25 August 2026 · TechSlideITS
Why medical store margins disappear
Pharmacy margins look reasonable on paper. What arrives in the bank is usually a good deal less, and the gap has four fairly consistent causes.
Look at a pharmacy's margin on paper and it seems workable. Look at what actually reaches the bank and it usually does not match.
Four things account for most of the difference, and only one of them shows up as a line in the accounts.
1. Schemes that bought stock you did not need
The most seductive. Buy ten, get one free improves margin on paper immediately — and only if the eleven all sell before expiry.
The margin is booked at purchase and the loss appears months later as expiry, in a different period, attributed to a different cause. The two are rarely connected.
The question is not whether the scheme is good value. It is whether your actual monthly movement for that item will consume the quantity in time. That requires knowing your movement rate, which is a simple thing most stores do not have to hand.
2. Credit that is extended easily and chased late
Credit to regular customers, nearby clinics, small institutions. Individually reasonable, collectively a large amount of working capital sitting outside the business.
The margin is not lost so much as delayed — but delayed capital is what forces you to decline the next scheme, or take one on borrowed money.
Worth tracking specifically: ageing, not just outstanding total. A ledger showing what is over 30, 60 and 90 days makes a conversation possible. A single outstanding figure does not.
3. Expiry, which is really a purchasing decision
Covered in more detail elsewhere, but it belongs on this list because expiry is where scheme buying and slow movement finally settle up.
The recoverable portion is the part inside supplier return windows. The rest is a purchasing lesson if anyone reviews it, and a repeated loss if nobody does.
4. Substitution that nobody records
A prescribed brand is unavailable, an equivalent is dispensed. Entirely normal.
It matters commercially because margins differ significantly between brands and equivalents, and because if substitution is not recorded against the original prescription, your item-level movement data is describing something that did not happen. Reorder decisions then get made on the wrong item.
What to actually measure
- Movement rate per item — units sold per month, so scheme quantities can be judged against it
- Receivables ageing — by customer, in buckets, reviewed weekly
- Expiry value by month, and how much of it was inside a return window
- Margin by item category, because averages hide the items you are losing on
- Non-moving items — no sale in a defined period, which is tomorrow's expiry
The one that changes behaviour
Movement rate per item. It is the number that converts a scheme from a feeling into a calculation: at your actual rate, will this quantity clear before it expires?
Stores that have that number in front of them at purchase time buy differently. Not less — differently. They take the schemes that work and decline the ones that would have become write-offs.
If you want to see movement, ageing and expiry reported together, see our pharmacy system or book a demo.
Frequently asked questions
Four causes: scheme buying that booked margin at purchase and expiry months later, credit extended easily and chased late, expiry write-offs, and unrecorded substitution that corrupts movement data. Only expiry usually shows up as a visible line in the accounts.
Against actual monthly movement for that item. The scheme improves margin only if the whole quantity sells before expiry, so the question is whether your real movement rate will consume it in time. Having that number at purchase turns the decision from a feeling into a calculation.
By ageing rather than by outstanding total — what is over 30, 60 and 90 days, by customer, reviewed weekly. A single outstanding figure does not support a conversation with a customer; an ageing bucket does.
Margins differ significantly between a prescribed brand and an equivalent, and if the substitution is not recorded against the original prescription your item-level movement data describes sales that did not happen. Reorder decisions then get made on the wrong item.
Movement rate per item — units sold per month. Stores with that in front of them at purchase time do not necessarily buy less, they buy differently: taking schemes that will clear and declining the ones that would have become write-offs.