Pharmacy Industry Facts Author Samuel A. Maldonado, CBI
Four Forms of Payment
Cash Medicaid Medicare Part D HMO—Health Maintenance Organization • PPO—Preferred Provider Organization
Health Maintenance Organization
A health maintenance organization (HMO (HMO)) is a type of Managed Care Organization (MCO) that provides a form of health insurance coverage in the United States and Switzerland that is fulfilled through hospitals, doctors, and other providers with which the HMO has a contract. Unlike traditional indemnity insurance, care provided in an HMO generally follows a set of care guidelines provided through the HMO's network of providers. Under this model, providers contract with an HMO to receive more patients and in return usually agree to provide services at a discount. This arrangement allows the HMO to charge a lower monthly premium, which is an advantage over indemnity insurance, provided that its members are willing to abide by the additional restrictions. In addition to using their contracts with providers for services at a lower price, HMOs hope to gain an advantage over every day insurance plans by managing their patients' health care and reducing unnecessary services. To achieve this, most HMOs require members to select a primary care physician, a doctor who acts as a "gatekeeper " to medical "gatekeeper" services. PCPs are usually internists, internists, pediatricians, pediatricians, family doctors, doctors, or general practitioners. practitioners. In a typical HMO, most medical needs must first go through the PCP, who authorizes referrals to specialists or other doctors if deemed necessary. Emergency medical care does not require prior authorization from a PCP, and many plans also allow women to select, in addition to a PCP, an OB/GYN whom they may see without referral. HMOs also manage care through utilization review. The amount of utilization is usually expressed as a number of visits or services or a dollar amount per member per month. Utilization review is intended to identify providers providing an unusually high amount of services, in which case some services may not be medically necessary, or an unusually low amount of services, in which case patients may not be receiving appropriate care and are in danger of worsening a condition. HMOs often provide preventive care for a lower co-payment or for free, in order to keep members from developing a preventable condition that would require a great deal of medical services. When HMOs were coming into existence, indemnity plans often did not cover preventive services, such as immunizations, immunizations, wellbaby checkups, mammograms, mammograms, or physicals. It is this inclusion of services intended to maintain a member's health that gave the HMO its name. Some services, such as outpatient mental health care, are often provided on a limited basis, and more costly forms of care, diagnosis, or treatment may not be covered. Experimental treatments and elective services that are not medically necessary (such as elective plastic surgery) surgery) are almost never covered. Other methods for managing care are case management, management, in which patients with catastrophic cases are identified, or disease management, management, in which patients with certain chronic diseases like diabetes, diabetes, asthma, asthma, or some forms of cancer are identified. In either case, the HMO takes a greater level of involvement in the patient's care, assigning a case manager to the patient or a group of patients to ensure that no two providers provide overlapping care, and to ensure that the patient is receiving appropriate treatment, so that the condition does not get worse beyond what can be helped. HMOs often shift some financial risk to providers through a system called capitation, where certain providers (usually PCPs) receive a fixed payment per member per month and in return provide certain services for free. Under this arrangement, the provider does not have the incentive to provide unnecessary care, as he will not receive any additional payment for the care. Some plans offer a bonus to providers whose care meets a predetermined level of quality. Some critics regard HMOs as monopolies that distort the market for health care. They argue that HMOs were supposed to be a stopgap solution, and perhaps even set up for ultimate failure so the public would demand that the federal government would take over with a national health care system. reference: http://en.wikipedia.org/wiki/Health_maintenance_organization
Preferred Provider Organization
In health insurance, insurance, a preferred provider organization (or "PPO", sometimes referred to as a participating provider organization) organization) is a managed care organization of medical doctors, doctors, hospitals, hospitals, and other health care providers who have covenanted with an insurer or a third-party administrator to provide health care at reduced rates to the insurer's or administrator's clients. The idea of a preferred provider organization is that the providers will provide the insured members of the group a substantial discount below their regularly-charged rates. This will be mutually beneficial in theory, as the insurer will be billed at a reduced rate when its insured utilize the services of the "preferred" provider and the provider will see an increase in its business as almost all insured in the organization will use only providers who are members. Even the