Every pharmacy owner knows how many prescriptions they filled last week. We as owners have been taught from previous owners and chain managers to know our prescription count. Yes, Rx count is important and has a huge impact on revenue but there are other factors which are overlooked. These include payer mix, generic vs. brand mix and lines of business (compounding, LTC, specialty and OTC).
Lets look at each.
- Payer Mix – who pays you can cause your revenue to go up or down. For example in some states the managed Medicaid programs have gone to a fee for service whereby you are paid cost plus a dispensing fee. This may actually lower your revenue (it doesn’t mean you will make less) it just will show a lowered revenue. It could also increase your revenue. Understanding your payer mix will allow you to know why your revenue is changing.
- Generic vs Brand Mix – The more brands you dispense the higher your revenue goes and vice versa the more generic the lower your revenue. Even a slight change in this mix could make your revenue appear to increase or decrease giving you a false representation of how your business is doing. Understand this mix so you can spot and understand changes.
- Lines of Business – understanding your lines of business is important. For example growth in LTC may lower your average revenue per script but it may be more profitable. Compounding can cause your average revenue per script to be lower or higher depending on the therapies you specialize in.
In summary knowing your various mixes that impact revenue will allow you to spot trends that are occurring faster which then allows you to make adjustments to costs to accommodate or take advantage of opportunities.