Latest / Pharmacy Podcast Network / Infusion, Distributor Cut-offs, Nexus Issues, Personal Guarantees, Financing | The Bottom Line Rewind

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Infusion, Distributor Cut-offs, Nexus Issues, Personal Guarantees, Financing | The Bottom Line Rewind · Pharmacy Podcast Network

• 0:05
  Speaker 1: You are listening to the global network of podcasters dedicated
• 0:09
  Speaker 1: to the pharmacy profession.
• 0:10
  Speaker 2: Welcome to the Pharmacy Podcast Network.
• 0:33
  Speaker 3: Welcome back to the Bottom Line Rewind, the show that
• 0:36
  Speaker 3: shares all the best moments from this past month on
• 0:39
  Speaker 3: the Bottom Line Pharmacy podcast. This month, we've got four
• 0:42
  Speaker 3: great interviews lined up on infusion pharmacy, distributor cutoffs, peptides,
• 0:48
  Speaker 3: and personal guarantee insurance. Plus, we're bringing you an exclusive
• 0:52
  Speaker 3: interview that talks about financing a pharmacy acquisition. If you
• 0:55
  Speaker 3: want to check out the full conversation, you'll find the
• 0:57
  Speaker 3: links to each of these interviews in the description of
• 0:59
  Speaker 3: this episode. Check them out. First up, a clip from
• 1:06
  Speaker 3: Infusion Pharmacy Ownership in 2026 featuring Patrick Carpenter and Chris
• 1:11
  Speaker 3: Patillo of Boson & Snow Law. We talk about transaction
• 1:15
  Speaker 3: and regulatory trends facing infusion pharmacies.
• 1:18
  Speaker 4: Check it out.
• 1:19
  Speaker 3: I guess kind of shifting gears here, you know, we
• 1:20
  Speaker 3: could talk about some of the transactions that you guys
• 1:25
  Speaker 3: are seeing, some of the transaction trends you guys are
• 1:27
  Speaker 3: seeing on the infusion side. Talk a little bit about
• 1:31
  Speaker 3: maybe some of the, you know, I guess, an overview
• 1:36
  Speaker 3: as to what kind of transactions you're seeing? What are
• 1:39
  Speaker 3: some deal risks that owners are running into?
• 1:42
  Speaker 5: Yeah.
• 1:44
  Speaker 1: I mean, I think the regulatory diligence for a transaction
• 1:48
  Speaker 1: involving an infusion pharmacy really is checking the underlying regulatory compliance.
• 1:54
  Speaker 1: I mean, is the pharmacy operating with the licensure it needs?
• 1:58
  Speaker 1: Is it operating according to the standards that govern its practice?
• 2:02
  Speaker 1: Is everyone... Are the employees licensed? I mean, you could
• 2:05
  Speaker 1: expand to if they're accepting government payers, are they on
• 2:09
  Speaker 1: the list of excluded providers? But the scope of diligence
• 2:13
  Speaker 1: in a transaction can also encompass the matters Chris was discussing,
• 2:17
  Speaker 1: just contractual review and quality of earnings. We tend to
• 2:22
  Speaker 1: be more focused on the actual payer contracts, distribution contracts,
• 2:26
  Speaker 1: drug supply contracts, and then again, the regulatory compliance diligence.
• 2:30
  Speaker 4: Are you all getting involved in the quality of earnings?
• 2:33
  Speaker 6: Yeah, I mean, sometimes, you know, when we do, I just,
• 2:38
  Speaker 6: you know, the one thing I was going to expand
• 2:39
  Speaker 6: a little bit on or just kind of from what
• 2:43
  Speaker 6: Patrick said is the due diligence process, especially in a
• 2:46
  Speaker 6: compounding pharmacy, is so important, right? Because fixes to the
• 2:51
  Speaker 6: HVAC system, the air changes, right, depending on what type
• 2:55
  Speaker 6: of clean room it is, could be potentially multimillion-dollar investments beyond.
• 3:01
  Speaker 4: What a purchaser is expecting, right?
• 3:04
  Speaker 6: So that's a very, you know, I do a lot
• 3:06
  Speaker 6: of on-site evaluations and due diligence reviews at various pharmacies,
• 3:10
  Speaker 6: and that's a very big focus right now in home
• 3:13
  Speaker 6: infusion if somebody's going through that. And then same thing
• 3:16
  Speaker 6: with the quality of earnings that you mentioned. Having a
• 3:20
  Speaker 6: lot of bad debt and having a lot of outstanding
• 3:27
  Speaker 6: receivables should be a fairly big red flag to who's
• 3:30
  Speaker 6: ever purchasing that pharmacy because that is most likely there's
• 3:34
  Speaker 6: a good chance it could turn into bad debt. So
• 3:36
  Speaker 6: that is something that is part of our due diligence process.
