One of the first steps of opening and running an independent pharmacy is to select the correct buying group. Here are the top 10 FAQs we hear.
1. What is an independent pharmacy buying group?
A buying group consists of independent pharmacies joined together in negotiating the cost of drugs with a wholesaler. This aggregated buying power provides economy of scale to allow independently owned businesses to compete more effectively with large chains.
2. What are the different types of buying groups?
There are three main types of independent pharmacy buying groups: for-profit, associations and cooperatives.
3. What type of buying group is AAP?
American Associated Pharmacies (AAP) is a cooperative. Our income is generated in the form of administrative fees collected from suppliers that contract to provide goods and services. Qualified profits generated are shared among all members as annual Board-declared Patronage Dividends.
4. How do I choose which buying group to join?
It’s important to question your group’s mission, values, goals and company culture when assessing whether they could be a good fit. When a group’s values align with yours, it’s typically a good indication that the partnership will work well. Differences in overall mission, values, goals and culture could potentially lead to conflict.
5. How much does it cost to join a buying group?
Is the group a for-profit entity, nonprofit, not-for-profit or cooperative? Most groups will have fees or earn administrative dollars. Be sure to ask if the profits are retained by the organization owners or shared with the member pharmacy owners?
AAP is a true cooperative. Our application fee is $500, and that’s it. We don’t have any membership dues.
6. What types of additional products or services does a buying group provide?
Do some deep digging to understand the types of discounts, programs, analytics and services the group offers. There are strengths and economies realized with group buying power that, when used effectively, will provide efficiencies for group participants.
7. Does the group or wholesale supplier require a contractual termination commitment?
Your business will change and evolve. It is important that your business relationships provide flexibility. Understand there may appear to be advantages today for a two- or three-year purchasing commitment, but will those same advantages apply in 12 months, or even six months, as your business changes? Be careful not to put limitations on your business success by entering into a fixed, long-term binding commitment.
8. Does the group provide a customized and flexible purchasing program?
When it comes to purchasing inventory for your pharmacy, there are many market forces and uncertainties that may require agility and change. Your pharmacy buying group’s ability to allow you to maintain flexibility, while also advising you on adjustments to optimize your buying strategy, is crucial. Do keep in mind that while it is easy for a group to claim they are flexible, real-world customer experience will usually indicate otherwise.
AAP offers three primary vendor agreement (PVA) options with our national primary wholesaler. We can analyze your purchasing and help you decide which PVA works best for you.
9. Does the group show you how to purchase inventory?
Wholesale supplier Brand Rx pricing, Generic Rx pricing, OTC pricing, rebates, secondary suppliers pricing, etc., are all tied together. Too much exclusive focus on any one element, without the consideration of the others, can negatively impact store profits. Aggregating purchases is the foundation of most groups, but no two pharmacies are the exact same. What works for one may be detrimental for another. It’s important to understand how to navigate and then maximize YOUR bottom line.
10. What are the benefits of an AAP Membership?
As an AAP Member, pharmacies benefit from collaboration, expertise and guidance from our industry experts, plus enhanced buying power, patronage dividends, API Warehouse, ProfitAmp business analytics, SmartSync simplified bulk ordering, free Retail Plan-O-Grams and other innovative programs.
Learn more about independent pharmacy buying groups here.