Could Bankruptcy Save Local Pharmacies?

Posted on August 14, 2018 at 12:00pm by
Picture of Pharmacy

According to the Missouri Pharmacy Association’s CEO, times are tough for independent pharmacies in our state. Large competitors, falling prescription rates and fewer people filling prescriptions are taking a toll on corner drug stores. However, some of these pharmacies are finding relief and staying open thanks to bankruptcy.

How Can Bankruptcy Help Local Pharmacies?

In 2016, Family Pharmacy Inc. filled around 1.4 million prescriptions. By 2017, that number had fallen to just 1 million. This caused profits for the company to drop. In 2015, the company saw $686,000 in profits. By 2017 it had lost $7.5 million. Due to this loss, the company filed for Chapter 11 bankruptcy, but the company has no intention of closing.

Chapter 11 bankruptcy filings can help provide a structure for businesses to repay their debts through a court-supervised reorganization. The court and a committee of the business’ creditors will work together with business owners to negotiate the best course for the company. In this process, debts can be reduced, and contracts can be broken and renegotiated. That means better lease deals can be worked out, or employees can set new terms for their employment, which can allow them to keep their jobs.

How Will Family Pharmacy Use Chapter 11 to Save Its Business?

In the case of Family Pharmacy Inc., it appears that Smith Drug Co. may buy the business. Smith Drug Co.—a division of J.M. Smith Corp. that wholesales pharmaceuticals—is Family Pharmacy’s largest creditor. Outside analysts believe that the wholesaler intends to save Family Pharmacy, which has 20 locations. But it will take an investment of time and money to bring the independent pharmacy chain back to profitability.

For Family Pharmacy, the company did not have enough time to adjust its business model to changes in the market. This prevented it from turning a profit. However, the measures made available by Chapter 11 bankruptcy could give the company the time it needs to make changes. Other independent pharmacies could also follow this example if they are met with similar difficulties.

To learn about your business’ options when it comes to handling debt, reach out to The Sader Law Firm. We can help give businesses more options when it comes to handling debts and creditors.