equipment and a trained team, focus on streamlining daily operations to maintain quality and compliance. Key practices include:
Sourcing raw ingredients from FDA-registered manufacturers with verified Certificates of Analysis
Independently testing raw materials and consistently monitoring lab conditions
Documenting all procedures, conducting multi-phase pharmacist checks, and setting clear beyond-use dates
For sterile compounds, ensuring sterility reports and maintaining an ISO-classified clean room
Performing regular inspections and certifications to stay aligned with USP requirements
These practices help minimize errors and improve efficiency, making veterinary compounding a more profitable and reliable service.
Growing Your Veterinary Business
Marketing to Veterinarians
Develop strong connections with veterinarians by demonstrating your knowledge and dedication to animal health. Experts recommend setting aside 2–5% of your gross revenue for marketing efforts. Focus on working alongside veterinary services rather than competing with them.
"Local veterinarians see the writing on the wall that it's a competitive market for the dispensing portion of their business. They'd prefer to partner with a local business like an independent pharmacy rather than losing that business to a mail order operation."
Some effective approaches include:
Specializing in specific species or conditions
Providing compounding services that meet regulatory standards
Offering unique or hard-to-find products
Assigning a referral coordinator to maintain strong partnerships
Don’t stop at in-person efforts - expand these relationships online to reach more people.
Online Promotion Methods
Pair your in-person strategies with a solid online presence. With American pet owners spending over $31.4 billion annually on animal health, engaging with them digitally is more important than ever.
Start with a mobile-friendly website that highlights:
Your compounding services
Transparent pricing
Educational resources
Easy-to-use contact forms
Positive client testimonials
Social media is another key tool, especially for connecting with younger pet owners. Millennials and Gen Z (ages 24–42) value convenience, transparency, and expertise in veterinary care. Use your platforms to share:
Stories about successful treatments
Pet health tips and education
Insights into your compounding process
Information about local pet care events
Success Stories and Reviews
Combine your online strategy with real-world feedback to build trust and credibility. Referrals are incredibly powerful - 92% of consumers trust recommendations from friends.
"Veterinarians are great people. I love working with them. You have to create that trust. You have to create that connection."
Strengthen your reputation by focusing on:
Documenting successful cases
Highlighting client testimonials
Managing professional reviews effectively
Engaging with your local community
Supporting animal welfare initiatives
These strategies will showcase your expertise in compounding and help grow your veterinary services.
Conclusion
Main Points Summary
The veterinary compounding market is expected to grow to $2.45 billion by 2030, with an annual growth rate of 8.29%. This expansion is driven by increasing pet ownership and higher spending on companion animal healthcare.
Some key benefits of offering veterinary compounding services include:
Boosted Revenue: Specialty compounds can significantly increase pharmacy income.
Improved Client Retention: Keeping existing clients is more cost-effective than finding new ones.
Streamlined Operations: Managing inventory efficiently helps control costs and ensures the availability of high-demand medications.
"Veterinary compounding has always been about customising medications to meet the unique needs of animals, but recent refinements in techniques and tools have enhanced our ability to address challenging conditions." – Zenith Pharmacy
Getting Started Steps
To set up veterinary compounding services, focus on these key steps:
Ensure compliance with regulatory and USP standards.
Source pharmaceutical-grade ingredients and implement strict quality controls.
Build strong, transparent partnerships with local veterinarians.
The future of veterinary compounding lies in personalized care, advancements in technology, and closer collaboration between pharmacies and veterinarians. By prioritizing quality, compliance, and professional relationships, pharmacies can successfully add veterinary compounding to their offerings and meet the growing demand in this field.