NATIONAL COMMUNITY PHARMACISTS ASSOCIATION

n Gross margin remained constant as in 2007 at 23.2percent.n Payroll expenses, as a percentage of sales, decreasedby 0.2 percentage points in 2008 to 13.5 percent. Thenumber of employees also decreased which allowed payrollexpenses to decrease. As prescription volume increased,pharmacists were challenged with becoming more efficient;thereby filling more prescriptions with less staff.n All other operating expenses remained at 6.5 percent.n Through attempts by independents to lower their payrollexpenses and control operating expenses, the average netoperating income increased to 3.2 percent. However, thenet operating income dollars before tax remained similarto 2007.It is important to note that this year’s Digest data reflect themarketplace in 2008, the third year for the Medicare Part Dprescription drug benefit. In 2008, 30 percent of prescriptionsin independent community pharmacies were coveredby Medicare Part D, a 4 percentage point increase fromlast year. Thus, the role of government programs such asMedicare Part D and Medicaid continues to increase whileprivate third-party plans have been declining since 2005.Viability of IndependentCommunity PharmacyIndependent community pharmacies are working hard toimprove their financial position. Historically, before theimplementation of Medicare Part D in 2006, an averageof 12.4 percent of independent community pharmacies operated at a loss between 2001 and 2005. In 2006 the profitabilityof pharmacytooka strong hit, 22.9 percent ofindependent community pharmacies operated at a loss forthe fiscal year in 2006 while over 1,100 pharmacies endedup closing their doors. In 2007 independent communitypharmacy saw a slight improvement compared to the previousyear, with 19.2 percent of pharmacies operating at aloss for the fiscal year 2007.Viability of Independent PharmacyNet Profit as a Percent of Sales Percentage ofPharmaciesAccumulatedPercentagesOperating at a loss 14.7% 14.7%Less than 2% 28.9% 43.6%2 to 4% 21.8% 65.4%4% to 6% 12.8% 78.2% 6% to 8% 10% 88.2%8% and over 11.8% 100%In2008, 14.7percentof independentcommunity pharmacies operated at a loss. Independent community pharmacistsare finding ways to remain financially viable. Forexample, independents this year reduced their payrollexpenses, increased the use of technology, and obtainedrevenue for medication therapy management (MTM)services provided.Distribution of Pharmacies Over Time by Net Profit 2009 NCPA Digest, sponsored by Cardinal Health