How to Start an Online Pharmacy

Starting an online pharmacy can be an exciting and rewarding business venture for entrepreneurs who are passionate about providing accessible medication solutions and improving the well-being of their customers.

Having said that, you should keep in mind that launching a successful online pharmacy requires careful planning and strict adherence to legal and regulatory requirements.

In this comprehensive guide, we’ll walk you through all the essential steps you’ll need to take to start your own online pharmacy, from developing a marketing strategy and setting up a secure e-commerce platform to stocking up your inventory and obtaining the necessary licenses.

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Industry Overview

The pharmaceutical industry in the United States is a booming market, with revenue on track to reach an impressive $630 billion in 2024 alone and growth projected to continue at a steady annual rate of 4.65% until 2029 — when it should hit a market volume of $791 billion.

This growth is driven by several key trends, including the rising demand for personalized medicine and targeted therapies, as well as specialized treatment such as oncology drugs — which stand out in particular as the largest segment of the market, with a volume of $103 billion.

Given that the US is leading the global market for pharmaceuticals, there’s a significant opportunity for entrepreneurs looking to enter the online pharmacy space here. Furthermore, the continued expansion of the pharmaceutical sector is only making it a more favorable environment for new entrants, assuming they can navigate the regulatory landscape and provide consumers with reliable access to these drugs.

Startup Costs

If you’re considering whether an online pharmacy is right for you, the first thing you’ll need to know is whether it’s a) affordable, and b) worth the investment. I mean, how much can you actually make running your own online pharmacy?

Well, it depends. The initial investment for an online pharmacy varies widely based on factors such as the scale of your operations and the types of medications you plan to offer. However, it should be primarily composed of the following key costs:

• E-Commerce Infrastructure: Building a secure and functional online platform is not only critical for the success of your pharmacy, but also to ensure that it’s legally compliant. In addition to basic e-commerce functionality, your website is legally required to comply with HIPAA regulations to protect patient data and handle sensitive medical information securely. As a result, you’ll need to invest a significant amount in web development — typically between $5,000 and $20,000 — in order to implement solid cybersecurity and prescription verification systems.
• Stock and Inventory: Another key upfront cost to budget for when starting out is the expense associated with acquiring your initial stock of medications and health products. While the total amount you invest will ultimately depend on the range and volume of products you plan to offer, you can expect to spend between $10,000 and $50,000 on building an adequate starting inventory. Make sure to only obtain products from licensed suppliers to ensure that they all meet FDA standards.
• Staffing Costs: Unless you’re qualified as a licensed pharmacist, hiring employees will likely be a mandatory expense for your online pharmacy. Initial hiring and onboarding costs for these professionals — including recruitment, training, and salary guarantees — can range from $5,000 to $30,000 at first, depending on the size of your team and your business’s needs. However, you’ll also need to bear in mind the ongoing cost of continuing to pay your staff their salary, which should fall somewhere between $3,000 and $7,000 per month (depending on their experience and speciality).
• Licensing and Regulatory Compliance: In order to ensure your business is operating legally, there are a number of different licenses and permits that your online pharmacy will need to obtain (see Step 7). While others may be mandatory depending on your location, your business will likely need a state pharmacy license, a non-resident pharmacy license, and registration with the DEA and PDMP (if handling controlled substances), plus any other state-specific requirements regarding online sales. Overall, you shouldn’t be surprised if you need to spend anywhere from $2,000 to $5,000 on these licenses.

In terms of ongoing costs, the main expenses to be aware of don’t differ too much from the initial costs. Once your online pharmacy is up and running, the majority of your costs will go toward replenishing your inventory and stock, website maintenance, and paying any staff their salaries.

Earning Potential

The earning potential for an online pharmacy can be substantial, depending on the type and range of products your business offers, its pricing strategy, and the market demand.

For the most part, the primary way in which online pharmacies generate revenue is by marking up the cost of prescription drugs that they purchased at wholesale prices. The size of this markup is typically influenced by the demand for specific medications, since as an online-based business you won’t be able to use the pricing of competitors based in the same geographical area as a guideline.

With that being said, subscriptions continue to represent an increasingly common source of income for both physical and online pharmacies. On top of being a great way to attract more customers with benefits like lower prices or quicker services, its true value lies in the ability to take advantage of recurring automatic payments, without the need for the customer to make a decision.

