ItsOverZyvox

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What kind of gross profit margin could you expect to run as an indy and would you say chain and grocers are able attain higher gross margin than an indy?

Let me give you the quick formula just in case you forgot how to calculate gross margin.

(Gross Sale - Cost of Goods Sold)/ Cost of Goods Sold.

Hurry with the reply. I'll thank you later.
 

MountainPharmD

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What kind of gross profit margin could you expect to run as an indy and would you say chain and grocers are able attain higher gross margin than an indy?

Let me give you the quick formula just in case you forgot how to calculate gross margin.

(Gross Sale - Cost of Goods Sold)/ Cost of Goods Sold.

Hurry with the reply. I'll thank you later.
I will double check my P&L when I get to work. I believe GROSS profit margin is 11%. NET profit however is 3%. I was told by my last Pharmacy Supervisior the industry net profit average is 3.5% to 4%.

I think retail chains have a higer profit margin because of thier purchasing power. We as a company are able to negotiate discounts that a true indy cannot. I would estimate an indy would have a 2% to 3% higher cost of goods sold.
 

ItsOverZyvox

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I will double check my P&L when I get to work. I believe GROSS profit margin is 11%. NET profit however is 3%. I was told by my last Pharmacy Supervisior the industry net profit average is 3.5% to 4%.
Yeah? What's the average cost of a script?
Basically, I'm trying to see a feasibility of independent survival.

If indeed there will be a surplus of retail pharmacists, then it'll be a great opportunity to bring the indys back.
 
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girllein

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OIG Report Confirms Dangerously Thin Margins for Community Pharmacy
Acquisition Costs and Dispensing Fees Yield a Mere 1.3% Profit Margin

ALEXANDRIA, Va., Jan. 15 /PRNewswire-USNewswire/ -- The Office of the Inspector General of the Department of Health and Human Services released a "Review of the Relationship Between Medicare Part D Payments to Local, Community Pharmacies and the Pharmacies' Drug Acquisition Costs." In response Bruce Roberts, RPh, executive vice president and CEO of the National Community Pharmacists Association (NCPA), issued the following statement:

"While the report acknowledges that it does not account for all costs of dispensing prescriptions, we applaud the work of the OIG in confirming the financial difficulties Part D has placed on community pharmacy. Its estimate that local community pharmacies received an average Part D dispensing fee of $2.27 per prescription reinforces our position that community pharmacies are not adequately reimbursed for the costs of dispensing drugs. When you also consider the slow rate of reimbursement, as evidenced by a recent University of Texas study, pharmacists may be forced to close their doors, or stop participating in these government programs and patient access to the medicines they need will be seriously threatened."

In the report, the OIG estimates that the difference between Part D payments and drug acquisition costs is $9.13 per prescription including wholesaler rebates, which are not received by every pharmacy. With the $2.27 dispensing fee, the compensation to pharmacies then averages $11.40 per prescription.
The recent study by the accounting firm Grant Thornton found that the average cost to dispense a prescription drug is $10.50, yielding 90 cents, on average, per Medicare prescription. With an average prescription price of $68.26, this nets a mere 1.3% net profit margin.

The National Community Pharmacists Association, founded in 1898, represents the nation's community pharmacists, including the owners of more than 23,000 pharmacies. The nation's independent pharmacies, independent pharmacy franchises, and independent chains dispense nearly half of the nation's retail prescription medicines. To learn more go to http://www.ncpanet.org

http://www.reuters.com/article/pressRelease/idUS241794+15-Jan-2008+PRN20080115


Now stop taking lame, old man pictures!
 

ItsOverZyvox

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Ok Einstein. 1.3% net refers to Medicare Part D scripts. So what percent of scripts are Medicare Part D?
 

MountainPharmD

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Ok Einstein. 1.3% net refers to Medicare Part D scripts. So what percent of scripts are Medicare Part D?
At my pharmacy 80%. It sucks because you get reimbursed the least for the group of people who take up the majority of your time.
 

MountainPharmD

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Yeah? What's the average cost of a script?
Basically, I'm trying to see a feasibility of independent survival.

I personally think there will be a resurgence of independent pharmacies. Right now I think it is a very tough time for all pharmacies especially independents. There are some great opportuniites out there for independants to make money. As the previous poster pointed out. If you have to depend on Medicare part D you will go broke.
 
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MountainPharmD

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I don't mind helping to enroll them into new plans each year, but sometimes their 20 minute appointment turns into an hour!
Don't you just love that? We get completely shafted by the government on reimbursement. George Bush all but called pharmacists crooks for making so much money. What is the governments grand plan for explaining the whole Medicare mess? Oh….Go to your local pharmacy and they will explain it. All for free of course since there is no provisions to bill for our time. It is a complete joke.

