Price matters, but so do terms, service, reliability, flexibility and the organization standing behind your wholesale relationship.
Choosing a primary wholesaler is one of the most consequential business decisions an independent pharmacy makes.
Sometimes that decision is planned. Other times, circumstances force it unexpectedly.
The recent announcement that Smith Drug Company will cease operations is a reminder that even longstanding wholesale relationships can change. A wholesaler may exit the market, your pharmacy’s needs may evolve, economics can shift or an existing relationship may simply stop being the right fit.
Whatever brings you to the decision, don’t simply replace what you had. Take the opportunity to evaluate what your pharmacy needs from the relationship going forward.
At AAP, we work exclusively with independent community pharmacies, and we know there’s much more to this decision than the price of the products arriving at your door. Your purchasing relationship can affect your inventory, cash flow, operations, profitability, rebates, and ultimately your ability to serve patients.
We believe a strong relationship should provide competitive purchasing opportunities, practical business tools, expert support and the flexibility to adapt as your pharmacy’s needs change.
At AAP, we’re confident in the value we provide our Members and we believe it’s our responsibility to continue earning their business.
As you evaluate your options, here are eight questions worth asking.
1. Are you comparing prices or the total value of the deal?
Price matters. There’s no getting around it.
But the lowest quoted acquisition cost doesn’t necessarily mean the best overall economics for your pharmacy.
Look at the complete purchasing structure. Consider brand and generic pricing, rebates, purchasing requirements, payment terms, fees, freight, incentives and any thresholds you must meet to achieve the economics being presented.
Then ask whether those requirements realistically align with the way your pharmacy operates.
A compelling proposal on paper only creates value if your pharmacy can actually achieve it.
Don’t simply ask, “What’s my price?” Ask, “What’s the total value of this relationship to my pharmacy?”
And don’t underestimate the value of having someone help you understand the numbers. A good partner shouldn’t simply present a purchasing structure, it should help you understand how that structure performs for your individual pharmacy.
2. Can they reliably supply the products your patients need?
Competitive pricing means little if you can’t get the product.
Ask about availability and fulfillment. How does the wholesaler handle shortages, allocations and backorders? What options are available when a product isn’t available through your normal ordering channel?
Also consider how additional sourcing options could complement your overall purchasing strategy. Having more than one resource available can provide valuable flexibility when availability or economics change.
Your wholesaler is a critical link between your pharmacy and your patients.
When a patient is waiting, supply-chain performance becomes much more than a purchasing issue.
3. What happens when you need help?
Technology can make purchasing more efficient, but there will inevitably be times when you need an actual person.
Consider the service model behind the proposal.
Will you have access to people who understand independent pharmacy? Who helps when you have an ordering, billing or account issue? How quickly can problems be resolved?
And does the support extend beyond troubleshooting?
At AAP, Members receive support from a dedicated Pharmacy Business Advisor who can help audit costs through invoice comparisons, identify purchasing opportunities and navigate programs designed to support financial performance.
The best relationships shouldn’t feel transactional when you need them most.
4. Does the technology offered help you run a better pharmacy?
Technology like a wholesale ordering platform and other tools shouldn’t simply make it easier to place an order. It should help you make better business decisions.
Consider the ordering experience, integrations with your existing workflow, purchasing analytics and the data available to help you understand what’s happening inside your pharmacy.
Ask yourself:
Does this technology save my team time? Does it give me better visibility? Can it help me identify opportunities I’m currently missing?
AAP Members have access to tools such as SmartSync, which uses pharmacy data to help automate ordering and streamline inventory management, and ProfitAmp, which helps identify missed refill opportunities with a focus on medications that can have the greatest impact on profitability.
The best technology shouldn’t add another task to your day. It should help make the business easier to manage.
5. What exactly are you agreeing to?
When you’re evaluating a wholesaler, the offer in front of you matters.
So does the agreement behind it.
Understand the length of the commitment, purchasing requirements, applicable exclusivity provisions and termination terms. Ask what happens if you don’t meet certain thresholds or if your pharmacy’s needs simply change.
That matters because independent pharmacy is changing rapidly. Reimbursement pressures, brand Rx WAC deflation, GLP-1 utilization, generic market changes and evolving Medicare programs can affect pharmacy economics in ways that are difficult to predict years in advance.
A decision that makes sense today may look very different in less than a year and most definitely will not be the same two or three years from now.
AAP takes a different approach. AAP Members may terminate their wholesaler agreement with 90 days’ notice rather than being locked into a multi-year commitment.
That flexibility reflects our confidence in the broader value of AAP membership. We don’t believe a long-term contract should be the reason a Member stays.
