The announcement of Smith Drug’s closure has created something every community pharmacy owner understands all too well: uncertainty.

When a sourcing partner unexpectedly leaves the market, the immediate questions come quickly:

Where will I get my inventory? Will I be able to open an account with another full-line supplier? What will happen to my pricing? How do I make sure my pharmacy continues operating without disruption?

Those are legitimate concerns.

But while the situation may feel urgent, urgency should not be confused with the need to make a rushed decision.

Purchasing prescription drugs is one of the largest expenses—and one of the greatest opportunities to protect profitability—in a community pharmacy. Your wholesaler and GPO relationships can affect acquisition cost, rebates, purchasing compliance, inventory availability, cash flow and ultimately your pharmacy's ability to serve patients.

That makes choosing a new sourcing partner an important business decision.

If you are evaluating your options following the Smith closure, here are six things worth considering before signing a new agreement.

1. Did the Supplier Know You Before You Needed Them?

One of the first questions I would ask a prospective supplier is simple:

"What relationship did you have with my pharmacy before this announcement?"

There is nothing wrong with suppliers reaching out to pharmacies affected by the closure. In fact, competition for your business can be healthy.

But there is a difference between a company that has been trying to build a relationship with you and a company that suddenly appears because they know you need somewhere to put your business.

Ask yourself:

• Have they tried to partner with your pharmacy before?
• Did they understand your business before this situation occurred?
• Have they demonstrated a commitment to independent pharmacy?
• Do they understand the challenges you face with reimbursement, inventory and margins?
• Are they interested in a long-term relationship or simply capturing your volume?

How a company treats you when you don't need them can tell you a lot about how they may treat you after they have your business.

This is a good opportunity to look beyond the sales pitch and evaluate the relationship you are actually being offered.

2. Can You Realistically Get Approved?

Getting excited about a new supplier's pricing is easy.

Getting approved for the account is another matter.

Before you make plans around a new full-line supplier, have an honest conversation about the application and approval process.

Ask:

"Based on what you know about my pharmacy, do you believe I am likely to qualify for an account?"

No supplier can—or should—guarantee approval before completing its credit and regulatory review. But a good supplier should be willing to have a candid conversation about the requirements and potential challenges.

Ask questions about:

• Credit requirements
• Regulatory requirements
• Licensing
• Financial documentation
• Account setup timelines
• Purchasing requirements
• GPO affiliation
• Geographic considerations
• Any other requirements that could affect your approval

The last thing a pharmacy needs after losing a sourcing partner is to assume it has a replacement lined up, only to discover weeks later that the new account cannot be opened.

Understanding your probability of approval allows you to diversify your options instead of putting all of your eggs in one basket.

3. Ask for References—and Actually Call Them

Every salesperson has a story about how great their company is.

Your job is to find out what their customers think.

Ask a prospective supplier for references from independent pharmacies in your region that are similar to your business.

Then call them.

Don't just ask whether they like the supplier. Ask specific questions:

• How responsive are they when there is a problem?
• Does the pricing actually match what you were promised?
• How easy is it to reach someone when you need help?
• How often do you experience out-of-stocks?
• Do you understand your purchasing requirements?
• Are the rebate or compliance expectations clear?
• How difficult is it to manage the relationship?
• What surprised you after becoming a customer?
• If you could make the decision again, would you choose them?

That last question can be particularly revealing.

Your peers have already lived through the onboarding process, the first invoice, the first shortage, the first pricing dispute and the first time they needed someone to answer the phone.

Talk to them before you make the commitment.

4. Do You Really Understand What You Are Being Offered?

This may be the most important question of all.

A supplier can present an attractive offer with better pricing, rebates, discounts, compliance incentives or GPO benefits.

But do you understand exactly what you have to do to earn those economics?