insured should benefit, as lower costs to the insurer should result in lower rates of increase in premiums. Preferred provider organizations themselves earn money by charging an access fee to the insurance company for the use of their network. They negotiate with providers to set fee schedules, and handle disputes between insurers and providers. PPOs can also contract with one another to strengthen their position in certain geographic areas without forming new relationships directly with providers. PPOs differ from health maintenance organizations (HMOs), in which insured who do not use participating health care providers receive little or no benefit from their health plan. PPO members will be reimbursed for utilization of nonpreferred providers, albeit at a reduced rate which may include higher deductibles, co-payments, lower reimbursement percentages, or a combination of the above. Exclusive Provider Organizations (EPOs) are similar to PPOs, except that they do not provide any benefit if the insured chooses a non-preferred provider, except for some exceptions in cases of emergencies. Some state regulations limit how much and under what circumstances an insurance plan can lower the insured's benefit for using a non-preferred provider. Other features of a preferred provider organization generally include utilization review, where representatives of the insurer or administrator review the records of treatments provided to verify that they are appropriate for the condition being treated rather than largely or solely being performed to increase the amount of reimbursement due, a procedure that many providers resent as second-guessing. Another near-universal feature is a pre-certification requirement, in which scheduled (non-emergency) hospital admissions and, in some instances outpatient surgery as well, must have prior approval of the insurer and often undergo "utilization review" in advance. The rise of PPOs was credited by some with a reduction in the rate of medical inflation in the U.S. in the 1990s. 1990s. However, as most providers have become members of most of the major preferred provider organizations sponsored by major insurers and administrators, the competitive advantages outlined above have largely been reduced or almost entirely eliminated, and medical inflation in the U.S. is again advancing at 150-200% the rate of general inflation. Furthermore, passive PPOs are now a part of the marketplace. These PPOs obtain discounts for insurance companies on indemnity and out-of-network claims, and often take as their fee a portion of the discount obtained. The aspects of utilization review and pre-certification are now widely used even in traditional "indemnity" plans, and are widely regarded as being essentially permanent features of the American health care system. PPOs can also create inefficiencies and ironies in the health care industry. Though PPOs often require insurers to pay a claim within a certain timeframe in order to take the PPO discount, calculating the PPO discount and having the insurer pay the PPO's access fee is still one more step-- and one more opportunity for mistakes and delays--in the alreadycomplex process of paying for health care in the United States. Since PPOs have more power in their relationship with providers, they can still provide a benefit to insured patients. Uninsured patients may, however, be unable to obtain these discounts--even if they pay cash. Reference from "http://en.wikipedia.org/wiki/Preferred_provider_organization " "http://en.wikipedia.org/wiki/Preferred_provider_organization"
Medicaid
Medicaid is the US health insurance program for individuals and families with low incomes and resources. It is jointly funded by the states and federal government, and is managed by the states. Among the groups of people served by Medicaid are eligible low-income parents, children, seniors, and people with disabilities. Medicaid is the largest source of funding for medical and health-related services for people with limited income. Contents [hide] 1 History and participation 2 Comparisons with Medicare 3 Eligibility 4 Budget 5 Important legislation 6 References 7 External links [edit] History and participation Medicaid was created on July 30, 1965 through Title XIX of the Social Security Act. Each state administers its own Medicaid program while the federal Centers for Medicare and Medicaid Services (CMS) monitors the state-run programs and establishes requirements for service delivery, quality, funding, and eligibility standards. Each state may have their own names for the program. Examples include "Medi-Cal" in California, "Mass Health" in Massachusetts, and "TennCare" in Tennessee. States may bundle together the administration of Medicaid with other separate programs such as the State Children's Health Insurance Program (SCHIP), so the same organization that handles Medicaid in a state may also manage those additional programs. Separate programs may also exist in some localities that are funded by the states or their political subdivisions to provide health coverage for indigents and minors. State participation in Medicaid is voluntary; however, all states have participated since 1982 when Arizona formed its AHCCCS program. In some states Medicaid is subcontracted to private health insurance companies, while other states pay providers (i.e., doctors, clinics and hospitals) directly to ensure that individuals receive proper medical attention.
