I posed this question to the self-styled Pharmacy God (PG), an anonymous blogger who works in a retail pharmacy. Be forewarned: his posts range from fascinating behind-the-counter insights to mundane profanity. Nevertheless, he is one of the better pharmacist-bloggers and I like to read his blog Thoughts from the Pharmacy God.
PG gave me a detailed answer to my question about pharmacy margins, so I thought I’d share it with you. Note that his pharmacy fills a much lower share of Medicaid scrips than a typical independent.
Any other viewpoints? Note that the recent stimulus compromise takes out the option to let states extend Medicaid to the unemployed.
Thanks again, PG!
(Yup, it’s been an all-guest-post week. Don’t worry – I’ll be back with new stuff next week.)
“My pharmacy doesn’t fill a lot of pure Medicaid prescriptions (less than 1 percent), so I can't really comment on the profits on them. My state has switched a lot of its chronic Medicaid families over to the managed care companies, but even with those factored in I still bill less than 4% of my scripts to these plans. I remember a few years ago that Medicaid reimbursed well, but things may have changed since then.
On the Medicare Part D side, the reimbursements are all over the place. One PBM will pay 3% higher on Medicare D scripts, the next will be 3% lower. At my pharmacy, I'm lucky to pull a 16% gross profit.
Here's the catch... the base dollar amount that the profit is coming from has dropped. I don't know if it's the Walmart effect or if there is a backroom deal between the government and manufacturers, but the actual dollars profit per rx has dropped.
Three years ago it was normal to see a generic's cost to be $25. Add your 18% profit and you would make $4.50 on the script. Now I'm seeing generic costs on a lot of the fast moving medications below $5. That means that I'm going to make a buck (hopefully) on the script.
This past, Monday I ran a report just to check on my reimbursement amounts. For the purpose of my report, I assumed that my actual cost to dispense each medication would be $8.00. When I looked at the report, I saw that the total reimbursement for 28.4% of the generic medications didn't even break the $8.00 mark. And when I look at brand name reimbursements, it's not uncommon to see reimbursements that are $4-10 over the actual cost of the medications.”