Private pharmaceutical manufacturers seem to be bouncing back from the recession faster than the private drugstores that sell their drugs, according to research from Sageworks, a financial-information company.
In 2006 the annual revenue growth for private pharmaceutical manufacturers was about 15.6%. Although that number dropped to 10.6% in 2007, it jumped back up in 2008 and stayed within a two-point range. Over the past two years, the sales percent change for private pharmacos averaged 13.84%.
“Really through the recession, the manufacturing side didn’t take as big of a hit as the store side did,” says Sam Zippin, analyst at Sageworks. “They stayed consistent both in their sales growth and in their net profit margin.”
Pharmacies, on the other hand, fell from about 5.7% in 2007 to a low of 1.12% in 2009. But sales are rebounding, reaching 2.4% last year.
One possible explanation for the drop in sales growth at drugstores: pharmacies often sell more than prescription drugs, says Zippin. “If you’re in CVS, the candy you buy might also be part of that sales number,” he says. “Sales in their other things, like toiletries, food, or candy, might have been going down in other areas. So it depends on how the accountant is breaking it out.”
It’s also possible that drugstores were hit harder by the recession than pharmaceutical manufacturers, since pharmacies were forced to compete with large, mail-order pharmacy benefit managers like Express Scripts and Medco. The two PBMs are moving ahead with plans to join forces after the Federal Trade Commission approved their controversial merger Monday.
Both privately held pharmaceutical makers and pharmacies have also been plowing increasing amounts of cash into working capital. From 2008 to 2011, the ratio of working capital to assets increased in both industries. The data included private pharmaceutical manufacturers and pharmacies with annual revenues of $1 million to $10 million.