Medicaid cont’d
Comparisons with Medicare Although their names are similar, Medicaid and Medicare are very different programs. Medicare is an entitlement program funded entirely at the federal level, while Medicaid is a social welfare program with both state and federal funding.[1] funding.[1] One criterion for Medicaid eligibility is being impoverished under the program's guidelines — this plays no consideration in determining Medicare coverage. While Medicaid and Medicare cover similar groups, there are important differences between them. For example, Medicaid covers a wider range of health care services than Medicare. In 2001, 2001, about 6.5 million Americans were enrolled in both Medicare and Medicaid, also known as Medicare dual eligible. eligible. [edit] edit] Eligibility Medicaid is a joint federal-state program that provides health insurance coverage to low-income children, seniors and people with disabilities. While Congress and the Centers for Medicare and Medicaid Services set out the main rules under which Medicaid operates, each state runs its own program. As a result, the eligibility rules are somewhat different in every state, although the framework is the same throughout the country. Both the federal government and most state governments have made many changes to the eligibility requirements and restrictions over the years. This has most recently occurred with the passage of the Deficit Reduction Act (DRA) of 2005 (Pub.L. No. 109-171) which significantly changed rules governing the treatment of asset transfers and homes of nursing home residents.[2] residents.[2] The implementation of these changes will proceed state-by-state over the next few years. To be certain of your rights under the Act you should consult an expert, as the rules are complex. The DRA now requires that anyone seeking Medicaid must produce documents to prove that they are a United States citizen or resident alien. alien. [edit] edit] Budget Unlike Medicare, which is totally federal, Medicaid is a joint federal-state program. Each state operates its own Medicaid system, but this system must conform to federal guidelines in order for the state to receive matches and grants. This federal funding only pays for about half the states' Medicaid costs, with the states themselves funding the remainder. Medicaid funding has become a major budgetary issue for many states over the last few years, with the program, on average, taking up a quarter of each state's budget. According to CMS, the Medicaid program provided health care services to more than 46.0 million people in 2001.[3] 2001.[3] In 2002, Medicaid enrollees numbered 39.9 million Americans, the largest group being children (18.4 million or 46 percent). It is estimated that 42.9 million Americans will be enrolled in 2004 with (19.7 million of them children). Medicaid payments assist nearly 60 percent of all nursing home residents and about 37 percent of all childbirths in the United States. Medicaid is also the program that provides the largest portion of federal money spent for health care on people living with HIV. HIV. Typically, poor people who are HIV positive must progress to AIDS before they can qualify under the "disabled" category. More than half of people living with AIDS are estimated to receive Medicaid payments. Two other programs that provide financial assistance to people living with HIV/AIDS are the Social Security Disability Insurance (SSDI) and the Supplemental Security Income. Income. Financial advisors typically advise retirees and other individuals facing high health costs to adopt strategies that will protect their financial assets in the event of large medical bills. Many programs do not consider the value of one's home in calculating eligibility, therefore it is often recommended that retirees pursue home ownership. By adopting the recommended strategies, seniors hope they will quickly qualify for Medicaid benefits if the need for long-term care arises. A person should seek advice from a qualified expert who is familiar with Medicaid rules and financial planning. planning. See Elder law. law.
Medicaid cont’d
[edit] Important legislation 1965 PL 89-97 Medicaid 1997 PL 105-33 Balanced Budget Act (Children’s Health Insurance Program) [edit] References ^ http://www.medicare.gov/LongTermCare/Static/Home.asp ^ http://www.cms.hhs.gov/NewFreedomInitiative/downloads/LTC%20Roadmap%20to%20Reform.pdf ] ^ http://www.cms.hhs.gov/publications/overview-medicare-medicaid/default4.asp [edit] External links CMS official web site. •
Medicaid
•
Overview
Medicare
Medicare official web site for beneficiaries. beneficiaries.
