[I had sent this article on pharmacy markups (which was referenced on this list) to a friend of mine who is a pharmacist. I'm not sure I completely follow the margins, but it is a different perspective...]
This is an interesting article. Our enalapril generic vasotec is 24.19 at a cost of 1.50, brand is 44.19. Prozac 120.39 at a cost of 88.46, generic is 34.19 at a cost of 1.13. What they failed to say is that cash paying customers comprise a small amount of the business, about 14% in our case and some of those are people whose cash price is less than their copay. Blue cross and bluie shield only pays 17.78 for the enalapril, generic vasotec. Health partners pays only 14.65 for fluoxetine, generic prozac. The other thing they did poorly was mark up. Nobody in retail talks markup. The correct way to refer to mark up is gross magin. That is in any business, even yours. Investors never ask about mark ups only about margins. The gross margin is the price-the cost/price. The prozac would be 120.39-88.46/120.39 or a gm of 26%. The gm for healthpartners fluoxetine is 14.65-1.13/14.65 =92%. That sounds like a lot but my overall GM for the year so far is 19.3%! The standard for retail businesses is 40%. That is, the GM on clothes, cd's, radios, tv's, hardware, lumber, etc. is 40%. The net margin is what is left when you subtract overhead. Our net margin is about 1.8%. The retail industry standard is 12%. The bottom line is that more pharmacies close every year than open. The ones that open are chain pharmacies. The profitability in retail pharmacy has decreased every year since 1953. Place like wal-mart, Kmart, shopko, cub and the like can survive only because the rest of the store supports them. Pharmacy has become a marketing tool. K. Re: > >http://www.wxyztv.com/news/0207221204.html > >Monday, July 22, 2002 L O C A L N E W S > >Investigation: Prescription Drugs Reported by Steve Wilson Web produced by >Kelly Reynolds > >If you're one of the millions of Michiganders who have to pay out of your >pocket for the prescription drugs you need, hold onto your wallet. Action >News Chief Investigative Reporter Steve Wilson has the story your >neighborhood drugstore doesn't want you to see. > >Testifying on Capitol Hill this past week, Alan Greenspan bemoaned what he >called "infectious greed" that has gripped much of America's business >community. You knew about it at Enron, you've heard of Worldcom, Kmart and >the others*but even down at your local pharmacy on the corner, when it >comes to pricing? > >Greg Pabb may not be the last honest man in the drugstore business but I >didn't find many like him in my investigation of pharmacies throughout >Metro Detroit*a local businessman with the courage to confess what he >admits is nothing less than price gouging rampant at all kinds of >drugstores all across Metro Detroit and beyond. > >Now we're not talking about the skyrocketing cost of brand name drugs which >year after year make the American pharmaceutical industry richer, nor the >fact that Americans can cross the border into Canada and buy the same U.S. >made drugs for a fraction of the cost. No, we're talking about the drugs >we're promised will save us lots of money. How to avoid paying too much for >prescriptions? > >Pharmacists all agree generic versions of name-brand drugs give you the >same medicinal benefit at a tiny fraction of the cost of their brand-name >equivalents. > >But the truth is if you're like these folks and paying for your own >prescriptions because Medicare doesn't cover it, or you don't have a job >that gives you health insurance, or even if you do but your insurance >doesn't cover drugs, you may be saving some, but what your friendly >pharmacist doesn't tell you? He's putting the lion's share of the savings >right into his own pocket and hoping you never find out. It's a fact the >industry vehemently denies. > >But that's exactly where we found it. It's a secret every insider seems to >know but virtually nobody wants to tell. > >We went to store after store after store where a prescription for a generic >that costs the pharmacy only about $2 is being sold to many of you for as >much as $100, despite their denials. > > A Closer Look at Cost > >Prescription drug prices, they're the fastest growing segment of health >care costs today, and now we're learning it's not only the big drug makers >reaping sky-high profits, local drugstores encouraging you to buy >lower-cost generic drugs are quietly keeping most of the savings for >themselves. > >Take Vasotec, which many people need to treat their high blood pressure and >heart problems. But now the generic version called Enalapril Maleate is >also available. > >The shape may be different but it goes down just as easy, and instead of >spending $76 on a one-month supply of the name-brand Vasotec, wouldn't you >be pretty happy if somebody behind the pharmacy counter at CVS suggested >you buy the generic for only $61?