It is not uncommon for us to run into pharmacies owned by partners that have no agreement in place defining how and when the partnership will end. This is called a pharmacy buy sell agreement. Please note that this is separate from an operating agreement (even though the operating agreement may have some language about how the partnership will end in the event of a death of one of the partners).

Buy sell agreements are part of a solid partnership (or pharmacy junior partnership) because they ensure all partners (and partner's spouses and families) understand what will happen under certain circumstances. It is our opinion and observation, that it is better to define the events that will occur before something comes up that requires certain actions. We have seen situations where these aren't defined, something happens, and the result is wasted time, energy and money (legal fees). We have also seen situations where something happens and the agreement spells out exactly what happens. This is a much better alternative.

The next logical question is what should a buy sell agreement cover. If you have an agreement in place already, it most likely addresses the death of one or more of the partners. However, there are three other basic things that a buy sell agreement should address:

1. Disability - the two things that you should address are the definition of disability and the length of time that must pass before the disabled partner is required to sell his or her interest. The definition is important because one partner may think another partner is disabled and the accused partner may disagree. The length of disability is important because most partners are willing to give a disabled partner time to recover but do not want them to be a burden for the company forever.
2. Divorce - many community pharmacy owners tell us that they are happy being in business with their partners but may not be as happy being in business with their partners' spouses (this can be for many different reasons). We have seen many horror stories including one recently where a pharmacy owner's family member (who owned interest in the pharmacy but was not active in the pharmacy) got divorced. Now that pharmacy owner is trying to buy out his family member's ex-spouse who knows nothing about pharmacy. The last we heard is that the ex-spouse is asking for a significantly higher amount than the interest is actually worth.
3. Disillusionment - This is the least common thing we see addressed in buy sell agreements. There have been situations where one partner just decides pharmacy is not right for him or her anymore. They then go do whatever they want to do and ask for their percentage of profits to be sent to them every quarter, year (or whatever frequency profits are distributed). If this happens in your pharmacy, you may want the option to buy out your partner because many partnerships are entered into with the expectation that each partner will actively contribute to the success of the partnership.

As you can see, there are many moving parts that must be addressed in a pharmacy buy sell agreement. They can seem overwhelming at times and extremely cumbersome to complete. Therefore, we have created a new workshop designed to help you with your current buy sell agreement or help you get started thinking about establishing one.

Why do we do what we do?

Our mission is to help independent community pharmacy owners achieve all their goals and dreams, inside, outside and after their life in pharmacy. In doing so, we are helping independent community pharmacies remain independent and thrive for many years to come.