Trends in Medicare, October 2006. Staff Paper of the Office of the Assistant Secretary for Planning and Evaluation (ASPE), U.S. Department of Health and Human Services AT Wiki on Assistivetech.net Read Congressional Research Service (CRS) Reports regarding Medicaid Kaiser Family Foundation - Substantial resources on Medicaid including federal eligibility requirements, benefits, financing and administration. State Health Facts Data on health care spending, utilization, and insurance coverage, including details extensive Medicaid information. State of the States 2006 - Information on state health reforms, including Medicaid (PDF). Medicaid information from Families USA Medicaid Reform - The Basics from The Century Foundation National Association of State Medicaid Directors Organization representing the chief executives of state Medicaid programs. Ohio Medicaid Basics A primer on one state's Medicaid program. Referenced from "http://en.wikipedia.org/wiki/Medicaid"
Medicare ď Ž
ď Ž
There is a booklet that provides basic information about what Medicare is, who is covered and some of the options you have for choosing Medicare coverage. Website: www.medicare.gov Toll-free number:1-800-MEDICARE (1-800-633-4227)TTY number:1877-486-2048
Medicare cont’d
What is Medicare? Medicare is our country’s health insurance program for people age 65 or older. Certain people younger than age 65 can qualify for Medicare, too, including those who have disabilities and those who have permanent kidney failure or amyotrophic lateral sclerosis (Lou Gehrig’s disease). The program helps with the cost of health care, but it does not cover all medical expenses or the cost of most long-term care. Medicare is financed by a portion of the payroll taxes paid by workers and their employers. It also is financed in part by monthly premiums deducted from Social Security checks. The Centers for Medicare & Medicaid Services is the agency in charge of the Medicare program. But you apply for Medicare at Social Security, and we can give you general information about the Medicare program. Medicare has four parts Hospital insurance (Part A) that helps pay for inpatient care in a hospital or skilled nursing facility (following a hospital stay), some home health care and hospice care. Medical insurance (Part B) that helps pay for doctors’ services and many other medical services and supplies that are not covered by hospital insurance. Medicare Advantage (Part C) formerly known as Medicare + Choice plans are available in many areas. People with Medicare Parts A and B can choose to receive all of their health care services through one of these provider organizations under Part C. Prescription drug coverage (Part D) that helps pay for medications doctors prescribe for treatment. A word about Medicaid You may think that Medicaid and Medicare are the same. Actually, they are two different programs. Medicaid is a state-run program that provides hospital and medical coverage for people with low income and little or no resources. Each state has its own rules about who is eligible and what is covered under Medicaid. Some people qualify for both Medicare and Medicaid. For more information about the Medicaid program, contact your local medical assistance agency, social services or welfare office.
Medicare cont’d
Who can get Medicare? Hospital insurance (Part A) Most people age 65 or older who are citizens or permanent residents of the United States are eligible for free Medicare hospital insurance (Part A). You are eligible at age 65 if: You receive or are eligible to receive Social Security benefits; or You receive or are eligible to receive railroad retirement benefits; or You or your spouse (living or deceased, including divorced spouses) worked long enough in a government job where Medicare taxes were paid; or You are the dependent parent of someone who worked long enough in a government job where Medicare taxes were paid. If you do not meet these requirements, you may be able to get Medicare hospital insurance by paying a monthly premium. Usually, you can sign up for this hospital insurance only during designated enrollment periods. NOTE: Even though the full retirement age is no longer 65, you should sign up for Medicare three months before your 65th birthday. Before age 65, you are eligible for free Medicare hospital insurance if: You have been entitled to Social Security disability benefits for 24 months; or You receive a disability pension from the railroad retirement board and meet certain conditions; or You have Lou Gehrig’s disease (amyotrophic lateral sclerosis); or You worked long enough in a government job where Medicare taxes were paid and you meet the requirements of the Social Security disability program; or You are the child or widow(er) age 50 or older, including a divorced widow(er) of someone who has worked long enough in a government job where Medicare taxes were paid and you meet the requirements of the Social Security disability program. You have permanent kidney failure and you receive maintenance dialysis or a kidney transplant and: • You are eligible for or receive monthly benefits under Social Security or the railroad retirement system; or • You have worked long enough in a Medicare-covered government job; or • You are the child or spouse (including a divorced spouse) of a worker (living or deceased) who has worked long enough under Social Security or in a Medicare-covered government job.
Medicare cont’d
Medical insurance (Part B) Anyone who is eligible for free Medicare hospital insurance (Part A) can enroll in Medicare medical insurance (Part B) by paying a monthly premium. If you are not eligible for free hospital insurance, you can buy medical insurance, without having to buy hospital insurance, if you are age 65 or older and you are— A U.S. citizen; or A lawfully admitted noncitizen who has lived in the U.S. for at least five years.
Medicare cont’d
Medicare Advantage plans (Part C) If you have Medicare Parts A and B, you can join a Medicare Advantage (formerly Medicare + Choice) plan. With one of these plans, you do not need a Medigap policy, because Medicare Advantage plans generally cover many of the same benefits that a Medigap policy would cover, such as extra days in the hospital after you have used the number of days that Medicare covers. Medicare Advantage plans include: Medicare managed care plans; Medicare preferred provider organization (PPO) plans; Medicare private fee-for-service plans; and Medicare specialty plans. If you decide to join a Medicare Advantage plan, you use the health card that you get from your Medicare Advantage plan provider for your health care. Also, you might have to pay a monthly premium for your Medicare Advantage plan because of the extra benefits it offers. People who become newly entitled to Medicare can enroll during their initial enrollment period or during the annual coordinated election period from November 15 – December 31 each year. There also will be special enrollment periods for some situations.