By taking advantage of the lower overheads associated with an electronic business, an online pharmacy can experience far greater gross profit margins than their brick and mortar counterparts. In fact, where a traditional pharmacy’s net profit margins may fall somewhere between 15% and 20%, online pharmacies can boast margins that range from 20% up to as much as 35%.

Naturally, this model can lead to very significant profits — as an example, if your pharmacy sells 1,000 prescriptions each month at an average cost of $200 each and you manage ongoing operational costs of around $30,000, you could potentially earn $170,000 in profit.

To further increase your earning potential, you can think about offering additional tiers to your subscription services, such as a “Silver Plan”,  “Gold Plan”, and “Platinum Plan”. By providing these tiers, you could entice customers to pay elevated sums in return for more personalized services (e.g., direct access to a pharmacist or doctor for consultations or specialized treatment plans).

6 Steps to Starting an Online Pharmacy

In order to start an online pharmacy, you’ll need to complete the following steps:

1. Planning Your Online Pharmacy
2. Registering Your Business
3. Building Your Online Store
4. Stocking Up Your Inventory
5. Getting all Applicable Licenses and Permits
6. Obtaining Business Insurance

We’ve broken each one of these down in more detail below.

Still exploring your options? Check out other small business ideas.

Step 1: Plan Your Online Pharmacy

Before diving into your online pharmacy, you’ll need to spend some time conducting thorough market research.

This can involve analyzing the local market to understand the demand for prescription medications and health products, identifying potential competitors, and assessing the target demographic.

This will help you evaluate the financial viability of your project — including projected revenues and expenses — as well as determine the best location for your business.

Finding a Suitable Name

Choosing the right business name is both important and challenging.

Your name will need to be eye-catching, memorable, and (at least somewhat) related to your industry.

If you don’t already have a name in mind and need help, you can visit our How to Name a Business guide or use our Online Pharmacy Name Generator tool.

If you do have a name in mind, we recommend researching the following to confirm it’s available:

• Your state’s business records
• Federal and state trademark records
• Social media platforms

You will also need to make sure that your business’s name is available as a domain — this is your website’s URL address.

Note: If you’re planning to operate a sole proprietorship, you might want to operate under a business name other than your own name — known as a “Doing Business As” (DBA) name. Keep in mind that this is not recommended for an online pharmacy.It’s very important to secure your domain name before someone else does.

Figure Out Shipping Logistics

Establishing the logistics of how your online pharmacy will ship out orders will be essential to its basic operation, as the timely and secure delivery of medications is the minimum you’ll need to offer for customers to be satisfied.

The first step to establishing a well-structured shipping system is to partner with a reliable shipping carrier that has plenty of first-hand experience handling medical products.

In particular, keep a look out for carriers that offer services like:

• Package tracking
• Express delivery options
• Special handling (e.g., refrigeration for temperature-sensitive drugs)

This step is important because the ability to reliably deliver orders is essential for more than just customer satisfaction — for some individuals it’s vital that their medication arrives on time for them to be able to manage chronic conditions or prevent serious health complications.

Next, ensure that your shipping process is fully compliant with mail-order pharmacy regulations, as there are both federal and state laws containing provisions for how medications should be packaged, labeled, and delivered.

Some of the most important shipping regulations to be aware of include:

• Child-Resistant Packaging: Many medications — especially prescription drugs and over-the-counter (OTC) medications containing hazardous ingredients — are required to be packaged in containers that are difficult for children to open, as mandated by the Poison Prevention Packaging Act.
• Controlled Substance Labeling: For certain specific substances, labels must include a clear indication that the drug is a controlled substance (i.e., with a warning statement) and comply with DEA labeling requirements.
• Signature on Delivery: In many states there are laws in place that specify controlled substances can only be delivered after the recipient’s signature has been received, ensuring that the medication reaches the intended patient.

Failing to meet these standards can lead to severe penalties and loss of business credibility, so it’s essential to stay informed on all regulatory requirements.

Step 2: Register Your Business

One crucial aspect that cannot be overlooked when starting your online pharmacy is the importance of establishing a solid business foundation.

While sole proprietorships and partnerships are the most common entity types for small businesses, they’re a far less stable and advantageous option than LLCs — especially when it comes to online pharmacies (with potential liabilities and debt).

This is because unincorporated business structures (i.e., sole proprietorships and partnerships) expose you as an owner to personal liability for your business’s debts and legal actions, while LLCs protect you by keeping your personal assets separate from your business’s liabilities.

