Where is all the money going?

Fortunately – or unfortunately – my pharmacy memories goes back a great deal. My first summer working in a drug store was the summer of 1967. Medicare/Medicaid was a new concept. There were no “drug cards”, if fact bank charge cards were a novelty. That first summer, I got to do a gross profit survey of recently filled Rxs… as I remember the average Rx price was in the $4 range the gross profit  percent was in the low 40’s.

A  12 hr/7 days a week store averaging 100 Rxs/day was a “three man store”

Life expectancy was in the mid-60’s and pharmacy dollars were reportedly around 6% of total health care dollars.

There was also basically no generics, no wholesale  price increases and of course no computers, IVR’s, and we had two phone lines – one was “unlisted”  as a “doctor’s line”

Wholesalers worked on 18%-20% margins and typically we got TWO DELIVERIES A DAY. I can remember having a “minimum Rx price” of $1.25…which was used often.

I can remember, as a PIC for a small apothecary franchisor company store in the mid-70’s… business was great… even though margin were where the company wanted them.. as any corporation… they wanted more volume… but.. didn’t want to add staff… in fact … given the amount of space we had.. additional staff would have been more of  a problem than a solution.. so I – unilaterally – implemented what I considered a minor price increase – hoping to stunt the increase of the Rx business… changing the pricing to a minimum of cost PLUS $1.00… profits soared.  Growth slowed… corporate “suits” never figured it out.. .but they were happy.

Jump to today… it is reported that pharmacy dollars are 10%-12%.. average life expectancy is late 70’s to early 80’s

Wholesalers are working on %5-6% margins… Pharmacy is working on 20%+/- margins

We have generics out the wazoo – 80%+

Average Rx price is north of $60.. with many brand names easily hitting triple digits for a month’s supply.

The typical non-24 hr store must fill 400+ Rxs/day to stay financially viable.

If  two of the major players (wholesaler & pharmacy) have given up half or more of the previous gross margins

generics up, Rxs/RPh man hour up… and Rx $$ as a per-cent of total medical dollars has almost doubled…

Has all the “savings” only been sucked up by middlemen … that have and continues to promise saving the system money… only – in reality – just supports larger and larger infrastructures … that has really served no real purpose in providing health care to those in our society.

Maybe I am wrong… but.. the numbers just don’t compute ! Could our “simpler” system that we had decades ago… have been a more efficient system?





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