We believe your business should continue to be earned, not guaranteed by a long-term contract.
6. Does your partner understand the business of independent pharmacy?
Your pharmacy isn’t simply a purchasing account.
You’re managing inventory, reimbursement, staffing, cash flow, patient care and an increasingly complicated business environment simultaneously.
Look for a relationship that recognizes those realities.
Can the organization help you better understand acquisition costs? Identify purchasing opportunities? Reduce exposure to below-cost dispensing? Keep you informed about changes affecting independent pharmacy?
AAP’s Pharmacy Business Advisors work directly with our Members to understand their businesses, evaluate costs and identify opportunities. Members also receive ongoing industry insights designed to help them stay informed about issues affecting independent pharmacy.
The question isn’t just whether your wholesaler understands distribution.
Does the organization behind it understand your business?
7. Are you choosing a vendor or joining something bigger?
When comparing wholesalers, there’s another question worth considering:
Who is sitting on your side of the table?
AAP is a Member-controlled cooperative built exclusively around independent community pharmacy. Its Board of Directors is elected by and composed of AAP Members, giving independent pharmacy owners a voice in the organization designed to serve them.
That cooperative structure creates value in several ways.
Stronger purchasing power. AAP negotiates national agreements and helps Members better understand purchasing structures, evaluate options and align their agreements with their business objectives.
Additional purchasing flexibility through API Warehouse. As an AAP subsidiary, API Warehouse gives pharmacies an additional purchasing resource for generic Rx, brand Rx, front-end inventory, pharmaceutical supplies and OTC products. For AAP Members, API can complement their primary wholesaler relationship and provide another opportunity to optimize purchasing.
The opportunity to share in the cooperative’s success. Subject to Board approval, AAP’s Board may allocate year-end profits back to Members through Annual Patronage Dividends, allowing Members to potentially share in the value created by the cooperative.
Tools designed for independent pharmacy. ProfitAmp, Invoice Comparisons and SmartSync provide data-informed ways to identify opportunities, improve purchasing decisions and streamline operations.
Support beyond purchasing. Members have access to PSAO services through AlignRx, ongoing industry insights and Preferred Partners, many of which provide exclusive Member pricing on products and services pharmacies use every day.
People invested in your performance. Dedicated Pharmacy Business Advisors help Members understand available programs, review costs and identify opportunities specific to their businesses.
Wholesale purchasing is an important part of AAP membership, but it isn’t the entire relationship.
When evaluating your options, don’t stop at:
“What can I buy from this organization?”
Consider:
“What can I gain by being part of it?”
8. Is your partner confident enough to continually earn your business?
After evaluating purchasing performance, supply, service, technology, contract terms and the organization behind the relationship, there’s one final question worth considering:
Why will you want to stay?
At AAP, we want the answer to be the value you continue to receive.
Competitive purchasing opportunities. Tools that help uncover profitability. Support from people who understand independent pharmacy. Access to programs and partners that can strengthen your business. And the collective advantages of belonging to a Member-controlled cooperative.
We don’t want the answer to be simply because you’re contractually obligated to stay.
That’s why AAP Members have the flexibility to terminate their wholesaler agreement with 90 days’ notice.
For our Members, that provides the freedom to make decisions that are right for their pharmacy as their business and the market change.
For AAP, it creates accountability.
If we want to keep your business, we have to continue earning it.
And we’re confident in our ability to do exactly that.
Don’t Just Choose a Wholesaler. Choose the Right Relationship.
Changing wholesalers can be disruptive, particularly when the decision wasn’t yours to make.
But it can also create an opportunity to take a fresh look at one of your pharmacy’s most important business relationships.
Compare the pricing, but don’t stop there.
Evaluate the total purchasing economics. Ask about product availability. Understand the service model. Explore the technology. Look at the resources available to help your pharmacy perform better. Read the agreement carefully. And understand exactly how much flexibility you’ll retain after you sign.
Then consider the organization behind the wholesaler.
Will you simply be its customer, or can the relationship give you something more?
AAP was built around the belief that independent pharmacies are stronger together. As a Member-controlled cooperative, we provide independent pharmacy owners with purchasing opportunities, practical business tools, strategic support and relationships designed around their long-term success.
We’re confident enough in that value to believe your business should be earned continually, not secured by a multi-year commitment.
For pharmacies already purchasing through API Warehouse, you already know part of our organization. Now may be the right time to explore what the full AAP relationship could bring to your pharmacy.
See What AAP Could Do for Your Pharmacy
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Disclaimer: This article is for informational purposes only and is not intended as legal, financial or contractual advice. Pharmacies should review agreements carefully and consult appropriate advisors before making business decisions.