Medicare cont’d
Medicare prescription drug plans (Part D) Anyone who has Medicare hospital insurance (Part A), medical insurance (Part B) or a Medicare Advantage plan is eligible for prescription drug coverage (Part D). Joining a Medicare prescription drug plan is voluntary, and you pay an additional monthly premium for the coverage. You can wait to enroll in a Medicare Part D plan if you have other prescription drug coverage but, if you don’t have prescription coverage that is, on average, at least as good as Medicare prescription drug coverage, you will pay a penalty if you wait to join later. You will have to pay this penalty for as long as you have Medicare prescription drug coverage. The initial open enrollment period is between November 15, 2005, and May 15, 2006. People who become newly entitled to Medicare should enroll during their initial enrollment period. After the initial enrollment periods, the annual coordinated election period, to enroll or make provider changes will be November 15 – December 31 each year. There also will be special enrollment periods for some situations. Reference from http://www.ssa.gov/pubs/10043.html#part2
Drug Wholesalers
Company/FYE ending $ millions 1. McKesson Drug 3/31/93 $8,900 2. Bergen Brunswig 8/31/93 $8,400 3. FoxMeyer 3/31/93 $5,393 4. Alco Health Services 9/30/93 $3,700 5. Bindley Western 12/31/93 $2,911 6. Whitmire Distribution 7/31/93 $2,670 7. Cardinal Distribution 3/31/93 $2,070 8. Tennessee Wholesale Drug Co. 3/31/93 $1,000 9. Humiston-Keeling 4/30/93 $822 10. Commons Bros. 4/30/93 $517 11. OCP-America 9/30/93 $475 12. Neuman Wholesale Drug 4/30/93 $433 13. Drug Guild 7/31/93 $387 14. Kay Wholesale Drug 6/30/93 $382 15. Walker Drug 12/31/93 $324 16. Moore Medical 1/1/93 $278 17. Gulf Distribution 6/30/93 $274 18. The F. Dohmen Co. 4/30/93 $273 19. Kinray 12/31/92 $264 20. N. Carolina Mutual Wholesale Drug 3/31/93 $242 Source: Drug Store News/NWDA survey.
Location San Francisco, CA Los Angeles, CA Carrollton, TX Valley Forge, PA Indianapolis Folsom, CA Montgomery, AL Nashville, TN Chicago, IL Elmsford, NY Clark, NJ Ridgefield, NJ Secaucus, NJ Ridgefield, NJ Birmingham, AL New Britain, CT Miami, FL Fermantown, WI Elmhurst, NY Durham, NC
Pharmacy Expense & Profit Margins
Cost of Goods Sold……………………75% Payroll/Labor Costs……………………..9% (employees plus Owner (5%) of annual sales……..15% Range………………………………………12 to 18% Occupancy Cost……………………………5% Profit (Net Sales)……………..10 to 13% Source: National Community Pharmacists Association (NCPA)
Pharmacy Benchmarks
Average number of prescriptions per pharmacy: 54,427 annually, equaling 174 per day Average independent pharmacy sales: $2.855 million Average prescription sales: $2.55 million Average independent pharmacy employs 2.6 pharmacists (including owner) and 3.3 technicians Source: National Community Pharmacists Association (NCPA)
The Pharmacy Industry Segments
In 2005 the number of independent, franchise independent, single store independent, independent chains, independent long-term care and I.V. pharmacies, and independent pharmacist-owned supermarket pharmacies—increased slightly upwards Independent Pharmacies make up the nation’s total retail marketplace of 43% with 58,109 pharmacies based on NCPDP and NCPA data Chains comprise of 31% of the market with 18,279 stores Supermarket pharmacies comprise 15% with 8,790 locations Mass merchandisers comprise of 11% with 6,695 locations
How many Owners own more than one pharmacy? ď Ž
ď Ž
Among multi-store owners, the average number of pharmacies owned is 2.8. For the independent sector as a whole, the average is 1.2 pharmacies. Pharmacies are a paper trial business and confirmation of figures could be done literally in one hour!
Where are the profits?
