Pharmacy Profit by Category: Rx vs OTC vs Cosmetics

"Last month the till rang up 1.6 million. And when it came time to pay the pharmacists and settle with the distributor, I was borrowing from my sister again. The profit was somewhere, just not in the account — it was sitting on the shelves as creams, supplements and syrups that hadn't sold yet."

From the outside, a pharmacy looks like a money machine. People come in all day, the queue barely thins, the till rings from morning to night. A decent location turns over a million and a half a month, sometimes more. And yet at month's end the owner stares at the account and can't figure out where it all went.

Plenty of owners know this picture: big revenue, thin profit, and never enough real cash. The money seems to be there, but it's not in the account. It's standing on the shelves, sitting in the stockroom, slowly melting away with the expiry dates. To work out where it got stuck, you have to stop seeing the pharmacy as one till. Under that single roof there are really several different businesses, and each one earns in its own way.

Profit by Category in Plain Words

Revenue is what customers handed over at the till. Profit is what stays with you after you've paid the distributor for that same stock. The gap between those two numbers is your margin. And in a pharmacy the margin varies so wildly that counting it "on average across the till" is like measuring the average temperature of a hospital ward.

Roughly speaking, pharmacy stock falls into three big baskets. Prescription drugs (Rx) are the serious medicines a doctor prescribes, often chronic: blood pressure, heart, diabetes, antibiotics. Over-the-counter (OTC) is what a person grabs themselves: cold remedies, headache pills, a nasal spray, a plaster. And the third basket is cosmetics and parapharmacy: creams, shampoos, supplements, vitamins, skincare, orthopedics. Formally it's all "pharmacy stock." Financially, these are three different planets.

Rx brings big revenue and keeps the footfall coming, but you earn little on it. Markups on essential medicines are regulated by the state, so you simply don't have the right to mark them up "as much as I like." The chronic blood-pressure patient comes in every month for the same pill — steady traffic, but a thin margin. OTC earns noticeably better: the markup is freer here, and the customer rarely checks the price to the last cent. Cosmetics and supplements are a different margin altogether, sometimes two or three times higher than prescription.

Your greatest freedom lives in that third basket. Nobody dictates the price of a cream or a bottle of vitamins from above, the competitor around the corner sells a different brand, and the customer goes by the pharmacist's advice and the packaging rather than by the odd cent. So parapharmacy is the part of the pharmacy where you truly steer the margin instead of just following someone else's rules. The only condition is that it turns over rather than gathers dust.

Why the Average Markup Lies

When the bookkeeper says "our average markup is 28%," that number explains nothing. It glues together things that shouldn't be glued. Hidden inside it is prescription stock at 12–15% and cosmetics at 40–50%. You look at 28% and assume the business is even. It isn't. It's lopsided.

The trouble is that one set of categories makes the revenue and a different set makes the profit. Rx can be forty percent of turnover and barely cover its share of rent and wages. Cosmetics, on modest revenue, put more in your pocket than the eye suggests. As long as you stare at the total till, you can't see this and you steer blind: you push what's loud and miss what quietly feeds you.

There's one more layer the average hides — speed. Two categories can carry the same margin in percent, yet one turns its money over in two weeks while the other holds it on the shelf for two or three months. For your account that's the difference between heaven and earth. A high margin on stock that doesn't sell isn't profit — it's frozen cash with a pretty price tag.

Look at the Numbers

Take a hypothetical pharmacy turning over 1.6M a month. The figures are simplified and illustrative, but this pattern repeats in almost every review. Don't look at the revenue column — look at the two on the right: margin and turnover (how many days it takes for stock to turn back into money):

Rx is the revenue leader here, nearly 40% of the till. But a 14% margin and a regulated markup mean that every hryvnia of turnover leaves you pennies. What saves it is speed: the money turns over in 12 days, so the same invested capital cycles twice a month and delivers its thin margin twice. Rx isn't about earnings — it's about footfall and fast cash.

Now look at the bottom of the table. Cosmetics carry a 45% margin — three times fatter than prescription. On paper, a dream. But 68-day turnover means the money you put into those creams comes back after more than two months. Supplements are slower still. Hence the paradox: the category with the richest percentage is also the one that freezes your money hardest. A cream at 45% markup that has stood on the shelf for four months earned you less than a cheap syrup that turned over six times.

A word on the regulated markup. On medicines from the essential list the state sets a ceiling: however much you'd like to, you can't price above it. For people that's right; for your economics it means one simple thing — on a large share of Rx you're working almost at the tariff. The earning here isn't in the percentage on the box, it's in the fact that these people come back every month and, between the pills, pick up a plaster, vitamins and a cream from you, where the margin is finally yours.

That's where the answer to "big revenue, no cash" hides. Rx and OTC build the big till, while the free cash gets soaked up by the shelves of cosmetics and vitamins you keep topping up at every order because "the margin's so good."

Write-offs and Expiry Dates

A pharmacy has a cost most other businesses don't — stock that simply dies on the shelf. Every package has an expiry date, and whatever doesn't sell in time has to be written off. This isn't abstract. It's a direct minus off your profit, except it doesn't show up as its own line; it quietly dissolves into the general till.

And again the categories behave differently. Rx and fast-moving OTC turn over quickly, so write-offs there are small. Cosmetics, seasonal vitamins and narrow "just in case" items are the prime candidates for the bin. You bought a batch of immune complexes for the season, the season passed, half is left, and by spring it has expired. That money already went to the distributor, and it's never coming back.