• 3:41
  Speaker 5: Yep.
• 3:41
  Speaker 2: That's one thing we've learned in this infusion space for
• 3:45
  Speaker 2: sure is the RCM process and how there can be
• 3:48
  Speaker 2: lots of bad debt situations and receivable situations. And that
• 3:54
  Speaker 2: was brought up about every few minutes when we were
• 3:56
  Speaker 2: at the last trade show. But it is something like that.
• 4:00
  Speaker 2: The due diligence on that is huge.
• 4:03
  Speaker 6: Oh, it's quite scary. You know, I've looked at some
• 4:06
  Speaker 6: P & Ls in my career where the amount of
• 4:11
  Speaker 6: outstanding receivables is exceeding their, you know, monthly, every two,
• 4:16
  Speaker 6: every three months revenue, right? You know, and not all
• 4:20
  Speaker 6: of that's because of the pharmacy. Even, you know, I
• 4:22
  Speaker 6: know we've mentioned talking about like home infusion consolidations, but
• 4:26
  Speaker 6: there's been a lot of insurance company consolidations too. And
• 4:29
  Speaker 6: there's been a lot of very large IT hiccups when
• 4:32
  Speaker 6: they consolidate, you know, the systems aren't a one for one.
• 4:35
  Speaker 6: So you start submitting claims and it just gets in
• 4:37
  Speaker 6: a backlog until somebody's able to fix it.
• 4:40
  Speaker 4: Yeah.
• 4:40
  Speaker 5: Right.
• 4:41
  Speaker 2: And a lot of what we hear is, you know,
• 4:42
  Speaker 2: because these are expensive drugs, these infusions, and, you know, insurance,
• 4:46
  Speaker 2: of course, is going to push back as much as
• 4:48
  Speaker 2: they can. And so there's times someone was explaining to
• 4:52
  Speaker 2: me that, you know, this patient may have had that
• 4:55
  Speaker 2: infusion three times before they get the final, final denial, like,
• 4:59
  Speaker 2: we're not going to pay for this. And so that
• 5:02
  Speaker 2: could be $ 40, 000, $ 60, 000 that they're out.
• 5:05
  Speaker 4: Or more, yeah.
• 5:07
  Speaker 7: Or more?
• 5:07
  Speaker 8: Oh, yeah. Yeah.
• 5:09
  Speaker 5: So....
• 5:11
  Speaker 2: That AR, no matter what kind of pharmacy, that inventory
• 5:15
  Speaker 2: is where it's at. You got to make sure that
• 5:17
  Speaker 2: stuff is right for sure.
• 5:20
  Speaker 3: Our second clip comes from Inside a Distributor Injunctive Relief
• 5:26
  Speaker 3: 101 with Michael Alexander at Brown and Fortunato Law Firm.
• 5:30
  Speaker 3: We talk about red flags to pay attention to before
• 5:32
  Speaker 3: a distributor cutoff hits your pharmacy. Here's that clip.
• 5:36
  Speaker 7: Some of those, like a pharmacy, you know, operating normally,
• 5:43
  Speaker 7: doing nothing sketchy or anything like that in terms of opioids,
• 5:49
  Speaker 7: normal dispensing. Where does a pharmacy maybe cross into the
• 5:55
  Speaker 7: issues of having this potential issue arise? What are those
• 6:01
  Speaker 7: red flags? What pharmacies need to do to monitor this
• 6:06
  Speaker 7: on their own end to make sure they're not getting
• 6:08
  Speaker 7: into any issues here? Because like you said, If they
• 6:12
  Speaker 7: do get cut from the distributor, that has a detrimental
• 6:15
  Speaker 7: impact to the pharmacy.
• 6:17
  Speaker 5: So, I mean, one, just know what the red flags are.
• 6:21
  Speaker 5: And they're easy to know because they're stated in the
• 6:23
  Speaker 5: injunction relief. So my advice to clients all the time
• 6:26
  Speaker 5: is just pull it.
• 6:27
  Speaker 4: Up and read it. The distributor's mandate is to know
• 6:31
  Speaker 4: their customers.
