How many pharmacies are there in the US? (2)

healthcare pharma Market sizing pharma and health care cases
New answer on Oct 27, 2021
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Tereza asked on Oct 25, 2021

Hi guys, 

I'm new to case studies and I was trying to solve this one: How many pharmacies are there in the US? We’re talking about pharmacies/drug stores in the European sense (so no CVS etc., but “pure pharmacies”). 

I think that I’m mixing things together but let’s see. I came up with two ways to solve this. I think that the first one is more suitable for pharmacies as they’re not like other businesses, I’d approach it geographically, but I made it too simplistic. The other approach would be probably more suitable for restaurants and I feel like that’s not the way to go. 

1ST APPROACH. I'll decompose the number of pharmacies as (average # per city) x (# cities in the country).

The average might be around 15 pharmacies. Larger cities can have much more, smaller cities are more numerous and usually have fewer. For the cities, I will assume that half of the US population lives in cities and that the average population is 150-200 thousand. Again, small cities are much more common than large ones, which is the reason for my estimate. This gives me an estimate of (350M/2)/175k = 1000 cities So, I estimate 15,000 pharmacies in total.

2ND APPROACH. 1. I’ll segment the population into young (0-18), middle-age (19-65), and old (65-100). The age distribution is approx. 25% of young, 60% of middle age, and 15% of old population. 

> we have 87,500 young; 210,000 middle age and 52,500 old (Population is 350,000)

2. Frequency of pharmacy visits per age: I’ll assume young need something in a pharmacy once every 2 months, middle-aged once every 3 months, old once every 1 month, I’m neglecting tourists.

> 87,500/(3x30) = 1,458 young people need something in a pharmacy every day; 2,333 middle age and 1,750 old every day = 8,263 people need something in a pharmacy every day

3. Now I’m stuck. I don’t think I should calculate how many people can be served by a pharmacy in one day (as their distribution is not based only on profits but also based on “needs”, and they can be full in peak hours but not all the time). 

///

I like the first approach better, but I think it's too simplistic (skipping some steps maybe?). 

Thank you for your hints on how to proceed or which one to choose!

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Clara
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Content Creator
replied on Oct 27, 2021
McKinsey | Awarded professor at Master in Management @ IE | MBA at MIT |+180 students coached | Integrated FIT Guide aut

Hello!

 

Given that market sizing cases were the topic of many questions in this Forum, I developped a market sizing case, that you can find for free in PrepL´s library

https://www.preplounge.com/en/management-consulting-cases/candidate-led-usual-style/intermediate/market-sizing-new-startup-launch-baby-strollers-in-the-us-244

Let me know if you have any doubts with it, it contains a detailed explanation and methodology about how to solve this specific example, but you can extrapolate to many other market sizings!

Hope it helps!

Cheers, 

Clara

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