Establish a Corporate Name and Identity
- Select an easy-to-say, read and type name. It may be different from the official corporate name. If it is different, it is called a DBA (doing business as) name and requires a separate filing in the state of the business.
- Google the name and check for competition. It is lawful to reuse a name from a different state, and even the same state if use and geography are not confusing. See your attorney for details.
- Work with an attorney or accountant to select the corporation structure, such as an LLC, S-Corp, or other. These are IRS-set entities that each have different tax consequences and processes.
- Avoid common pharmacy names, or trying to be overly clever.
- General steps
- Register business
- Apply for an Employer Identification Number (EIN)
- Get federal and state tax IDs
- Apply for a business license and permits, if applicable
- Open a business bank account
- Apply for appropriate trademarks, copyrights or patents
- Purchase insurance policies
Obtain a Facility or Location
- Leasing is difficult to start because landlords usually want 3-5 years to start. For a starting business, it is emotionally difficult to commit. But, when your business does well, you will appreciate the stability of a lease. It is not uncommon for a landlord to evict and rent at a higher rate to a new pharmacy once the site is built up and the business is established.
- Location is critical.
- Research demographics.
- Locating near writing physicians is still important as it aids in establishing relationships.
- Don't underestimate the size required; determine the professional and retail space required.
- Target more than the lawful minimum, but a professional pharmacy may exist well on 300-400sqft to start. Normally a pharmacy can run smoothly under 1000 sqft for years.
- Try to obtain a lease extension option and have an option to sublease, in case a small clinic, testing service, or another office service may need space.
Licensing - Board of Pharmacy License
- Pharmacy and pharmacist licensing is required.
- State and Federal (DEA) licensing required
- Research all the requirements and carefully complete the forms.
- Recognize that certain facility systems may need to be operational before State licensing, such as facility insurance, water, counseling area, pharmacy systems, and similar.
- Certificate of Occupancy and Fire Evacuation Plans are almost always needed prior to State inspection.
- Apply for the DEA Certificate as soon Board of Pharmacy Licensing is obtained.
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Select Software, Phone, Texting, and Alarm Systems
- Technology has become more complicated and more integrated.
- Modern pharmacy technology package has to manage key technologies so that the pharmacist and staff may function efficiently. Inefficiency creates both clinical and financial stress.
- Key technologies should include:
- Pharmacy management of all lawful retail pharmacy actions.
- Point of Sale with workflow integration, savings cards, PCI compliance, and good credit card rates.
- Audits by the Feds, States, and PBMs is common. Having a pharmacy system that reliably tracks and documents all key areas is a lifesaver, and can be worth 10x its cost in audit protection.
- Some states require pharmacy system installation before the inspection.
- Pharmacy system vendors should provide transparency in their monthly pricing breakdowns.
Apply for PBM/insurance Contacts
- Many pharmacies choose to jump-start their insurance contracting with a PSAO. Wholesalers and some independent groups may provide these.
- However, certain PBM/Insurance contracting must be done directly regardless of PSAO status, such as state Medicaids and some Blue Crosses.
- Pharmacy owners may choose to be part of a PSAO, or manage all contracting independently.
- Beware. Contracting takes time! A modern pharmacy has to have PBM/Insurance contracting to operate. Be sure that the PBM/Insurance contracting paperwork is a top priority.
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Apply for Wholesaler Contacts
- Pharmacy owners can choose to be part of a "Buying Group" or handle his wholesaler accounts directly.
- Secondary wholesalers are also able to provide Brand, Generic, OTC, and Controlled Medication.
Prepare Marketing for the New Retail Pharmacy
- Initial Marketing is recommended to be in the form of flyers or postcards.
- Putting out a "Pharmacy Coming Soon" banner is an easy and cost-effective option.
- Do not spend all of your budget on pre-marketing.
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Choose an Opening Date
- When selecting your opening date, check your local Prescribers' schedules first.
- Choose your opening date based on when Prescribers are not going to be too busy for a quick conversation.
- Weekends are not the best option, unless you plan on combining with free food and activities.
Engage in Marketing
- Post Marketing is your best area to go "all-in" with the Prescribers, LTC, Hospice Care, Assisted living, and every other source of obtaining new prescriptions.
- Build a relationship first, and show why you will be a good partner for their business.
- In your first year of business, dedicate 4 hours every week towards Post Marketing.
- Prescribers will only give you one chance to prove yourself. Be certain that you accept all insurances, carry specific drugs, and provide the services necessary to fulfill their patient's needs.
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Financial Management - Reconciliation
- Run DIR reports.
- Run Profit/Loss reports.
- Spend extra time periodically to review insurance reimbursement checks and make sure accounts are being paid.
- Have any additional questions or budgeting issues? Book a free session with SRS' Consulting Pharmacist.
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Bonus Content
Reminders
- If payroll is to be issues, apply for an unemployment insurance license (number).
- Find a business insurance agent:
- Purchase building (or rental) insurance.
- Purchase workman's compensation insurance.
- Purchase business facility (liability insurance).
- Purchase business auto insurance.
Michigan LLC Creation
- Attorneys can manage all the paperwork for the State and IRS, but the process for an LLC is relatively simple and can be done on its own. Below are the basic steps for filing in Michigan to assist in understanding the process.
- Information needed in advance:
- Choose your favorite attorney to use as Resident Agent. If there is any official correspondence to the corporation, it will go to the Resident Agent.
- Create LLC Operating Agreement:
- Contact an attorney to assist.
- Visual Example
- Create Articles of Incorporation:
- Contact an attorney to assist.
- Visual Example
- Name and address of LLC
- How to apply:
- In Michigan LARA is governing agency.
- To apply for a state business license (EIN-employer identification number), one needs the business and attorney information, along with the Articles of Organization.
- To apply for IRS Tax ID (EIN):
- In filing with the IRS, one needs to know a few details about the LLC similar to the state. Use the link to learn. Contact your attorney for advice.
- The IRS will send you via email, and likely through the mail, your SS4 form which contains your IRS EIN (format NN-NNNNNNN).
- Scan and save this document as they will not send it again.
- The SS4 is needed to verify IRS compliance and is used to open bank accounts and other formal processes.
Bank Accounts
- To open bank accounts, on needs a copy of the following:
- LARA articles of organization.
- Operating Agreement.
- SS4 EIN tax ID form.
- Statement from the LLC board authorizing someone to open bank accounts.
- Initial deposit, $1,000.00
- With the above information, a bank account should be allowed to be opened.
State Requirements
- Sales tax license.
- Unemployment insurance.
Location Security
- Locate security/alarm company:
- This is required for most pharmacies to have an active alarm that is monitored.
- Video cameras:
- Wise to invest in video surveillance systems for drug shelving, pharmacy counter, and retail area.
- Internet security with IT management:
- Most pharmacies forget this is important need and think that the Cable router's firewall is sufficient or the computer company's server is sufficient.
- Most pharmacy software vendors specifically do not monitor networks, have retreated to just supplying the data server, and don’t set up security. It is the responsibility of the pharmacy. Find a pharmacy vendor that not only provides pharmacy software but also provides network and system security.
Reports
- IMS/IQVIA reporting as many pharmas use this for doctor rating.
- PDMP controll reporting:
- Opioid reporting, wholesaler know your pharmacy.
- Policy book for key staff functions and duties pertaining to 5 Star program, Track & Trace (DSCSA), among others.
Tips
- Be aware of additional contracts and integration requirements.