• 6:32
  Speaker 5: And a pharmacy works within that by knowing itself before
• 6:35
  Speaker 5: the distributor knows them in a sense itself. Things like
• 6:39
  Speaker 5: your controlled substance to non-controlled substance ordering ratio and dispensing ratio,
• 6:46
  Speaker 5: your C2 versus your non-C2 controlled substances, your general categories
• 6:52
  Speaker 5: of what are your ratios of opioids to non-opioids. So
• 6:56
  Speaker 5: you're looking at a whole lot of ratio data, your
• 6:58
  Speaker 5: stimulants versus your non-stimulants. Where are your prescribers? Is there
• 7:04
  Speaker 5: a great deal of distance between your prescribers and you?
• 7:08
  Speaker 4: Is there distance between your prescribers and their patients? Where
• 7:12
  Speaker 4: are your patients?
• 7:13
  Speaker 5: Are your patients driving past for their pharmacies to get
• 7:16
  Speaker 5: to you?
• 7:17
  Speaker 4: And if so, why?
• 7:19
  Speaker 5: So, uh, these are the types of things, you know, cash,
• 7:23
  Speaker 5: how much of this is cash-based versus non-cash-based, you know,
• 7:26
  Speaker 5: is this being sent up the chain through a payer
• 7:29
  Speaker 5: who's also going to independently be verifying these things, or
• 7:32
  Speaker 5: is this coming in as a cash claim, which are
• 7:34
  Speaker 5: always viewed as, you know, I think that I don't
• 7:37
  Speaker 5: think the DEA or the boards would admit to this,
• 7:39
  Speaker 5: but I think cash claims are always viewed as suspicious
• 7:42
  Speaker 5: until proven otherwise. Uh, And that's by nature of the
• 7:46
  Speaker 5: fact that they've had to deal with them in the past.
• 7:48
  Speaker 5: But these are the types of red flags. So they're
• 7:50
  Speaker 5: not uncommon red flags that people are unaware of. But
• 7:54
  Speaker 5: they are things that the distributor has immediate access to
• 7:58
  Speaker 5: data on and therefore is like, hey, we got an
• 8:01
  Speaker 5: order from ABC Pharmacy. And ABC Pharmacy just put in
• 8:07
  Speaker 5: an order for three times the amount of opioids they
• 8:10
  Speaker 5: normally order.
• 8:11
  Speaker 4: What's going on?
• 8:13
  Speaker 5: Well, there might be a completely valid explanation for it.
• 8:16
  Speaker 5: It might be, hey, we just expanded our pharmacy practice,
• 8:19
  Speaker 5: and we're in an agreement with a hospice care program now,
• 8:24
  Speaker 5: and hospice has a high, high demand for pain medication,
• 8:28
  Speaker 5: a lot of it being opioid-based, and that's a valid prescription.
• 8:33
  Speaker 5: But if that is not communicated to the distributor, then
• 8:38
  Speaker 5: Then the distributor, all they see is an order that's
• 8:41
  Speaker 5: three times outside normal ranges and they're worried because they're like,
• 8:45
  Speaker 5: hold on, why are you doing this? And so it's
• 8:48
  Speaker 5: about knowing what their distributors are looking at.
• 8:53
  Speaker 4: Before the distributors see it.
• 8:55
  Speaker 5: And if something comes up, go into the distributors to
• 8:58
  Speaker 5: talk to them about it. Because the other piece that
• 9:00
  Speaker 5: is difficult in this process is pharmacies are under what
• 9:04
  Speaker 5: are called ordering thresholds. but they're not told what the
• 9:07
  Speaker 5: thresholds are. And that is stated explicitly within the injunction related.
• 9:13
  Speaker 5: They're not, that's not communicated what the thresholds are. So
• 9:16
  Speaker 5: there's just some thresholds sitting out there that a pharmacy
• 9:19
  Speaker 5: has to know that they're under, but they can't know
• 9:22
  Speaker 5: the amount of it. And so you could be coming
• 9:26
  Speaker 5: up on it, not know. And so that's why for me,
• 9:29
  Speaker 5: it's so important. If a pharmacy sees a potential bump
• 9:32
  Speaker 5: in numbers coming, that they flag it, They document it.
• 9:37
  Speaker 5: They have to say, like, why is this going to happen?
• 9:39
  Speaker 5: What are the valid reasons I'm going to see this jump?
• 9:42
  Speaker 5: And then they take it to the distributor, not to
• 9:46
  Speaker 5: the sales team, but the controlled substance monitoring program team
• 9:49
  Speaker 5: and say, hey, guys, I know I have my threshold.