Independent pharmacies offer a wide range of patient services. The top services offered in 2004 were: • • • • • • •
Delivery—85% Nutrition—84% Patient Charge Accounts—83% Compounding—73% Herbal Medicine—70% Durable Medical Equipment—60% Blood pressure monitoring and diabetes training continue to be the top disease management services offered
Source: NCPA-Pfizer Digest, “Total, Prescription Sales Increase at Nation’s Independent Pharmacies
What Insurances pay better?
(30% + margins) Cash obviously is the best form of payment (95% of all prescription sales come from third party payment i.e. HMO, PPO, Medicaid, Medicare Part D)
(Up to 30% margins) Medicaid tops the chart with the best margins retail vs. cost to an independent niche clientele business (7 to 10% margins) Medicare Part D hosts smaller margins then Medicaid. However, is still better than most HMO third party insurers (Just co-payment sometimes) HMO still continues to give the smallest margins to an independent pharmacy owner
OTC vs. Generic Drugs vs. Branded Drugs
OTC drugs are probably some of the highest margin items one could sell in order to skew an average pharmacy margins. (i.e. Children’s Cold Medicines could hold profit of up to 60%) Generic Drugs are cheaper in cost than Branded Drugs and retail for a little less than Branded Drugs. Hence, delivering a larger margin of profit to a pharmacy i.e. Viagra(branded) vs. Levitra (generic) even vs. Cialis (generic) Branded Drugs are the most expensive and host the smallest margins in the pharmacy business and some HMOs and other third party providers may not even cover the drug underneath their policies i.e. Viagra
The ideal ratio of OTC:Generic:Branded
OTC should comprise of 20% of sales Generic should comprise of 45% of sales Branded will comprise 35% of sales
Ideal Pharmacy Demographics
Low Elderly Community (need people below the age of 65 to avoid heavy concentration in Medicare Part D prescription sales) Inner City Neighborhood (Low rent, no space for large chain pharmacies plus this is not their target demographic. Hence the phrase “Niche Independent Pharmacy.”) High Population density High Level of Poverty i.e. usually leads to HIV/AIDS patients, which hold high margins example: $2,000 a month of cost drugs per patient could lead to profits of $400 to $500 per patient: 10 HIV/AIDS patients per month equals $4,000 to $5,000 net profit per month and more than $60,000 net profit per year. Low Income level so a high percentage of your prescription sales could come from Medicaid (re-visit Medicaid Policy and Usage as well as profit margins) Or, a high luxury area with a niche business providing luxury medicine i.e. Fertility drugs, 20 prescriptions a day could equal the money of 120 prescriptions a day and could host better margins and will be a cash/credit/charge customer.
Are the Chain Pharmacies in the same business as the pharmacy I am interested in? ď Ž
Answer: No, because large chain stores, such as: Walgreens, Duane Reade, CVS, K-Mart, Wal-Mart, Target and Supermarkets are in the department store or grocery/food industry. The pharmacy is an ancillary service that either draws the customer in or provides convenience to the customer. These stores are typically located in commercial shopping areas and in high to middle-high income areas that deal in a ton of HMO business. HMOs hold no margins and the larger chains are trying to get away from HMO but the roots are in to deep. Also, these chains buy in mass from drug wholesalers giving them margins like no one else in order to try to make more profit on the least profitable form of business payment. This is a basic economic principle of volume vs. price per unit.
Why are Pharmacies a popular business industry? ď Ž
Answer: The Baby Boomer—Between 1946 and 1964 this generation is three times the size of the previous generation and still significant in size compared to the present generations. The average person over 60 years old takes 6 medications per day. Hence, the major involvement from retail stores, chain stores and now the new unstable boom off the online business.