Count it honestly at least once: how much you write off per month by expiry, and in which categories. It often turns out that the celebrated high margin on cosmetics is entirely eaten by writing off stale items. Meaning you earned not 45% on them but 20% if you're lucky, because the rest went to the bin along with the expired boxes.

The simplest rule: once a week, review the items with less than four months left and decide their fate now, not when the date has already passed. A cream sold at a discount returns at least part of the money. A written-off one takes all of it. Over a year, the gap between those two outcomes adds up to a very tangible sum you never even saw, because it was quietly hiding inside the general till.

"I thought cosmetics were my gold mine. Until I counted the write-offs: over a year, 180,000 worth of expired stock went in the bin. That's exactly where all my 'high margin' ended up."

What to Highlight and What to Trim in the Range

Once you see the pharmacy by category, the decisions get obvious, and not one of them is about "dropping prescription." Leave Rx alone: it brings people in and gives you fast cash, and the regulated markup isn't something you argue with. Your game plays out elsewhere.

• Drive the OTC till. It's your best balance of margin and speed. Prime shelf placement, a word from the counter, "everything for a cold" bundles lift the average ticket exactly where the margin is already decent.
• Push the cosmetics that actually sell, and ruthlessly cut the ones that just stand there. Not all cosmetics are bad — the bad ones are those turning over in 90+ days. Find the movers and keep those; sell the dead stock at a discount while it's still within date.
• Buy for turnover, not "just in case." Order fast-movers more often in smaller batches. The temptation to take a big load for the distributor's discount often costs you more than the discount, because half the load will live long enough to be written off.
• Watch expiry dates like money. Items with three or four months left, move them to the front, into promo, into recommendations. Every box sold before its date is live cash rescued.
• Don't bloat the range. Usually a narrow set of items makes the bulk of the till, while a long tail of rare names simply holds your money and adds to write-offs.

Notice that none of these steps ask you to sell more or push the staff harder. They're decisions about where your purchasing money goes. You simply stop feeding the slow shelves and pour the same budget into categories that turn over faster and leave more behind. The till often doesn't even drop, and free cash shows up for the first time in a long while.

How It Sounds in Real Life

You've probably caught yourself saying these lines. They sound logical, and that's exactly why they're dangerous — each one hides the trap of category blindness.

"The till's full, why would I count by category?" The till is full of prescription stock that leaves you almost nothing. "I'll take more cosmetics, the margin's best there." The margin is best while the cosmetics sell, not while they sit to expiry. "The distributor gave a volume discount, be a shame to pass it up." A 5% discount is worth nothing if a quarter of the batch heads to the bin. "Everything turns over, I can see the empty shelves." Empty shelves on fast-movers and full ones on slow-movers are two different worlds, and the one you usually notice is the first.

Each of these thoughts is sensible on its own. Together they do the same thing: they pack the shelves with margin that looks great in percent but moves slowly, and they leave you with no cash in the account while the till is full.

How to See It in Finmap

To run a pharmacy by category, you don't need heroic nights in Excel — you need the number to build itself. That's what Finmap is for: it shows the pharmacy not as one till, but by the lines you define yourself.

• Income by category. Rx, OTC, cosmetics, supplements — each group on its own line. You see at once who makes the revenue and who makes the profit, and that they're different categories.
• Direct costs kept separate. The cost of goods from the distributor sits next to the revenue of the same category, so each line's margin calculates itself, with no manual tallying.
• Margin, not just turnover. You see not "the till" but how much actually stays with you per group, in hryvnias and in percent. The average number stops fooling you.
• Money tied up in stock. You can see how much of your cash is standing on the shelves and in which category it's stuck deepest — right where the margin is good and the turnover is slow.
• Payment calendar. When to pay the distributor, when payroll is due, when rent lands — all on one timeline, so you see a cash gap coming instead of hitting it on the first of the month.

With all of this in front of you, purchasing stops being guesswork. You top up what turns over and earns, and hold back what freezes your money. Not by feel, by the number.

And there's one more thing this picture gives you — calm. When you can see how much each category leaves behind and when the next payment to the distributor falls due, that background worry of "will there be enough on the first?" disappears. You know the answer in advance, because it's built from your own numbers rather than a month-end gut feeling. Owners who start looking at the pharmacy by category almost always say the same thing: the first month is unpleasant, because you can see how many years the money quietly sat on the shelves. But after that every purchasing decision gets simple, and the pharmacy finally brings in not just revenue but cash in the account.

On a related note — if the feeling of "there's profit but the account is empty because it all settled into stock" sounds familiar, read the breakdown of money stuck in a retail store's inventory. And when you want to compare the margin of different lines, locations and channels by filters rather than by feel, here's the detailed piece on margin by direction, location and channel.

"In a pharmacy, one set of categories makes the revenue and a completely different set makes the profit. As long as you watch a single till, you're managing someone else's money."

"A high margin on stock that's been sitting for three months isn't profit. It's your own money, put on a shelf and forgotten."

Money Doesn't Disappear. You Just Don't See It.

Your money didn't vanish between the till and the account. It simply spread across categories you still see as one number. Break the pharmacy down into Rx, OTC, cosmetics and supplements, and it becomes clear where the margin is thin, where the cash is frozen, and where the quiet earner sits. Finmap builds this picture for you, with no late-night Excel. Try it free for 14 days and look at your pharmacy by category — chances are the very first review will show where your money leaks away each month. Start for free →