• 9:52
  Speaker 5: I don't know where I'm at with relation to it,
• 9:54
  Speaker 5: but I wanted to let you know, we just expanded
• 9:58
  Speaker 5: into hospice. We're bringing on this new hospice hospital, and
• 10:01
  Speaker 5: we're going to be likely ordering more opioid-based products. We
• 10:06
  Speaker 5: wanted to make you aware of that in the event
• 10:08
  Speaker 5: that our threshold needs gets increased. And oh, by the way,
• 10:11
  Speaker 5: we're not just telling you this. Here's the documentation to
• 10:13
  Speaker 5: show it because it is very much a show-me process.
• 10:16
  Speaker 4: It's not a tell-me process.
• 10:17
  Speaker 5: It's a... Here's the issue coming up, and here's the
• 10:21
  Speaker 5: documentation to show it because the distributors are required to
• 10:25
  Speaker 5: not just take the.
• 10:26
  Speaker 4: Pharmacy's word for it.
• 10:27
  Speaker 5: They have to, as part of their diligence, see the
• 10:28
  Speaker 5: documentation supporting issues.
• 10:33
  Speaker 3: Next up, a clip from the Bottom Line Catch-Up Episode
• 10:36
  Speaker 3: 4 featuring Scotty Sykes, Bonnie Bond, and Austin Murray at
• 10:40
  Speaker 3: Sykes & Company. They're talking about navigating multi-state tax issues
• 10:45
  Speaker 3: for compounded pharmacies. Here's that clip. The other thing, Scotty,
• 10:49
  Speaker 3: I think is interesting that we've been getting a lot
• 10:53
  Speaker 3: of calls about is out-of-state stuff for compounding. This kind
• 10:57
  Speaker 3: of relates to the peptide and the GOP issue is
• 11:01
  Speaker 3: the compounders that are doing out-of-state shipping and operating in
• 11:06
  Speaker 3: multiple states. Bonnie, you've heard this as well. What's kind
• 11:10
  Speaker 3: of the beat on that that you guys are seeing
• 11:13
  Speaker 3: from calls and stuff that we're taking?
• 11:17
  Speaker 2: Well, you know, we've got a lot of people that
• 11:19
  Speaker 2: have called and reached out trying to get these things
• 11:21
  Speaker 2: set up, like you said, ready to go for when
• 11:23
  Speaker 2: this gray area sort of kind of dissipates and, you know,
• 11:25
  Speaker 2: you get the green light. But like you mentioned, nexus
• 11:29
  Speaker 2: and issues with other states, shipping into other states can
• 11:32
  Speaker 2: cause a... It's not difficult, but it has to be handled.
• 11:37
  Speaker 2: And a lot of people we talk to are aware
• 11:40
  Speaker 2: of this and they're on top of it, but then
• 11:42
  Speaker 2: we have some that have no.
• 11:43
  Speaker 6: Clue about it.
• 11:44
  Speaker 2: Because there's a lot of people get into this space
• 11:46
  Speaker 2: that haven't had... They may have a pharmacist that they're
• 11:49
  Speaker 2: working with or part of their team, but they may
• 11:53
  Speaker 2: not be a pharmacist themselves or a compounder. And so
• 11:56
  Speaker 2: this is all new.
• 11:56
  Speaker 5: So....
• 11:58
  Speaker 2: That's one of the key areas that we all got
• 12:00
  Speaker 2: to be really careful of. Anybody coming and jumping into
• 12:02
  Speaker 2: the space, if you start delivering and selling into other states,
• 12:07
  Speaker 2: there's a lot of issues there because you got to
• 12:10
  Speaker 2: make sure you're covered on.
• 12:11
  Speaker 3: Well, and I'll tell you, there are a lot of
• 12:17
  Speaker 3: people entering the peptide space. So that leads me to
• 12:22
  Speaker 3: believe that this is pretty much– it's pretty much inevitable
• 12:27
  Speaker 3: that they're going to– that they're going to take it
• 12:31
  Speaker 3: all– put it onto a– you know, allow it to,
• 12:34
  Speaker 3: to all this, to kind of go through. Um, I
• 12:36
  Speaker 3: don't think people would put this much upfront investment and
• 12:39
  Speaker 3: this much kind of effort into something if they didn't
• 12:42
  Speaker 3: think that it was going to happen. Um, you know,
• 12:45
  Speaker 3: so they, they must see something on a regulatory perspective that, um,
• 12:49
  Speaker 3: is positive in that regard.
