A COMPARATIVE STUDY OF PHARMACY CLOSURES AND CHANGES OF OWNERSHIP WITH A MATCHED GROUP OF ONGOING PHARMACIES (MICHIGAN, NORTH CAROLINA, NEBRASKA, RHODE ISLAND, WASHINGTON)
Abstract
The objectives of this study were to determine: (1) the reasons for and circumstances surrounding the closure or sale of a representative sample of pharmacies; (2) whether pharmacies which were closed or sold were "low volume pharmacies" in terms of prescription volume and/or sales; (3) if specific areas of management weakness are common to less successful pharmacies; and (4) if there is a significant association between the use of specific financial ratios for making business decisions and business survival. Data were collected from former owners of ninety closures, 117 changes of ownership, and 191 owners of ongoing pharmacies in the states of Michigan, North Carolina, Nebraska, Rhode Island, and Washington. Closures had significantly lower prescription volume, mean sales, mean net-profit-plus-owner's-compensation in dollars, and mean net-profit-to-sales than changes of ownership or ongoing pharmacies. Changes of ownership had prescription volume levels similar to those of ongoing pharmacies and mean sales, mean net-profit-plus-owner's-compensation lower than those of ongoing pharmacies but higher than those of closures. Changes of ownership had significantly higher mean net-profit-plus-owner's-compensation-to-sales than either of the other two groups. No difference was detected between respondents in any of the groups based on time licensed before opening the study pharmacy, prior retail practice experience, hours worked in the pharmacy, or education attained. A greater proportion of the former owners of changes of ownership (74.4%) were members of the National Association of Retail Druggists than were former owners of closures (48.9%) or owners of ongoing pharmacies (49.7%). The distribution of respondents based on frequency at which income statements and balance sheets were prepared was not significantly different between any of the groups. Analysis of respondents' stated use or non-use of each of thirteen financial ratios revealed significant differences between the groups on only one. A greater proportion of former owners of changes of ownership (49.1%) than of former owners of closure (37.9%) or owners of ongoing pharmacies (34.2%) indicated use of the ratio of net profit to inventory.
Degree
Ph.D.
Subject Area
Business community
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