Pharmacy Profit Ratios: There are a number of components that are considered when deriving a pharmacy's realistic business value. Two of those components are the sales and profit ratios. We know that due to the aging population and new drugs being introduced that in general most pharmacies are seeing an increase in sales. However, due to federal regulations and other market conditions, net profit ratios are typically declining although sales are increasing.

Reimbursements: Reimbursements have been reduced and this is negatively impacting the pharmacy owner's profit. Additional cuts in pharmacy reimbursements are expected. On top of that, some states have become slower in paying the reimbursements. With many states getting into financial difficulties themselves, pharmacy owners will need to plan for the possibility of slower cash flow, or even an interruption of the reimbursement payments.

Medicare/Medicaid: When a pharmacy business has a larger portion of prescription sales in Medicare/Medicaid then the cuts in reimbursements, and slower payments, will have a more profound effect on the pharmacy owner's net profits. Some owners, out of necessity, will require the use of funds from accounts receivable financing, or some other type of financing.

Taxes: Higher, or new taxes, for personal income, business income, capital gains, consumption (VAT), and others are being considered by the government. Fewer dollars in the hands of the consumer will mean fewer purchases at their local pharmacy, while at the same time business expenses will increase. Due to higher expected taxes, pharmacy buyers will adjust their acquisition offers to meet Return on Investments requirements.

Mail Order: Some insurance companies are designating a noticeable amount of pharmacy patients 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.

Health Care Costs: With the rising costs of healthcare companies all around the U.S. have stated that health care costs have become a major concern and have either cut benefits, or proposed other ways to hold down their healthcare costs. These decisions will affect a pharmacy's gross sales and net profits.

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