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Learning Objectives

  1. Define key terms used for financial analysis and accounting.

  2. Describe the two major financial statements used to assess a pharmacy’s financial and operational performance.

  3. Describe where “the bottom line” of a pharmacy’s financial performance is found.

  4. Describe what is meant by “risk” and how a pharmacy may mitigate it.

  5. Provide tools to better manage a pharmacy and clearly communicate with pharmacy personnel, advisors, and other stakeholders.

Setting the Scene

You have just been promoted to co-manager of a new pharmacy in a large national pharmacy chain. One of your new responsibilities is to review business reports generated by your regional manager and by the pharmacy software system on a periodic basis. Your regional manager expects you to create action plans based on these reports. The pharmacy manager expects frequent updates and has also requested that you provide a high-level overview of how the pharmacy is performing financially and operationally. The company’s accounting firm visits on occasion and seems to be speaking a different language. You feel a bit overwhelmed. Although some of the reports make sense to you to read, you do not feel comfortable enough with any of the reports to explain the results to others.


Whether you are a pharmacist in a chain or independent community pharmacy, understanding your business’s finances is critically important for pharmacy success—and ultimately patient care. It must also be noted that familiarity with financial reporting and analysis should not be solely reserved for the pharmacy manager, leader, or owner. At a minimum, every pharmacist should have a baseline understanding of financial basics, including profit, loss, and risk management. For a front-line pharmacist, it may allow you to advocate for a new patient care service in terms of dollars and cents—a language more likely to be understood in making the case for that service. As a pharmacy manager, this will give you the tools to review and assess the various reports available to you so that you can understand, plan, and improve the pharmacy’s business. This is similar to collecting and analyzing patient care data, such as laboratory results, and then forming a patient care plan. Just as one must communicate in the same language as their patients to ensure understanding if they are going to provide optimal patient care, a community pharmacist too, must understand the language of finance if they are going to optimize the impact of their pharmacy on their community.

A pharmacist is first and foremost a clinician. Although in the United States, the doctor of pharmacy degree confers some basic understanding of business management and leadership as required by the Accreditation Council for Pharmacy Education (ACPE), it does not make such knowledge the priority.1 In this same spirit, this chapter presents information with an understanding that the goal is not to make the reader an expert ...

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