3 Key Legal Points When Buying A Pharmacy

Pharmacy sales have many similar issues to other retail businesses. However, there are some very significant issues that require a buyer’s particular attention prior to entering into a contract, so that the buyer can legally run the business after settlement.

Regulation & Pharmaceutical Benefits Scheme

There are strict requirements under Queensland law as to who can and cannot own a pharmacy business. In order to purchase a pharmacy in Queensland, the buyer, whether a company or individual, must meet the strict legal requirements set out in the Pharmacy Business Ownership Act 2001. Failure to meet the requirements of these laws before commencing business could incur fines of up to $20,000.00 and could potentially mean you own a business that cannot legally operate. Therefore, before signing a contract for the purchase of a pharmacy, consideration should be given to the process and time frame for making all applications for the necessary approvals, licenses and permits required to own and operate the business. Only once approval has been obtained from the appropriate state authority will Medicare Australia consider an application for the necessary approval for the business under the pharmaceutical benefits scheme.

It is therefore imperative that a contract for the purchase of a pharmacy is made conditional upon the buyer obtaining the necessary state and federal approvals by way of carefully worded special conditions.

Trading Stock & Suppliers                                

The continued supply of stock such as prescription medicines, health supplements, first aid products and often beauty and infant supplies are important to the continued undisrupted trading of the business following settlement. It will be important to ascertain whether existing supply agreements and their inclusion, such as display and shop fittings, can be transferred or if new agreements will need to be negotiated and put into place from settlement.  In order to accommodate this investigative and negotiation period it is important to make the settlement of the contract subject to obtaining satisfactory due diligence and also the satisfactory transfer or negotiation of new supply contracts. The only way to accomplish this is by the insertion of precise special conditions.

Account Customers                                                            

Most pharmacies will have customers who purchase goods from the pharmacy by way of a monthly account. Special attention should be paid to the amount of these accounts, their record of payment and any discounts that the current owner has agreed to provide to each account customer.  It is advisable to make the settlement of the contract subject to a special condition to obtain a satisfactory inspection of the business’ financial accounts, in order to give a buyer and its financial advisors time to ascertain whether aside from the rest of the financial records, they are satisfied with the customer account arrangements..

Conclusion

In order to protect their business, a buyer of a pharmacy should always seek the advice of a specialist business lawyer prior to signing a contract. Without this assistance and the inclusion of all necessary special conditions in the contract, a buyer could become the owner of a business without the necessary stock and trade, or worse a business they cannot legally operate.

Joe Kafrouni, Legal Practitioner Director, Kafrouni Lawyers

Disclaimer

The information provided by Kafrouni Lawyers is intended to provide general information and is not legal advice or a substitute for it. You should always consult their own legal advisors to discuss their particular circumstances. Kafrouni Lawyers makes no warranties or representations regarding the information and exclude any liability which may arise as a result of the use of this information. This information is the copyright of Kafrouni Lawyers.

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