• 12:51
  Speaker 1: Yeah.
• 12:53
  Speaker 7: Well, the going back to, um, This often gets overlooked.
• 12:58
  Speaker 7: You know, you open a business, you're doing compounding, you're
• 13:02
  Speaker 7: selling to patients, you're shipping over here, shipping over there.
• 13:05
  Speaker 7: You're not, not really thinking about it, but these States,
• 13:09
  Speaker 7: you got to watch out. You know, every state's a
• 13:11
  Speaker 7: different jurisdiction. They have their own tax rules and.
• 13:14
  Speaker 8: They want money.
• 13:14
  Speaker 7: You know, they want, they want their share of filings
• 13:19
  Speaker 7: and their regulations need to be addressed. And, I guess
• 13:25
  Speaker 7: you can brush it under the rug, but A, you
• 13:31
  Speaker 7: may get a tax notice of some sort. Obviously, you're
• 13:35
  Speaker 7: probably licensed in the state you're shipping to, so that's
• 13:38
  Speaker 7: kind of a state already is aware you're out there.
• 13:41
  Speaker 7: And then B, a lot of these compounders are building
• 13:45
  Speaker 7: up and they're building big facilities and there's going to
• 13:49
  Speaker 7: an exit ramp of some sort and that exit ramp
• 13:53
  Speaker 7: The potential buyer, well, they're going to be asking, how
• 13:57
  Speaker 7: are you compliant.
• 13:58
  Speaker 4: With all these things?
• 13:59
  Speaker 7: And if you don't have answers, that's going to hurt
• 14:02
  Speaker 7: you from a valuation standpoint.
• 14:04
  Speaker 8: Yeah.
• 14:05
  Speaker 2: And you've got to look at it, too, Scotty, in
• 14:06
  Speaker 2: two different ways, too. So we're talking about sales tax,
• 14:09
  Speaker 2: and we're also just talking about general revenue.
• 14:11
  Speaker 8: Right.
• 14:12
  Speaker 2: When it comes to filing a tax return, do you
• 14:15
  Speaker 2: need to file a tax return in that state? So
• 14:17
  Speaker 2: it's really two different areas. And there's thresholds. And just
• 14:21
  Speaker 2: like with everything else, every state is different. So it's
• 14:23
  Speaker 2: not something you can just figure out one time. You've
• 14:26
  Speaker 2: got to figure it out 50 times if you're going
• 14:28
  Speaker 2: in all these different states. So it's a lot to it.
• 14:31
  Speaker 2: So that's why folks like us are here.
• 14:34
  Speaker 7: Well, you have sales tax, you have the income tax,
• 14:37
  Speaker 7: and there's rules between all those. Every state's different. Then
• 14:40
  Speaker 7: you may even have some local, county issues. So, you know,
• 14:48
  Speaker 7: like I said, You.
• 14:50
  Speaker 2: Know, like I say, just for instance, the state of
• 14:53
  Speaker 2: Illinois is a state that charges a percentage regardless. Like
• 14:57
  Speaker 2: there's not exclusions from that for certain, for prescriptions like
• 15:02
  Speaker 2: there are for some states. So there's just, it's all different.
• 15:05
  Speaker 2: So you just make sure as you're setting these things up,
• 15:08
  Speaker 2: if you're moving in this direction, and this goes with
• 15:10
  Speaker 2: retail or, you know, any.
• 15:13
  Speaker 6: Any multi-state.
• 15:14
  Speaker 5: Yeah.
• 15:15
  Speaker 2: If you're doing things in other states, you got to
• 15:17
  Speaker 2: think about it.
• 15:18
  Speaker 5: Yeah.
• 15:20
  Speaker 3: Yeah, so this could be somebody who owns pharmacies on
• 15:24
  Speaker 3: the border of Oklahoma and Texas or something like that.
• 15:26
  Speaker 3: And they've got pharmacies on one side and then a
• 15:29
  Speaker 3: couple pharmacies on the other side. It could also be
• 15:32
  Speaker 3: you're a pharmacy owner of a pharmacy out in– uh
• 15:38
  Speaker 3: you know let's say california but you actually live in
• 15:42
  Speaker 3: like tennessee um you know so you've got that to
• 15:46
  Speaker 3: potentially consider if.
• 15:47
  Speaker 7: You got employees multi-state you're definitely in the.