*And buying these got you a 20% savings of >$15*only guess what the friendly pharmacist at CVs never tells? That >generic the pharmacist recommended and sold you for $61 has a true >wholesale cost of less than $6*and CVs probably pays even less for it. > >While the markup on Vasotec is only minimal, CVs marks up the generic by a >good 921%. And CVs is by no means alone. The markup at Walgreens is only a >tiny bit less. Walgreens in Oak Park sells the same prescription for >$58.19. > >Some of the independents we checked seemed even greedier. At Birmingham >drug? The cash price was about $68*and even though it says Save On >Pharmacy, we found Pharmacist Pabb was the one saving the most by charging >what he now admits is an "unconscionable markup." > >Now, we heard them singing the same song at lots of Motown drugstores where >the pharmacists claim the big insurance companies are to blame for this >because Blue Cross, and the others, just won't pay enough when insured >people need medication. > >In Lansing, Bill Knox speaks for the American Association of Retired >Persons, whose members are among those hardest hit by what he says are >these unconscionable markups. > >Insurers like Blue Cross do save millions when their members choose >generics because the big players keep an eagle eye on the true cost of >drugs. > >Franz Neibrecht at the Michigan Pharmacists' Association says Blue Cross >sometimes pays the pharmacy so little on some drugs, it's members sometimes >have a hard time making any profit*A claim denied by Richard Cole of Blue >Cross Blue Shielf of Michigan, who says there's just never any excuse for >unethical, if not illegal, markups to people not covered with a >prescription plan. > >Generic Prozac is an even better example of what so many druggists are >quietly doing to those who can least afford and have no help to pay for the >prescriptions they need. A 30-day supply of the generic Prozac is a >prescription that costs drugstores just $2.16 or less. But when a month's >supply of the name-brand Prozac itself sells for about $100, drugstores >like Heritage Pharmacy in Allen Park sell the generic for $92.24*and tell >you "you're still saving a few bucks." > >And now don't focus your anger on Gregory Papp just because he's honest >enough to admit it*over here at Birmingham Drug, the $2.16 generic Prozac >called Fluoxetine has been fetching $89.59. That's a markup of more than >4,000% for you math fans out there. And Walgreen's is not that far behind >at $74.49. CVs and Rite Aid both collect $72.99. > >Mr. Didur, who works for a corporation that claims to be committed to the >highest level of integrity in every aspect of its business, was kind enough >to do another price check*but no happier with the result. > >The truth is no matter where we went, from the big chain drug stores to the >independent, to the pharmacies at Krogers and Farmer Jacks, even to the >so-called discounters like Meijer and WalMart and Kmart, too, we found to >one degree or another, much if not most of the potential savings on >generics are going into the till at the pharmacy. > >It's true on the generic form of Zantac, the popular ulcer drug that costs >$7.50 wholesale but has been sold for more than $127 in Birmingham where >owner Bill Krasnick told me affluent customers can afford to pay a little >more*and Atenolol, another blood pressure drug, that costs less than $2 but >is selling for as much as $25.49*and the generic brand of Pepcid, the >popular heartburn medication, a $5 prescription that's been bringing well >over $100 at a couple of those places where the pharmacists believe the >market will bear it. Is their anybody we found NOT cashing in? > >Martin Peltz manages the pharmacy at Costco and on each and every one of >the drugs we checked, it was the pharmacy at Costco that was not only >cheaper but dramatically far and away cheaper than everyone across the >Metro area. While that other pharmacy is charging $92 for generic Prozac, >Costco is selling it for $9. When the chainstores sell generic Pepcid for >close to $100? Costco is dispensing it for only about $12. > >- Price Comparison Chart > > > > > > > > > > > > > > > > > > > > > > > ADVERTISEMENT: > > > > > We appreciate your comments, compliments, and >questions. > Click here to e-mail us. > All material © 2003 WXYZ-TV Scripps Howard >Broadcasting Company. > All Rights Reserved. > Users of this site are subject to our User >Agreement. > Please read our Privacy Policy. > WXYZ-TV is an equal opportunity employer. > > > > > > > _________________________________________________________________ MSN 8 helps eliminate e-mail viruses. 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