Mail order pharmacies have exploded in popularity given that people want a secure, discrete, and moderate cost way of obtaining their prescription medications. Not only have mail order pharmacies exploded as standalone businesses, but traditional pharmacies have begun to offer these services as well. One of the most important strengths related to a mail order pharmacies that these businesses are completely immune from negative changes in the economy given that medications and related products are required by people in times of economic prosperity as well in times of economic recession. The gross margins generated from each sale through a mail-order pharmacy typically ranges from 10% to 20% depending on the product being sold. Mail-order pharmacies also have very high barriers to entry, but they also have very high start up costs. A new mail order pharmacy can cost nearly $500,000 to $1 million to launch operations. A substantial portion of this capital is typically used for the acquisition of pharmaceutical inventories. The licensure requirements and need to have a number of licensed pharmacist on staff also creates very high barriers to entry for these businesses. However, once established, these companies can be extremely lucrative for their owners.
For weaknesses, mail order pharmacies have a number of issues that they need to contend with on a day-to-day basis. First, they need to have an extensive staff in place that includes pharmacists, pharmacy technicians, billing specialists, and administrative employees that manage all incoming orders from physicians. This lends to a very high operating cost given that these professionals often want to have large benefit packages as well for working for the business. Additionally, one of the other key weaknesses is that these businesses need to have a very large marketing campaign in order to ensure that clients will become enrolled in the mail-order pharmacies drug distribution services.
For opportunities, most common way that these businesses expand is by increasing the size of their marketing campaign so that they are able to obtain new clients on a regular basis. Additionally, many mail-order pharmacies will establish relationships with assisted-living facilities, nursing homes, palliative care centers, hospitals, and medical clinics that they can serve as the wholesale distributor for any pharmaceuticals required by these third-party medical entities. Finally, many mail-order pharmacies will also seek to establish businesses that are already in operation in order to expand their revenues through non-organic means. One of the nice things about these businesses is that they are able to generate income not only from patient payments but also from publicly funded healthcare systems including Medicare and Medicaid. Many private insurance companies also prefer that their patients fulfill their prescriptions through mail order pharmacy given the lower cost associated with these types of services.
For threats, the landscape regarding insurance reimbursement and publicly funded healthcare reimbursement is constantly changing. As such, a decline in reimbursement can have a substantial impact on a profit and loss statement for a mail order pharmacy. However, given that these businesses are able to properly control their costs given that they are not located in an expensive retail area – these risks are somewhat less for these types of companies. One of the other threats that may occur is that there may be a change in legislation that impacts the way the mail order pharmacy conducts business. However, these are risks faced by all pharmacy and medical related businesses and remaining on top of these issues can ensure that these threats are properly ameliorated as they come up.