• 15:49
  Speaker 3: Next oh yes sales reps i mean that's a huge
• 15:52
  Speaker 3: that's a huge one sales rep the sales rep part
• 15:55
  Speaker 3: is huge for compounders.
• 15:57
  Speaker 2: And delivery obviously you could be here and you deliver
• 16:00
  Speaker 2: if you're in south carolina you're delivering to north carolina
• 16:02
  Speaker 2: you know you're close to the border it's all those.
• 16:04
  Speaker 3: Things yeah Next up, a clip from Personal Guarantee Insurance
• 16:09
  Speaker 3: 101 with Ryan Conner, president at Braddock Road Insurance Group.
• 16:13
  Speaker 3: We're talking about what personal guarantee insurance is and why
• 16:16
  Speaker 3: it's important.
• 16:17
  Speaker 8: Here's that clip.
• 16:18
  Speaker 7: So just 101, our listeners on the personal guarantee, Ryan. So,
• 16:25
  Speaker 7: you know, you're in a transaction, you're buying a pharmacy,
• 16:28
  Speaker 7: you got an SBA. You have to personally guarantee that the...
• 16:35
  Speaker 7: The pharmacy, you know, something happens at the pharmacy level.
• 16:39
  Speaker 7: Maybe you have a distributor freeze in terms of controlled substances.
• 16:44
  Speaker 7: Your business is cut in half. You know, you're struggling there.
• 16:49
  Speaker 7: Where does the personal guarantee come in there, you know,
• 16:53
  Speaker 7: should the business kind of go under there?
• 16:56
  Speaker 3: Yeah, absolutely.
• 16:57
  Speaker 9: It's when you have used an acquisition loan to purchase
• 17:02
  Speaker 9: a pharmacy, you're stepping in or you have an existing
• 17:05
  Speaker 9: pharmacy and potentially you want to expand. Maybe you want
• 17:08
  Speaker 9: to take on some debt. You want to hire some
• 17:11
  Speaker 9: more people. And typically with small business loans, you have
• 17:15
  Speaker 9: that personal guarantee requirement. It's essentially when your business starts
• 17:20
  Speaker 9: to struggle and you can't pay back those loans. I'll
• 17:24
  Speaker 9: give you a scenario. Maybe you've got a really good
• 17:27
  Speaker 9: lock on a rural market and you're the only one
• 17:30
  Speaker 9: in town, but then a CVS comes in three blocks
• 17:34
  Speaker 9: from you. All of a sudden, the monopoly you had
• 17:37
  Speaker 9: in your small town changes very quickly and your revenue
• 17:42
  Speaker 9: starts to drop very significantly. And there's not a whole
• 17:45
  Speaker 9: lot of options you have on how to expand that revenue.
• 17:48
  Speaker 9: And all of a sudden, you really can't make your
• 17:51
  Speaker 9: loan payments. Another reason is loan payments with SBA and
• 17:55
  Speaker 9: conventional loans have changed a lot. over the past three
• 17:59
  Speaker 9: years as the increase in interest rates. So perhaps you
• 18:03
  Speaker 9: started with a loan that was maybe 3%, 4%, 5%
• 18:07
  Speaker 9: business loan, and you could make that every month. But
• 18:10
  Speaker 9: now the cost of that loan has gone up to 9%,
• 18:14
  Speaker 9: and your cash flow just doesn't support that. And so
• 18:17
  Speaker 9: the bank is going to give you a little window
• 18:20
  Speaker 9: of opportunity, potentially one deferral. But after that, if the
• 18:24
  Speaker 9: business is struggling, they are going to basically go in,
• 18:30
  Speaker 9: take over your pharmacy, sell it to someone else. And
• 18:33
  Speaker 9: then after that is when the personal guarantee kicks in,
• 18:36
  Speaker 9: where they go after your home and A lot of times,
• 18:39
  Speaker 9: individual spouses have to sign the personal guarantee, especially maybe
• 18:43
  Speaker 9: you don't have a really high net worth because you're
• 18:46
  Speaker 9: a little younger, you've come out of pharmacy school, you've
• 18:49
  Speaker 9: got some debt. So the little you have, you're going
• 18:52
  Speaker 9: to lose. And that's what's really scary about it is
• 18:55
  Speaker 9: running a pharmacy, running a small business is hard enough.
• 18:58
  Speaker 9: But then if you have the fear of losing your
• 19:01
  Speaker 9: entire nest egg, especially if you got kids, a wife...