In practice, this means that if your online pharmacy were to face a lawsuit or incur any debts, your savings, home, and other personal assets could not be used to cover these costs. On top of this, forming your business as an LLC also helps it to appear more legitimate and trustworthy.

Note: If you’re interested in more information before getting started, we recommend having a look at our state-specific How to Start an LLC guide (DIY) or our in-depth Best LLC Services review (for those opting for a professional service).

Step 3: Build Your Online Store

As an online-based pharmacy, building a secure, professional, and user-friendly website is essential to your long-term success.

While user-friendly website builder tools — such as WordPress, WIX, Shopify, or Squarespace — have made the process of designing your own website far easier, we would still recommend hiring a web developer for a project this complicated.

Whether you end up completing this step yourself or opting to hire a professional, make sure that your site includes all of the following:

• Homepage: This should provide a brief introduction to your online pharmacy before showcasing your featured products and services. Additionally, it’s important to make sure this page makes it easy for customers to search for medications, learn about your offerings, and navigate to other key sections of your website.
• About Us: This page should provide an overview of your pharmacy, including its mission, values, history, and its team of healthcare professionals. You should also use it to highlight any certifications or licenses your pharmacy and its staff have obtained.
• Medications Page: You should use this page to provide a comprehensive catalog of all the different prescriptions and OTC medications that your pharmacy offers. Categorizing medications into groups such as chronic conditions, mental health, or specialty medications can make it even easier for users to browse or search your site.
• Prescriptions Page: Here, your customers should be able to submit new prescriptions by uploading documents, learn about the prescription verification process, and manage their refills.
• Consultations Page: This page offers access to pharmacist consultations or telemedicine services, allowing customers to speak with healthcare professionals about their medications. If you offer them, it could also include subscription options for premium services.
• Account Login Feature: The account login page should provide customers with secure access to their personal profiles — where they’ll be able to view their order history, manage prescriptions and refills, update billing information, and track shipments.
• Contact Us Page: This page provides all the ways customers can reach the pharmacy’s support team, including a contact form, phone number, email address, and — if available — a live chat option for immediate assistance. Make sure to also outline business hours and typical response times on this page.

Each of these pages plays a crucial role in ensuring your website provides a seamless and secure experience for customers. Due to how much an online pharmacy depends on its website, it’s essential that you take your time on this step in order to create a page that’s clear, easy-to-use, and professional.

Step 4: Stock Up Your Inventory

With your website up and running, you’ll be ready to begin stocking up your inventory.

When completing this step, it’s essential that you cover a broad range of medications catering to the most common health needs — by focusing on these high-demand, everyday essentials you can ensure you meet the basic needs of your customers while maximizing sales and generating consistent revenue.

To help with this, we’ve included a list of some of the most common types of medications to build your inventory around below:

• Chronic Condition Medications: Drugs for managing common chronic conditions like diabetes (e.g., insulin), hypertension (e.g., ACE inhibitors, beta-blockers), and cholesterol (e.g., statins).
• Pain Relief Medications: OTC and prescription pain relievers, such as ibuprofen, acetaminophen, and opioids (with proper regulation).
• Antibiotics: Broad-spectrum antibiotics like amoxicillin or azithromycin for bacterial infections.
• Allergy Medications: Antihistamines (e.g., cetirizine, loratadine), decongestants, and nasal sprays for allergies and colds.
• Mental Health Medications: Antidepressants (e.g., SSRIs), anti-anxiety medications, and mood stabilizers.
• Digestive Health: Antacids, proton pump inhibitors (e.g., omeprazole), and laxatives for common digestive issues.
• Cold and Flu Medications: Decongestants, cough suppressants, and combination cold/flu remedies.
• Vitamins and Supplements: Basic vitamins like vitamin C, D, and multivitamins for general wellness.
• Topical Creams and Ointments: Antibiotic ointments, hydrocortisone, and antifungal creams for skin conditions.

By ensuring your inventory includes these essential medications, you’ll be well-prepared to meet the everyday needs of your customers. As your business grows, you can gradually add more specialized products in order to provide a more comprehensive range of care.

Step 5: Secure All Necessary Permits and Licenses

One of the final steps you’ll need to take before you can officially launch your online pharmacy is to obtain the various different licenses and permits that are commonly required by law for this business type.

Pharmacy Licenses

To operate legally, an online pharmacy must secure a Resident Pharmacy License from the State Board of Pharmacy where their business is based — this is what allows your business to distribute medications within its state.

