Managed Care

 

Choosing a city for mail order pharmacy

MANAGED CARE February 2008. © MediMedia USA
Snapshot

Choosing a city for mail order pharmacy

MANAGED CARE February 2008. ©MediMedia USA













When a company is considering the establishment of a mail order pharmacy, costs are a major consideration, according to John Boyd, president of the Boyd Co. An expensive location can cost millions more than an inxpensive one — each year. A new analysis of comparative operating costs conducted by the company ranks Sioux Falls, S.D., as the least costly location of 21 cities under consideration to operate a hypothetical mail order pharmacy center. San Diego ranked first. Only major geographically variable factors were considered : labor, utilities, land acquisition and construction, taxes, and corporate travel.

In addition to these costs, insurers should also look at “the regulatory climate for a given state,” says Boyd. “South Dakota recently expanded the ratio of technicians to pharmacists. Most states have two technicians for every registered pharmacist. Some states allow more technicians — South Dakota has a 4:1 ratio.

“Insurers are prioritizing the comparative costs of doing business. They are focusing on the potential labor cost savings in a smaller market location,” says Boyd. “The trend is to consider smaller market, less costly, more favorably regulated locations.”

The highs and lows of operating a mail order pharmacy
  San Diego, Calif. (highest cost city) Phoenix, Ariz. Willingboro, N.J. Sioux Falls, S.D. (lowest cost city)
Labor
Weighted average annual earnings $48,066 $43,573 $46,315 $38,777
Annual base payroll $5,767,920 $5,228,760 $5,557,800 $4,653,240
Fringe benefits $2,134,130 $1,934,641 $2,056,386 $1,721,600
Total annual labor $7,902,050 $7,163,641 $7,614,186 $6,374,939
Electricity $252,540 $138,732 $245,016 $138,231
Natural gas $4,615 $4,965 $5,743 $4,690
Amortization $2,617,576 $1,854,776 $1,515,171 $1,261,083
Property and sales tax $618,291 $714,029 $532,005 $453,973
Heating and air conditioning $28,073 $49,201 $82,097 $96,479
Shipping $23,597,190 $24,095,205 $23,406,705 $23,562,765
Corporate travel $207,730 $196,117 $207,748 $146,565
Total annual geographically variable operating costs $35,228,065 $34,216,426 $33,608,671 $32,038,725
Source: A 2008 Comparative Cost Analysis for the Mail Order Pharmacy Industry, The Boyd Co., 2008.

Meetings

Pharmaceutical Pricing and Contracting Conference Philadelphia, PA September 22–23, 2014
Private Health Insurance Exchanges Conference Washington, D.C. October 7–8, 2014
National Healthcare Facility Management Summit Palm Beach, FL October 16–17, 2014
National Healthcare CFO Summit Las Vegas, NV October 19–21, 2014
National Healthcare CXO Summit Las Vegas, NV October 19–21, 2014
Innovative Member Engagement Operations For Health Plans Las Vegas, NV October 20–21, 2014
4th Partnering With ACOs Summit Los Angeles, CA October 27–28, 2014
2014 Annual HEDIS® and Star Ratings Symposium Nashville, TN November 3–4, 2014
PCMH & Shared Savings ACO Leadership Summit Nashville, TN November 3–4, 2014
World Orphan Drug Congress Europe 2014 Brussels, Belgium November 12–14, 2014
Medicare Risk Adjustment, Revenue Management, & Star Ratings Fort Lauderdale, FL November 12–14, 2014
Healthcare Chief Medical Officer Forum Alexandria, VA November 13–14, 2014
Home Care Leadership Summit Atlanta, GA November 17–18, 2014