The Economics of Pharmacy

Imagine you are a furniture maker. You possess skills that takes many years to learn and have knowledge that few laymen possess. Because of this, you operate your own furniture store to sell your work to local consumers and businesses. You have to compete with the big box retailers, but because all of your furniture is hand made, and made quite well, you have a loyal customer base. You generally manage to keep your prices competitive and, at times, you can match prices of the larger retailers.

In essence you are a respected member of the community providing needed goods and services to the area.

For humor's sake, lets look at the actual cost of materials of the building of a rocking chair.

Wood for Chair - $150
Hardware - $20
Time & Labor - $30
Total Cost - $200

Thus you need to sell this particular chair for over $200 to procure a profit. Being a fiscally responsible businessman, you decide to sell the chair for $250, a 25% markup. This is generally in line with the pricing of similar items at other retailers. As the years go by, you enjoy modest success with this pricing method and remain able to compete with the big box retailers.

Suddenly one day, Walmart attempts to under cut you. They start selling identical chairs for $210. Knowing both you and Walmart have roughly the same cost involved in procuring the chairs, you realize that there is only a very marginal profit made.

Customers start complaining about your now 'over priced' chairs and you are forced to price your chairs at the $210 price point. It doesn't appear to matter that you offer services that Walmart can in no way compete with. You are now making only 5% on this chair, but this pricing method begins to spread to other items in your.

When you voice your displeasure with the situation, the majority of the replies are:

"Well you drive a nice car, live in a nice house and have a stable job, you don't need to be making that much on your products."

Because not all of your customers are demanding meeting this price point, you are able to stay afloat. Your cash flows are altered, but big orders from regional hotels and businesses are supplementing the lost income.

One day you are approached by one of your largest hotel clients. They want one of your rocking chairs in everyone of their thousands of hotel rooms. Naturally, you are excited at this proposal until they start listing their contract demands.

Namely they will pay you $150 for each chair.

"That is unfair," you state. "The cost for each chair alone is $200 and I have to be able to make some kind of profit on it in order to pay my employees and my bills."

"Ah," starts the hotel representative, "but you have operated successfully selling your chairs at $210 and we know the cost of wood in each of these chairs is only $150. Thus you can absorb another reduction in price. So we're willing to pay that amount, and that amount only."

"But you're misunderstanding the situation," you cry back. "The only reason my prices are so low is because I have to compete with the likes of Walmart and other retailers. I'm barely making a profit as it is. And the cost of each chair is not $150, but $200. Your missing the associated costs of actually constructing each chair!"

"Irrelevant!" replies the representative. "The cost of the wood is $150, so that must be the cost of the chair. We will not pay you a dime more for your chairs. Either you accept this agreement or we will take all of our business elsewhere."

Reluctantly you agree. You cannot afford to lose such a large client, even if the deal is rubbish. So you go along, making all of these chairs but never seeing any profit come from it.

Then another of your clients hears of the deal you signed and wants the same pricing. And then another. And then another. Soon a large percentage of your big buyers are purchasing your goods at cost. Tie in the purchases by single consumers for a price barely above cost, and you find yourself leaking money in multiple directions.

Finally, after decades of loyal service to your community, you are forced to close your business. The big box retailers and greedy large clients have bled you dry.

This is exactly how the economics of pharmacy work today. Walmart prices its $4 generics to the point where there is virtually no money made on it (actually the average cost of a prescription, before adding the drug cost, is around $10 per prescription). The large buyers in the story are the PBMs of the nation. Too many of these actually expect us to fill prescriptions for cost.

It is a sad sad fact that very few people are actively aware of. No one seems to care that pharmacies, specifically independent pharmacies, find themselves scrambling for other sources of income. It is the sort of thing that would have its own Dateline special if it were more well known. I highly doubt the public would stand for this type of thing if the majority were aware of it.