In addition to this, you’ll also need a Non-Resident Pharmacy License in each state in which you plan to offer your products. The only exception to this is in Massachusetts, which you can ship to without the need for an additional license as long as you hold a valid resident license in your home state that’s in good standing.

Securing both licenses ensures that your pharmacy can legally dispense medications locally and across various different states while complying with state regulations.

DEA Registration

If your online pharmacy handles and dispenses controlled substances (e.g., opioids, stimulants, or sleep aids), it will be mandatory to obtain DEA Registration.

This registration — which is Issued by the Drug Enforcement Administration (DEA) under the Controlled Substances Act — allows your pharmacy to legally handle medications classified as controlled substances, such oxycodone, hydrocodone, adderall, and ritalin (among many others).

PDMP Registration

In addition to DEA registration, you’ll also need to register with your state’s Prescription Drug Monitoring Program (PDMP) in order to be fully licensed to dispense controlled substances.

This is a system that serves to track prescriptions of these controlled substances in order to help prevent the abuse of these drugs.

Your online pharmacy will need to be compliant with both DEA and PDMP regulations in order to be able to distribute controlled substances legally.

Step 6: Get Business Insurance

In addition to securing the necessary permits and licenses, you will need to obtain the right business insurance.

Note

Even if you form an LLC, purchasing business insurance is still a good idea. This is because an LLC structure protects your personal assets, not your business’s.

While specific coverage needs may vary based on factors such as location, size, and unique risks, there are several key types of insurance that most online pharmacies should consider.

We’ve briefly outlined these below.

General Liability Insurance

General liability insurance is a foundational coverage that’s essential for online pharmacies because it protects against claims of bodily injury, property damage, and personal injury that may be caused by product defects or delivery mishaps.

An example of this might be if a delivery driver working for your online pharmacy accidentally injures a customer while making a delivery — in this case, general liability insurance would cover the costs.

The average cost for general liability insurance according to recent data is between $30 and $100 per month, though costs can vary based on your business’s specific needs and risks.

Errors and Omissions Insurance

In order to ensure your online pharmacy is protected against any claims of negligence, mistakes, or inadequate services it will likely need E&O insurance.

In the context of an online pharmacy these sorts of mistakes could include dispensing errors, incorrect advice, or failure to identify potential drug interactions.

For the most part, online pharmacies shouldn’t be surprised if they need to spend between $40 and $150 per month on E&O insurance.

Product Liability Insurance

Another essential policy for online pharmacies is product liability insurance, which provides your business with protection in the event that a medication or healthcare product you’ve sold causes harm to a customer.

In general, you can expect to spend between $50 and $125 per month on product liability insurance coverage.

Cyber Liability Insurance

This insurance, which protects against data breaches, hacking, and other cyber threats, is crucial for safeguarding sensitive patient information and ensuring compliance with HIPAA data protection regulations.

As a more specialist form of coverage, you should be prepared to spend a little more for it — generally somewhere between $100 and $300 per month.

Workers’ Compensation Insurance

If your online pharmacy will have employees, workers’ compensation insurance is likely going to be a legal requirement depending on your state.

This insurance policy provides coverage for medical expenses and lost wages to employees who are injured during work.

The average cost of workers’ compensation insurance ranges between $100 and $200 per month, but this can vary based on factors such as payroll, location, and (once again) your business’s specific risk profile.

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How to Start an Online Pharmacy FAQs

Who is the target market?

The target market for an online pharmacy includes individuals with chronic health conditions requiring regular prescriptions, customers seeking convenience in purchasing over-the-counter medications, and those looking for discreet or affordable access to healthcare products. It also includes patients who prefer online consultations and telemedicine services.

How much can you charge customers?

Pricing for medications varies widely based on the type of drug, market demand, and whether the customer is paying out of pocket or using insurance.

For example, prescription prices can range from $10 to several hundred dollars per fill, while OTC products often have smaller, more consistent price points.

How much profit can an online pharmacy make?

An online pharmacy’s profit can vary significantly based on factors such as sales volume, operational costs, and product pricing.

Many online pharmacies see net profit margins between 20% and 35%. If a pharmacy generates $1 million in annual revenue, it could make between $200,000 and $350,000 in profit.

How can you make your business more profitable?

In order to increase profitability, online pharmacies may include premium subscription services as they grow. For example, they could offer a “Gold Plan” which grants members access to five hours a month of direct pharmaceutical care from a licensed doctor. Alternatively, they could offer access to personalized treatment plans or more detailed advice about their conditions instead.