• 19:05
  Speaker 9: um a partner whoever it is it's depending on you
• 19:08
  Speaker 9: maybe older parents it's really stressful um so that that's
• 19:12
  Speaker 9: what our solution tries to do is essentially uh reduce
• 19:15
  Speaker 9: that risk uh at an affordable uh a rate so talk.
• 19:19
  Speaker 7: To me about yeah talk to us about that solution
• 19:22
  Speaker 7: you know what what where do you come in on on.
• 19:26
  Speaker 9: In in in this case Absolutely. So we generally get
• 19:30
  Speaker 9: referrals from SBA lenders that work with pharmacists, brokers, accountants, lawyers,
• 19:36
  Speaker 9: and they say, I have an individual that's about to
• 19:39
  Speaker 9: take out a $ 3 million loan to purchase this pharmacy,
• 19:42
  Speaker 9: or they're going to expand their practice. They want to
• 19:45
  Speaker 9: buy a neighboring pharmacy. We look at that. We typically underwrite,
• 19:49
  Speaker 9: look at that deal as it's actually transacting, going into closing.
• 19:54
  Speaker 9: We provide a quote that generally is a certain percentage
• 19:58
  Speaker 9: of the loan. typically not anything that's really going to
• 20:03
  Speaker 9: cause a whole lot of issues and is affordable. And
• 20:05
  Speaker 9: then we come in. If something were to happen, you
• 20:08
  Speaker 9: take over that pharmacy. Maybe the seller has disclosed books
• 20:13
  Speaker 9: and records, or maybe there is a outgoing investigation that
• 20:17
  Speaker 9: you didn't know about. And all of a sudden, the
• 20:19
  Speaker 9: revenue tanks, the store goes under. We come in and
• 20:23
  Speaker 9: typically provide about 50% downside to help mitigate that business disaster.
• 20:31
  Speaker 9: So that's really our goal is we don't solve the
• 20:34
  Speaker 9: entire pain point, but we essentially help turn down the
• 20:37
  Speaker 9: volume from a 10 to a 5. And that's really
• 20:40
  Speaker 9: our goal is just to make it a little easier
• 20:42
  Speaker 9: to be an entrepreneur, but still make it that you're
• 20:45
  Speaker 9: really going to do everything you can to make those payments.
• 20:48
  Speaker 7: Which could be where you keep your house, you know.
• 20:50
  Speaker 8: Yeah.
• 20:50
  Speaker 6: Yeah, absolutely.
• 20:51
  Speaker 2: So it's not a full, it's not a hundred percent.
• 20:53
  Speaker 2: You said you do get, you guys do about 50
• 20:55
  Speaker 2: up to 50. And I'm assuming that depending on there's other,
• 21:00
  Speaker 2: you could do less than that. And then that affects
• 21:02
  Speaker 2: the premium and the coverage is that.
• 21:04
  Speaker 3: Absolutely.
• 21:05
  Speaker 9: And, and a lot of times, you know, especially with,
• 21:08
  Speaker 9: with practices like this, you may have three or four
• 21:10
  Speaker 9: people on the loan. If it's helping reduce the amount
• 21:15
  Speaker 9: for everyone, it can make it a little more practical
• 21:18
  Speaker 9: if you've got three or four individuals that all want
• 21:21
  Speaker 9: to buy a practice together and they've got this coverage
• 21:24
  Speaker 9: in place. It helps, again, just turn down that risk.
• 21:29
  Speaker 3: Our last clip comes from financing a pharmacy acquisition featuring
• 21:33
  Speaker 3: Alan Sykes at Sykes & Company. He talks about how
• 21:36
  Speaker 3: much you actually need to buy a pharmacy in today's
• 21:39
  Speaker 3: pharmacy market.
• 21:40
  Speaker 4: Check it out.
• 21:41
  Speaker 3: One of the most common, I guess, questions that we
• 21:46
  Speaker 3: get is how much money do I need? Some people
• 21:47
  Speaker 3: look at the purchase price of the pharmacy and they think, well,
• 21:52
  Speaker 3: you know, this is the purchase price. You know, so
• 21:56
  Speaker 3: I must just need the purchase price is like 2 million.
• 22:00
  Speaker 3: I must only need 2 million for the deal. But
• 22:03
  Speaker 3: what we often recommend is, you know, you're going to
• 22:07
  Speaker 3: want more than that for a myriad of reasons. I
• 22:10
  Speaker 3: don't want to talk about like how much financing do
• 22:13
  Speaker 3: you actually need for a fund?