Of course this example is overly simplified and there are several other factors that contribute to this problem. I've thought for the last several years that pharmacies and PBMs are going to reach a breaking point some day soon. With two more prominent insurances this year telling us that they will not pay over cost, I feel that day is creeping ever closer.

And it's gonna be one helluva fight.

Five-for-five

Don't worry oh loyal readers, I am still alive. My main computer took a crap on me about three weeks ago and I have been trying to identify the problem ever since. Thus I have not been around to entertain you with my exquisite rantings.

In other news, I received noticed that I have two more interviews in the next three weeks. That makes me five for five on interviews thus far. I do believe its time I can start relaxing a bit over whether or not I'll be going to school in the fall. Kind of an odd feeling if you ask me.

So, ole Phatty will be boppin around the country for the next few weeks. Who knows, maybe I'll be sitting next to some of you in some random city and you'll never even know it.

Spooky, isn't it?

Interview... Round Three

I'm starting to enjoy going to these interview just to people watch. I mentioned on Twitter the guy in khakis and a green sweater. A rather odd combination for an interview, but he fit in with the guy in a polo and cargo pants.

Probably the best part of it is how serious some of the interviewees are. I mean seriously, there were sticks shoved so far up some peoples asses that they had splinters in their eyes. While the Dean gave the opening welcome I scanned the room and was astounded with how many people held their unblinking gaze with chin up in the area at the Dean.

It reminded me of a dog begging for a treat. I actually have to stifle a laugh.

A few times I attempted to chat with people, but most of them had the personality of a wet rag. Or at least they did at this particular time. I make a joke about something, and yes it was a decent joke, and you can hear crickets as the other people look at me.

Laugh people, they aren't going to like to interview a statue.

All in all I think it went rather well. I was very impressed with the program and the faculty members I met. It appears they know exactly where the profession is going and are more than willing to adequately train students for that. Much better than school number two whose sole focus was on research for some odd reason.

Now the waiting game begins once again as I will not here from this school for a couple months. The only thing I'm left wondering is how others felt when they finally did remove that stick from their ass. I bet they'll be shittin' pancakes for a week.

Prescribing, So Easy A Caveman Can Do It!

This appeared on my fax machine earlier today from a dentist office. I've seen a lot of strange form prescriptions before, but this one takes the cake. Really, all its missing is a bingo dauber for maximum effect.


Now I know what some of you are thinking. First, it is nice that it is legible to read. Second, I recognize that it is probably an easy way to prescribe common prescriptions.

But seriously? The kicker is you can tell they screwed up the refills to start out with judging by the marks. They had to make an X, the number 15 and the number 1. And they screwed up one of them.

Bravo, bravo.

Who new little old ladies in a bingo parlor on Saturday night had so much in common with prescribing prescriptions!

The Dark Side of Pharmacy

As the sun covered the ground with its rays in an attempt to perpetrate the first warm day of the year, we sat plugging along in the pharmacy. It was a typical day, nothing out of the ordinary.

Lunch came and went. The order came and went. Soon it was about three o'clock and we successfully filled over 200 prescriptions. For the time being, there was nothing in the queue so we all took a chance to relax and enjoy the peace and quiet.

Out of the corner of my eye I saw the young girl in the hoodie come through the back door of the pharmacy. It was nothing unusual for this time of year and I paid no attention to it. In the midst of discussing the some random fact I heard a voice murmur,

"I'm so sorry."

I looked towards the direction of that voice, which just so happened to be directly in front of our consultation window. There stood the girl in the hoodie with my manager. And a knife pressed to her neck.

"Here," she said and handed me a piece of paper. Hastfully scribbled in blue ink on that crumpled piece of paper said the following words:

Give me all of your Oxycontin and no one gets hurt. Do not call the police.

I looked up to our pharmacist, our eyes locked and he immediately knew what was wanted. Sadly, this was not his first time in this situation.