Medicare part D has been the biggest disaster this country has ever had in healthcare. I shudder to think what the government is going to come up with next. Lets hope Obama and the Democrats are a little smarter.
 

Old Timer

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IOZ:

The problem is Indies have longed survived on the profit margins on generic prescriptions, especially new generic medications. Once the six month exclusivity runs out, the acquisition costs plummet while the reimbursement remains high, approx 6-9 months. The trouble is the insurance industry has convinced the government that pharmacies are "robbing" medicare on generic drugs and the Bush administration responded with AMP (translated means, bend over, and by the way no KY jelly). Without the margins on generics to make up for the pitiful gross margins on brands, approx 10%, indies can't survive just filling scripts. The cost of carrying the inventory is huge, manufacturer return policies are more stringent. Abbott will no longer take back any expired medication.

Until the reimbursement issue settles out, it does not pay. That doesn't mean it wont in the future, just not now....
 

ItsOverZyvox

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IOZ:

The problem is Indies have longed survived on the profit margins on generic prescriptions, especially new generic medications. Once the six month exclusivity runs out, the acquisition costs plummet while the reimbursement remains high, approx 6-9 months. The trouble is the insurance industry has convinced the government that pharmacies are "robbing" medicare on generic drugs and the Bush administration responded with AMP (translated means, bend over, and by the way no KY jelly). Without the margins on generics to make up for the pitiful gross margins on brands, approx 10%, indies can't survive just filling scripts. The cost of carrying the inventory is huge, manufacturer return policies are more stringent. Abbott will no longer take back any expired medication.

Until the reimbursement issue settles out, it does not pay. That doesn't mean it wont in the future, just not now....
So you're saying as long as you're not reliant on scripts, you have a chance!:thumbup:
 
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ItsOverZyvox

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So you are going to make it on bait and soda fountain sales?!?!?!:confused:
So I'm on a fishing outing with my buddies. Cold as heck and snow everywhere. One morning, we go down to the town and there is this beautiful giftshop/restaurant/pharmacy in a building that used to be a train station. It's early.. about 7am. This tall fella serves us coffee takes orders. I just loved that store and the way it was set up. I did notice that the door to the pharmacy was open. Quite illegal I thought.

Then when the waiter came back, I asked... are you the druggist? He said.."Yup.. and the waiter..and the cook." My waitress called in late..

Would I want to be him? Why not! Free coffee all day.. come on down and hangout at my pharmacy and tell stories.

The issue I see is that the profession of pharmacy was deeply entrenched with a group of true entreprenuers, historically speaking. Unfortunately, current system has discouraged the romantic notion of owning your own drug store. This is evident in % of students who want to go the Indy route.

One of these days, we have to take our profession back.
 

VCU2011

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So you're saying as long as you're not reliant on scripts, you have a chance!:thumbup:
to put this into perspective- CVS is currently the third largest GROCERY STORE in Richmond.

our prof showed us a slide a few weeks ago (I cant find it right now) that showed the top 10 pharmacies in the country 10 or 15 years ago, and they combined had a total of 10,000 stores. Now of those 10 pharmacies, the only three left are CVS, Walgreens, and Rite Aid, who together have a combined 17,000 stores.

competition is tough!
 

MountainPharmD

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So I'm on a fishing outing with my buddies. Cold as heck and snow everywhere. One morning, we go down to the town and there is this beautiful giftshop/restaurant/pharmacy in a building that used to be a train station. It's early.. about 7am. This tall fella serves us coffee takes orders. I just loved that store and the way it was set up. I did notice that the door to the pharmacy was open. Quite illegal I thought.

Then when the waiter came back, I asked... are you the druggist? He said.."Yup.. and the waiter..and the cook." My waitress called in late..

Would I want to be him? Why not! Free coffee all day.. come on down and hangout at my pharmacy and tell stories.

The issue I see is that the profession of pharmacy was deeply entrenched with a group of true entreprenuers, historically speaking. Unfortunately, current system has discouraged the romantic notion of owning your own drug store. This is evident in % of students who want to go the Indy route.

One of these days, we have to take our profession back.
Dude, I am with ya!!!!

Running one business is hard, especially a pharmacy. I can't imagine running a giftshop/restaurant/pharmacy all at the same time by myself.
 

girllein

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to put this into perspective- CVS is currently the third largest GROCERY STORE
That's how Duane Reade stays in business with a 1% profit margin. They're a one-stop-shop kind of place that has what people need when they need it, not to mention that they'll build where others won't touch.
It seems like they're dollar-store esque though.

