Why a Line of Credit is a Critical Tool for Your Pharmacy 

1. Weathering The DIR Fee Storm – The Devastating Impact Of The Double-Dip

   The DIR Fee hangover has hit retail pharmacy owners hard. Once collected months after pharmacies dispensed scripts, DIR Fees are now assessed at the point of sale. While this allows immediate insights on patient profitability, and transparency will serve pharmacy owners in the long run, profit margins in the early months of 2024 have been constricted, leaving little extra cash available for when third-trimester DIR Fees from 2023 were assessed in March and April. Few pharmacy owners were fully prepared for this reality and have been foregoing salaries or invading retirement accounts to pay bills. Obtaining a line of credit provides liquidity that stabilizes cash flow until cash flow becomes normalized. 

2. Turning Your Vender Into Your Lender - Stop Borrowing From Your Wholesaler 

   Invoice dating and extended terms from your primary wholesaler can sound tempting when cash flow is tight. These options are easy and provide relief, but they only buy you time. When that finite period expires, if you can’t pay back the money, your wholesaler may withhold rebates or even orders. These financial obligations often turn into loans that can carry 18% interest rates. Wholesalers aren’t banks!!! When the company that controls your cost of goods becomes your creditor, you put your business at risk! A line of credit from an independent bank or lender doesn’t complicate your relationship with your primary wholesaler.

3. Competing With Larger, Better Funded Pharmacy Chains - Keep Inventory Stocked 

   CVS, Costco and other national pharmacy chains always have the inventory they need to serve patients. When an independent pharmacy owner can’t afford to maintain its drug inventory because cash is tight, you can lose patients forever. Don’t allow cash flow constraints to impact your inventory levels. A line of credit gives you the money you need to maintain your drug inventory so you’re never at risk of losing patients.

4. Growing Your Pharmacy Can Be Expensive - Reimbursements On New Patients Take Time 

   Adding a new LTC facility or bringing on new prescribers are how pharmacy owners grow their business. The problem is, you dispense the drugs and have to wait until you get reimbursed. Successful pharmacy owners sometimes feel cash poor when they are actually growing their business. A line of credit provides the perfect financing option for growth capital. Draw the money when you need it and pay it back when you get reimbursed.

5. Realizing When Something Is Broken - Fixing Problems Can Take Time And Money 

   Many pharmacy owners were damaged during the pandemic. When patient needs shifted to testing and vaccines, it became difficult to focus on your core business. Stimulus money like PPP and EIDL loans masked underlying problems in pharmacies. Today, the stimulus money is gone, the testing is gone, the vaccine money is gone and if your core business isn’t profitable, you’re losing money. The DIR Fee hangover and ensuing cash crunch is forcing pharmacy owners to reexamine their businesses. Fixing what’s broken can take time and treasure. A line of credit provides the time you need to stabilize your business, identify what needs to change to make your pharmacy profitable and headed in the right direction.