Together we walked over to our controls cabinet, unlocked it, and began emptying the requested bottles into a white sack. No words were spoken. No words needed to be spoken.

He stayed back to relock the cabinet as I carried the sack towards the window. The girl still stood there, her hands shaking. As I gave her the bag she slowly walked backwards, my manager still in hand. A few feet back from the counter she pushed her away and darted out the door.

Out of instinct I flew out of the pharmacy after her. I wasn't thinking of what I would do, it was just a reaction. By the time I ran out the door she was in a car speeding away.

Walking back into the pharmacy everyone was frozen. I stepped back into the pharmacy and hit our silent alarm. From some direction, to this day I do not know who said it, came the phrase,

"What the fuck."

The whole experience was slightly surreal, almost as if you have stepped back and are watching a movie of yourself. Adrenaline kicks in and saves you from completely breaking down... at least at that moment.

Why do I share this?

So often we share stories about addicts and crazy customers and do so in humorous tone. The thing is, some of them are really not all that humorous. It's merely a way to cope with what we see on a daily basis.

As cliche as it may sound, that day a part of me died. The innocent part that still believed things of that nature did not really occur. It was almost as if part of the joy I see in the world died a little bit that day.

Now when ever I see someone with a hoodie pulled up over their head, the hairs on the back of my neck stand up. It's almost an innate response now. Little quirks that previously were ignored are now highlighted with the possibility of a repeat occurrence.

It is really funny how something like that can change you. It's one of the few experiences that I really do not find any humor at all.

Why haven't I told this story after having this blog for well over two years and over 300 posts? I really have no idea. Why do I share this story now? In prepping for an upcoming interview one of the questions asked, "Name a moment in which you excelled in a difficult situation."

Honestly the only answer I can think of is that day. After the event I spent the next three hours defusing various aspects of the situation. That included driving to the location where the police eventually found them and identifying them.

There is something insanely sobering about sitting in the back of a police car when they remove another person, with guns drawn, in order for you to identify them. Especially when you considered what you just witnessed mere hours ago.

It was the only time in my life I have ever felt truly proud of how I conducted myself. And its the only time that completely answers that question.

I guess the real reason I've decided to finally share this is so that those of you who do visit this blog realize that it is not always fun and games behind the pharmacy counter. Sure we can joke about situations, but in the end not everything is truly as humorous as it seems.

That kind of goes against everything I believe in as a person. Ironic is it not?

Happy New Year... Minus the Happy

There shall be no year in review from this blogger. Why? Because I think they're gay, that's why.

What I have been pondering during the first work day of the new year is how paranoid I have become during this time of the year. It used to be that New Years signified a chance to start over and to better yourself. Now I wake up the next morning in cold sweats dreading heading into work even though I typically have New Years day off.

And who do I blame? Medicare Part D, that's who.

Even though it has been a couple years I still fear the clusterfuck that was Year 1 of Part D. We all walked into the store today with a bit of trepidation and reluctantly logged onto our terminals. This was before checking the faxes, before checking the phones, before even powering up the robot.

Of course the day has not been anywhere near as bad as that fateful first week in 2006. I have not witness a pharmacist punch his computer monitor today, which is still one of the most humorous things I have seen at this horrid place.

Sure I have about a dozen patients that I cannot fill anything for until they mosey on in with their new cards. Sure some Caremark plans aren't allowing refills until 85% utilization and some Medica plans aren't allowing refills until 100% utilization.

Note to Caremark and Medica VPs. Next time you pull a major switch like this, let us know next time. That way I can resist the urge to donkey punch you after being on hold for 20 minutes.

In all, it's not that bad. Yet still, in the back of our minds, there is this innate fear that it could all go down hill at any moment. It's almost as if we have a touch of PTSD regarding it. Funny how that works.

And perhaps the greatest joy is that we can no longer say Happy New Years because there is nothing happy about the new year anymore. CMS stole my joy, those bastards. Maybe I should donkey punch them instead.