• 22:15
  Speaker 8: Well, if you're going the SBA 7A route, let's say
• 22:19
  Speaker 8: on an assumed $ 2 million deal, if you had $ 100, 000
• 22:22
  Speaker 8: in cash availability or $ 150, 000, 10% of that would be $ 200, 000.
• 22:24
  Speaker 8: You might need $ 200, 000 on a $ 2 million arrangement. But
• 22:41
  Speaker 8: we see many transactions that are smaller than that, maybe
• 22:46
  Speaker 8: a million, million to a half, where $ 50, 000 to $ 75, 000
• 22:53
  Speaker 8: to $ 100, 000 of the owner equity injection is needed. And
• 22:57
  Speaker 8: many times the SBA lending institutions will allow the accounting
• 23:02
  Speaker 8: and legal costs that you're investing in on services that
• 23:06
  Speaker 8: you're purchasing online. to help you get up and going
• 23:10
  Speaker 8: to be part of that injection. And then there's some
• 23:16
  Speaker 8: situations that, frankly, again, I'm working on a deal right
• 23:20
  Speaker 8: now where the owner's financing the entire transaction as long
• 23:24
  Speaker 8: as he can go outside and purchase the real estate
• 23:27
  Speaker 8: separately at a very favorable interest rate. But there are
• 23:34
  Speaker 8: some certain terms and conditions I want to make a
• 23:36
  Speaker 8: little bit different. But each situation is different. The needs
• 23:44
  Speaker 8: of the seller are different in many cases. So it
• 23:50
  Speaker 8: just depends.
• 23:53
  Speaker 3: Yeah, absolutely. And I think another tip that another consideration
• 23:58
  Speaker 3: we give people as well is the type of lender
• 24:04
  Speaker 3: that you use is very, very important. Most often, you're
• 24:09
  Speaker 3: going to want to use a pharmacy niche bank, something
• 24:12
  Speaker 3: like a Live Oak Bank or a First Financial Bank
• 24:15
  Speaker 3: for these types of transactions. You really don't want to
• 24:18
  Speaker 3: use a local bank, and I understand a lot of
• 24:21
  Speaker 3: owners might want to use that. It's very tempting to,
• 24:23
  Speaker 3: especially if you've got a buddy that works at the bank,
• 24:25
  Speaker 3: and you kind of want to help them out. You
• 24:27
  Speaker 3: want to be supportive. Talk about why a pharmacy niche
• 24:34
  Speaker 3: bank is going to be more advantageous than perhaps maybe
• 24:36
  Speaker 3: a local bank for acquiring a pharmacy.
• 24:40
  Speaker 8: The key players in the pharmacy arena are typically directly pharmacy-oriented.
• 24:50
  Speaker 8: They have either pharmacist or prior pharmacist experience in the
• 24:54
  Speaker 8: financing direct arena. They understand the terms. They understand the conditions.
• 25:00
  Speaker 8: They understand third-party conditions. They understand compounding. They understand MFA.
• 25:08
  Speaker 8: They understand the whole process. And they understand that a
• 25:12
  Speaker 8: transaction needs to be typically a long-term term financing arrangement,
• 25:17
  Speaker 8: not something on a five-year revolving credit line, which is
• 25:22
  Speaker 8: what we see with a lot of local banks when
• 25:25
  Speaker 8: they reach out and make an offer to someone in
• 25:28
  Speaker 8: a local community. that can be really problematic is they
• 25:33
  Speaker 8: may give you, say, 15- to 20-year terms with a
• 25:36
  Speaker 8: five-year call. That doesn't do you a bit of good
• 25:39
  Speaker 8: because that means that in the five years, they can
• 25:41
  Speaker 8: call the entire note. And when you enter into a
• 25:45
  Speaker 8: purchase of a million-and-a-half, $ 2 million transaction, you best have
• 25:50
  Speaker 8: 10-year-plus type financing that's not callable. There may be varying rates.
• 25:58
  Speaker 8: Situations there where rates can change. Rates may be either
• 26:01
  Speaker 8: fixed or variable. That's a whole other matter. But you've
• 26:04
  Speaker 8: got– the terms are critical. If there's real estate involved,
• 26:08
  Speaker 8: typically that can even help you get even better terms.
• 26:14
  Speaker 8: But while the community and local banks are very important
• 26:17
  Speaker 8: potentially for demand deposits and making local daily deposits– They
• 26:24
  Speaker 8: typically do not understand this industry, and it's a very,
• 26:28
  Speaker 8: very different industry than a regular retail business. Thank you.