Great article from 2005: http://nymag.com/nymetro/shopping/features/11908/
 

blueclassring

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Go on over to the NCPA portion of the website. We have an ongoing session talking about these topics
 

MountainPharmD

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That's how Duane Reade stays in business with a 1% profit margin. They're a one-stop-shop kind of place that has what people need when they need it, not to mention that they'll build where others won't touch.
It seems like they're dollar-store esque though.

Great article from 2005: http://nymag.com/nymetro/shopping/features/11908/
That is a very good article. It gives some insight as to why Walgreens and CVS are successful. Both chains have horrible customer service. Most people will tell you they hate Walgreens and CVS. Yet they still shop there. Why? Because they are everywhere. Convenience wins, which is why it would be hard for an independent to make it.
 

Doctor M

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Gross profit= 18-22%
Net profit = 2-4%

Cant just dispense, most likely you will need other "programs" of if you do dispense one would need high rx volume.
 
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Doctor M

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That is a very good article. It gives some insight as to why Walgreens and CVS are successful. Both chains have horrible customer service. Most people will tell you they hate Walgreens and CVS. Yet they still shop there. Why? Because they are everywhere. Convenience wins, which is why it would be hard for an independent to make it.
Not if you were right in between 2 cvs and a walgreens...:) and had top customer service and serviced the customer 110%...:) an indy could make it...
 

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What do you do to counter the drive-thru issue?
By personally driving to a patient's house and handling them the drugs. I would love the mobile pharmacy concept! It would be like a taco truck! The pharmacy is constantly wandering throughout the city looking for patients. The patients would see the mobile pharmacy and run up to it and give their prescriptions. Fast, easy and cheap.
 

Doctor M

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What do you do to counter the drive-thru issue?
free delivery and pick up. Most regular customers come inside anyway. I dont see drive thru as an issue at all. the ones that do use the drive thru are too sick to come inside or just lazy. If i deliver their meds, we both win. Indy's can survive.
 

Doctor M

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By personally driving to a patient's house and handling them the drugs. I would love the mobile pharmacy concept! It would be like a taco truck! The pharmacy is constantly wandering throughout the city looking for patients. The patients would see the mobile pharmacy and run up to it and give their prescriptions. Fast, easy and cheap.
Like selling ice cream!!!:)
 

Doctor M

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But would you give me a $25 gift card to transfer my RX?
Nope, never. I let them go. Let them take their $4 rx to walgreens or cvs for their $25 gc. My regulars stay put and are loyal. Sometimes a regular will transfer one rx to walgreens and one pt actually pulled me aside and apologized for doing so. He just wanted the GC. I told him do whatever it is yoou have and that i wasnt mas at him. Ever since, he's filled monthly with me. Besides, here in fl, the state board is looking to make those GC illegal as an incentive for rx's.:thumbup:
 

psurocks

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those trasnfer cards need to be stopped, all they do is poly pharmacy and increase the risk of a drug drug interaction to be missed
 

Idesiretosling

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those trasnfer cards need to be stopped, all they do is poly pharmacy and increase the risk of a drug drug interaction to be missed
Wouldn't you miss getting yelled at after explaining to patients enrolled in government programs that they can not have the gift cards?

If you own the place you can listen to whatever music you want all day instead of storewide music, there is something about listening to good music at work, it just makes the job more enoyable! A little perk...
 
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psurocks

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Wouldn't you miss getting yelled at after explaining to patients enrolled in government programs that they can not have the gift cards?
i work at a heavy medicaid store, so i know how that is, but ive developed a good way of deailing with those kinda rude customers

but yea, itd be great if people were more nice
 

Old Timer

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So you're saying as long as you're not reliant on scripts, you have a chance!:thumbup:
As long as you are you're not reliant only on dispensing, you have a chance. I think you are right, by the way, indies will be back soon as RPh wages will stagnate or be depressed. If you can work 4 days week and really have no ag outside of the store and make $110,000.00+bennies and get a decent raise every year, working 80 hrs a week as an indie with no days off and total responsibility for an operation holds no alure...... That's about to change.... Unless something dratsic happens you will see more indies in about 5 years....
 
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evilolive

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Like selling ice cream!!!:)
Let's think of a catchy pill song, the opiate addicts will be SO excited! It'll be like pavlov via delivery service when we drive by the neighborhoods!
 

Doctor M

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Let's think of a catchy pill song, the opiate addicts will be SO excited! It'll be like pavlov via delivery service when we drive by the neighborhoods!
:laugh: could you imagine! Im sure the DEA would love us! imagine people walking up looking for the "blue" roxies!
 
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