Online & Mail Order Drugs ď Ž
Drug Wholesalers rank the internet and mail-order pharmacies as the most common weakness in the current distribution of drugs. These type of outlets are the most common leakage point in the supply of drugs to the consumer. Measures to curb diversion and counterfeiting through internet and mailorder are being addressed by the federal government and numerous state governments working with industry. Source: http://www.state.nj.us/health/eoh/foodweb/documents/tipsbuyingdrugs.pdf
Online & Mail Order Drugs cont’d ď Ž
DIVERSION - Data from the Food and Drug Administration (USFDA) show that counterfeiting, diversion, and theft are on the rise regarding pharmaceuticals. Diverted goods are those produced by an authorized manufacturer but sold through unauthorized distribution. Drugs may be stolen directly from manufacturing facilities, or during shipping to a primary or secondary wholesaler. The transfer of drugs between primary and secondary wholesalers and then between wholesalers and pharmacies opens opportunities for theft. Source: http://www.state.nj.us/health/eoh/foodweb/documents/tipsbuyingdrugs.pdf
Online & Mail Order Drugs cont’d
COUNTERFEITING - Counterfeit branded or generic medicine that may include products with the correct ingredients or with the wrong ingredients, without active ingredients, with insufficient active ingredients, or with fake packaging. Counterfeit drugs enter the supply chain through a variety of schemes. REMEMBER! - When you buy drugs from a questionable web site, you just don’t know what you’re actually getting. The main concerns are that the drugs could be outdated, contaminated, too potent or not potent enough, improperly manufactured and handled or counterfeit. Source: http://www.state.nj.us/health/eoh/foodweb/documents/tipsbuyingdrugs.pdf
The more pharmacies YOU own the more purchasing power YOU have!!! ď Ž
If we follow the basic economic principle of volume vs. price per unit, we will understand that if this is your second pharmacy, third, fourth, etc. THERE ARE HIDDEN PROFITS WITHIN BULK PURCHASING FROM DRUG WHOLESALERS!!!
HIV patients
HIV/AIDS patients take between 6 to 10 meds a day Per patient a pharmacy would have to hold in inventory an estimated $2,000 per month for a profit of 25% or $400 to $500 HIV patients also hold a specific lifetime profit and it is typical of them not to leave a specific area due to the treatments that they undergo. i.e. $500 X 12 X 10 = $60,000
Niche market Businesses
As a buyer of an existing business you are always trying to mitigate risk. The easiest way to achieve this goal is to enter into an industry with niche clientele. REASON: Niche markets are under- served business markets DEFINITION--A niche market is a focused, targetable portion (subset) of a market sector. By definition, then, a business that focuses on a niche market is addressing a need for a product or service that is not being addressed by mainstream providers. A niche market may be thought of as a narrowly defined group of potential customers. A distinct niche market usually evolves out of a market niche, where potential demand is not met by any supply. Such ventures are profitable because of disinterest on the part of large businesses and/or lack of awareness on the part of other small companies. The key to capitalizing on a niche market is to find or develop a market niche that has customers who are accessible, that is growing fast enough, and that is not owned by one established vendor already.
Niche Marketing
Niche marketing is the process of finding and serving small but potentially profitable market segments and designing custommade products or services for them. For big companies those market segments are often too small in order to serve them profitably as they often lack economies of scale. Niche marketers are often reliant on the loyalty business model to maintain a profitable volume of sales. On the Internet, niche marketing becomes interesting because the playing field is leveled for all online businesses. Niche marketing on the Internet means that one needs extensive keyword research and KOI analysis. Dr. Wilson wrote an excellent book on this topic at Wilsonweb. Thomas Wong at Intesync recommends that all marketing channels should be explored and that niche marketing is not just about finding small segments-- it's about expanding the overall market shares. THE PROBLEM WITH ONLINE DRUGS IS THE LEVEL PLAYING FIELD. REMEMBER, ANCILLARY SERVICES IN A PHARMACY MAKE THE SALE OF A DRUG OR CUSTOMER LOYALTY THAT MUCH EASIER. LEAD WITH ANOTHER PRODUCT AND/OR SERVICE i.e. NUTRITION, MEDICAL SUPPLIES, DIABETES, ETC.
CONCLUSION
Pharmacies are niche market businesses They exploit the masses theory and take advantage of the increasing age and aliments of the BABY BOOMERS. Sales trends will be in the positive direction as long as an owner actively grows the business with effort. Doctor relations should be formed in order to gain the trust of his/her active customer base. It helps with drug buying i.e. A Urologist would have specific drugs they prescribe and would like the pharmacy to have certain drugs in stock for immediate use. Online Drugs host a ton of problems: counterfeit drugs, crime, releasing of personal information to an unknown source, etc. BABY BOOMERS are retail, face to face, kind of touch it to believe it folks. The BABY BOOMERS is the largest generation known to man kind The average 65 year old takes 6 meds a day to stay active Certain Urban expense environments prevent larger name store chains to enter into the market. NOTE: Larger store chains have a business model to follow i.e. store must be 10,000 square feet, etc. All the financials are reported when it comes to meds. The business is on the computer.