12% Minimum order for generics via ABC Vendor

[LivingMyBestLife]

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My friend owns an independant dermatology pharmacy in Philadelphia, PA. The average cost of each med on his shelves is over $300. He was just complaining to me that recently an Amerisource Bergen representative complained to him that his Brand name ordering was way too high and that he needed to have at least 12% generic ordering (audited every 3 months) or they would suspend his account with Americsource Bergen and he will no longer be able to order from them.

Does anyone know why this 12% rule is in place for ABC? Thanks

 

[BidingMyTime]

I can't imagine why, unless they think somehow that he is acting as another wholesaler and reselling, but why the 12% random generic ordering? I am following to see what anyone else have to say.

 

[genesis09]

I never heard of that rule but since I am a normal pharmacy, meeting that requirement is easy. I know they don't want your total volume to be more than 20% controls.

Honestly, they should contact their rep and ask them. My guess is brands aren't that profitable and they are losing money on the account.

 

[owlegrad]

I would think ABC would be happy to move those high cost items. But to answer your question, no I have never heard of this. But I have also never heard of a pharmacy that is less than 12% generics so there you go.

 

[CynicalIntern]

I would be inclined to guess that the representative was part of high *buying group* and not part of ABC themselves - while ABC definitely wants your generic purchasing to be higher, if they were unhappy with his generic percentages they would just increase his COGS on brands until they were happy with the profitability. Whereas the buying group can be bullied to where if his brand purchases are so high, then all the other members of the buying group are penalized with worse COGs, so they're forced to either kick him out of the group or suffer worse pricing.

 

[ExpressMaiL]

ABC is absolute trash. However, your friend is screwed regardless as he or she probably doesn't have the purchasing volume to negotiate with any wholesaler. That being said, there really isn't a price difference between wholesalers and buying groups when it comes down to it, for several reasons.

Also, that is an unbelievable complaint to be coming from the wholesaler. Was it from a rep or someone higher up?

 

[MilknCheerios]

I was waiting on OP for more information and other users to post because I'm having a hard time understanding why a wholesaler would be upset with a client's expensive purchases. I'm under the impression that regardless of what you buy from them, they still make some kind of profit. Can the pharmacy just buy a bunch of cheap generics such as hydrocortisone to offset the % of brand drugs bought?

 

[Wickett]

I was waiting on OP for more information and other users to post because I'm having a hard time understanding why a wholesaler would be upset with a client's expensive purchases. I'm under the impression that regardless of what you buy from them, they still make some kind of profit. Can the pharmacy just buy a bunch of cheap generics such as hydrocortisone to offset the % of brand drugs bought?

I assume it's because generics generally have a higher profit margin across the board, as you go downstream from the supplier to the pharmacy and to the consumer. In general, the only person that makes a lot of money from brand name products are the drug manufacturers (unless you go no insurance as a specialty pharmacy and have fat markups for rich cash paying patients). Pharmacies generally make a smaller profit % on brand names, and so do the suppliers.

I'm sure some bean counter from the supplier did some calculations to come up with a % of generics someone needs to buy from them for the supplier to make enough profit from the partnership for it to be worthwhile for them. And as cynicalintern mentioned above, theres probably other, more complicated machinations in place with that may all tie in as well.

I dont work for an indie, but for a smaller chain where I can see the profit margin of everything I verify. We also have a % goal of preferred generics we have to meet as a company in order to get our negotiated backend discounts from our supplier..being a traditional retail pharmacy, we easily meet that goal and it isn't an issue.

And I assume the 12% is of total money spent ordering meds each quarter, not 12% of the number of items bought.....that would be a crap load of hydrocortisone.