Assessing changes in third-party gross margin for a single community pharmacy

Abstract

Objectives: To assess changes in prescription gross margin from 2008 to 2011 using a random sample of prescriptions, analyze changes in prescription gross margin from 2008 to 2011 using a market basket of prescription drugs, and investigate impact of changes in prescription mix from 2008 to 2011 on prescription gross margins. Design: Longitudinal, retrospective, descriptive case study. Setting: Single independent pharmacy in Iowa City, IA, from March and April of 2008-11. Participants: Prescription dispensing records for the pharmacy's largest private and Part D payers by prescription volume, as well as Medicaid and cash payers. Intervention: Random sampling and market basket approaches were used for gross margin calculation. Main outcome measures: Prescription gross margins and generic dispensing rate. Results: Data were collected for 2,400 prescription records for the random sample and 4,860 prescriptions for the market basket sample. The median random sample and market basket gross margin dollars (GMDs) from 2008 to 2011 decreased from $9.55 to $7.22 and from $9.60 to $8.50, respectively. The percent of dispensed prescriptions that was generic increased from 62.65% in 2008 to 73.64% in 2011, and GMDs were significantly lower for generic products. Conclusion: Third-party prescription drug gross margins in the study pharmacy varied substantially by payer and decreased over time. Pharmacies must continue to monitor changes in prescription margins and investigate ways to enhance alternative revenue sources to maintain profitability.