Our industry's drug problem
Bigger is cheaper
Chain pharmacies can afford to purchase large quantities of drugs from vendors, and these high-volume purchases likely get them lower prices. A chain pharmacy can purchase a medication at, for example, a penny a pill. Even if it marks up that pill 700 percent, it's still relatively inexpensive for the consumer. At 7 cents a pill, 60 pills cost $4.20. If 100 people purchase the medication, that's $420. Subtract the cost of 6,000 pills at a penny a pill ($60). That leaves the retailer a $360 profit. Of course, you also have to figure in the overhead, but most large pharmacies pay nonpharmacist employees minimum wage and use a high degree of automation to reduce costs.Compare that to a one- to three-doctor veterinary hospital. The doctors want to purchase the same drug. But because they can't purchase a huge quantity, they pay 5 cents a pill. With the same 700 percent markup, each pill sells for 35 cents, or $21 for 60 pills. Most veterinarians cringe at a 700 percent markup, so let's say they mark up the medication only 100 percent. So sixty pills cost the client $6. If 100 people purchase the medication, that's $600. Subtract $300 for the cost of the medication, and your profit is $300.
What about your overhead?
Now figure in the hospital's overhead. The hospital is paying a receptionist at least $200 per week to take a phone call from the client who wants the medication and to look up the patient's medical record. It's paying a technician $360 per week to review the record and bring any discrepancies to the veterinarian's attention. The receptionist has to call the client back to schedule any overdue procedures. Maintaining three phone lines to receive these calls costs about $50 per week. Already the hospital has spent $610 in a week, plus the initial $300 to purchase the medication, and it hasn't yet paid the doctor or received any income from other services offered. If the pet doesn't need any other services, just the medication, the staff still must be paid to fill and dispense the prescription. An average veterinary hospital can't cover all that by charging $6—and certainly you'd lose money at $4.
Service a pharmacy just can't provide
Yes, we're living in an age of low-cost health clinics and price-cutting pharmacies. But our clients expect us to maintain our standards of care. And you need a team to do that, which costs money. Could you get an automated pill counter and fire your technician? You bet. Could you get an automated phone answering service and do away with the receptionist? Certainly. But then you wouldn't have the receptionist who lugs seven pet carriers to and from the client's car, or the technician who patiently explains care directions three times, or the manager who approves a $10-a-month payment plan for a client who's incurred $500 worth of treatment costs. You need these qualified individuals who review the records and make recommendations based on experienced and knowledgeable examinations, medical history, and diagnosis.
Clients know they can get medicine cheaper elsewhere, but they'd rather get it from us—and the know-how that comes along with it.
Nicole Winkler, LVT, is the office manager at Suffolk Veterinary Group in Selden, N.Y. Send comments to [email protected]