Before signing, make sure you understand:

• What purchasing requirements exist?
• What products qualify?
• What products do not qualify?
• What are the GPR/GCR or other compliance requirements?
• How are rebates calculated?
• What purchasing behavior is being incentivized?
• What happens if you miss a threshold?
• Are there requirements around primary versus secondary purchasing?
• How often are the metrics calculated?
• Who is responsible for monitoring your compliance?
• What happens if the economics change?

If something doesn't make sense, stop and ask questions.

Do not allow the pressure of a supplier transition to push you into an agreement you don't fully understand.

The best sourcing relationship is one where both sides clearly understand what success looks like.

If you and your supplier aren't on the same page on Day One, you're setting the relationship up for frustration later.

5. You Don't Have to Make a Permanent Decision Today

This is where we believe independent pharmacies have an important advantage.

You have options.

The Smith closure creates a legitimate need to establish product coverage quickly. But establishing product coverage and choosing your long-term sourcing strategy do not necessarily have to be the same decision.

A pharmacy can use technology and secondary sourcing resources to help bridge the gap while it evaluates the broader marketplace.

That's one of the reasons Pharmacy Marketplace exists.

Rather than forcing a pharmacy to immediately replace one sourcing relationship with another, Pharmacy Marketplace can help provide access to alternative product sourcing while the pharmacy evaluates its options.

That can give pharmacy owners something incredibly valuable during a stressful transition:

TIME. 

Time to compare suppliers.

Time to understand GPO programs.

Time to evaluate pricing.

Time to understand compliance requirements.

Time to talk to other pharmacy owners.

Time to determine what purchasing strategy actually makes sense for your business.

And most importantly, time to make a calm, educated decision rather than an emotional one.

6. Don't Underestimate the Value of a Strong Full-Line Wholesaler and GPO Relationship

At Pharmacy Marketplace, we are not advocates for eliminating the traditional wholesaler relationship.

We believe there is tremendous value in having a strong full-line wholesaler and GPO partner.

A reliable primary supplier can provide product availability, distribution infrastructure, credit, service, contracting, purchasing programs and access to the broader benefits of a GPO relationship. For many community pharmacies, that relationship is an important foundation of the business.

In fact, Pharmacy Marketplace collaborates with many full-line wholesalers and GPOs across the market through our software.

Our goal isn't to replace those relationships. It is to help pharmacies make better decisions within them.

The right technology can give a pharmacy greater visibility into its purchasing, help it understand where its dollars are going, monitor compliance with its agreements and identify opportunities that may otherwise be missed.

It can also provide flexibility when a product isn't available through the primary channel or when a pharmacy needs to evaluate alternative sourcing options.

The future isn't necessarily about choosing between a full-line wholesaler and alternative sourcing. It can be about using both strategically.

The strongest model may be a pharmacy that has a dependable primary relationship while also having the data, visibility and tools to make informed secondary purchasing decisions when appropriate.

That is where we believe Pharmacy Marketplace can play an important role.

Don't Replace One Problem With Another

The Smith closure is a significant event for community pharmacy. Losing a sourcing partner can create anxiety, but it can also be an opportunity to reassess your purchasing strategy.

Don't simply ask:

"Who can replace Smith?"

Ask:

"What sourcing strategy gives my pharmacy the best combination of access, economics, flexibility, service and long-term sustainability?"

Those are two very different questions.

A strong full-line wholesaler and GPO relationship can be an important part of that answer. So can technology, data and strategic secondary sourcing.

The goal shouldn't be to eliminate one in favor of the other.

The goal should be to build a purchasing strategy that gives the pharmacy owner more control.

At Pharmacy Marketplace, we believe independent pharmacies should have the tools and visibility to understand their purchasing decisions, protect their economics and maintain flexibility.

If you're navigating a sourcing transition, don't panic.

Protect your inventory first. Evaluate your options second. Make the long-term decision when you have the information you need.

Your pharmacy has too much at stake to make a permanent sourcing decision based on a temporary sense of urgency.