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Monday, May. 11th 2015

What About Gross Profit?

Most pharmacies measure their financial performance by tracking their gross margins.  In speaking with hundreds of pharmacies a month we’ve noticed a trend where pharmacies are able to report on their gross margin #’s, but not their gross profit numbers.  From a financial perspective, gross margin is an important metric, but is most valuable in determining the efficiency of your revenue.  Gross profit percentage, as a metric, completes the missing component created by focusing on only gross margin as it gives you an indication of your true return on investment.

By paying attention to GP% a pharmacy with modest reporting functionality can better determine where their most profitable business is coming from.  For example, based on some general guidelines, it is not uncommon for a 250 Rx/day pharmacy with 10% cash/90% 3rd party business mix to have 25 – 35% of their gross profit being driven by the 10% of their business that is generated by cash.  In this case a more attentive approach to pricing cash Rx’s would increase gross profits and have a substantial impact on overall profitability.  A recent study showed that for every dollar lost on a cash claim would require $5 in 3rd party revenue to makeup for the profit lost on the cash claim override.

RxNet has recently developed an intuitive pricing model that considers your overrides, revenues, costs, and market data to develop a comprehensive pricing strategy designed to increase your patient count, make you more competitive, reduce claims paid at U&C, and increase GM/GP percentages.  This new service is effective for a single location pharmacy, as we’ll as multi-location pharmacies.  We are offering a free evaluation for interested pharmacies.  Some restrictions apply, please contact RxNet for more information.


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