South Dakota Pharmacy Industry: Current Market Conditions

By Brad MacLiver
Authorship and profile at Google


There are currently several factors that are having an impact the current market conditions of the U.S. pharmacy industry. These factors are affecting the pharmacy business valuations of pharmacies in SD and drug stores all across the U.S.

Local demographics:

The valuation process also uses local market conditions and local demographics.  Smaller communities, which have less growth potential, and declining profits mean a buyer will need to purchase at a lower value because they will have to service the debt from a business loan and try to make a living at the same time.  This is also true for any community that has lost population due to economic conditions or has a high rate of unemployment. Fewer people and fewer customers that have the ability to purchase will mean reduced sales and less chance of any substantial improvement in the near term. The end result of this are lower pharmacy business values.

South Dakota Pharmacists Shortage:

Pharmacies in South Dakota and across the country have had difficulties in finding pharmacists.  This shortage of pharmacists not only affects employee opportunities it also affects the number of potential independent buyers. 

Fewer Buyers:

There are also fewer corporate buyers. Some of the largest pharmacy chains have been purchased and consolidated in the SD pharmacy industry roll up. Many smaller chains have run into financial difficulties and have stopped their expansion. It is more difficult to drive a price higher when there are fewer willing, or capable, to purchase.

Current Market Conditions Requires Industry Roll-up:

The consolidation of the pharmacy industry is required to get more traffic into a single store.  Due to simple economics, when any business has a reduction in profits they are less attractive to a buyer and pharmacy business values drop. There are many factors contributing to the downward pressure of South Dakota pharmacy values and there is not any expectation of a turn around. Pharmacy owners should not be fooled by inexperienced Brokers claiming grand outcomes and over stating pharmacy business values not based on realistic market conditions.

With the consolidation of the pharmacy industry that has been happening for several years, many new brokers have entered the market to broker pharmacy acquisitions. Most brokers do not have pharmacy related experience, nor do they use current market conditions when they value a pharmacy. Most are using simple accounting formulas that hold no sound reasoning for the value when faced with current pharmacy market conditions. Due to this many brokers are valuing pharmacies in South Dakota 2 to 3 times more than what the market is really willing to pay. Any inexperienced person can quote a high value to capture a listing.  However, that does not mean the over inflated asking price is what the business will actually sell for.

Mail Order:

Some insurance companies are designating a noticeable amount of pharmacy patients in SD as “long-term medications” and require they only purchase the medications from mail order pharmacy companies who provide products at lower prices. This results in local pharmacies not only missing out on prescription sales, but front-end sales will also decline since the customer is not entering the store. Pharmacy mail order sales have now surpassed sales from independent retail pharmacies.

Choose a firm that provides South Dakota pharmacy business valuations based on real market conditions and does not use a simple formula for calculating the value of a pharmacy. Complex methods are used to derive the value of a pharmacy.

It is best to use a company that specializes in pharmacy in South Dakota and has extensive and current industry data.  Choose pharmacy specialists who have been working in the pharmacy industry long enough to have extensive pharmacy experience and an excellent reputation.  A company with good credentials possesses large amounts of national data.  The largest financial institutions, national chain pharmacies, regional pharmacy chains, independently owned drug stores, and pharmacy equity investment groups use the services of companies fitting this description.

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