Chapter 11 - McGraw Hill Higher Education

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Transcript Chapter 11 - McGraw Hill Higher Education

Math for the Pharmacy Technician:
Concepts and Calculations
Egler • Booth
Chapter 11: Operational
Calculations
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Operational Calculations
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Learning Objectives
When you have successfully completed Chapter 11, you
will have mastered skills to be able to:
 Calculate overhead costs
 Calculate profits
 Calculate discount amounts
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Learning Objectives
(con’t)
 Calculate average wholesale price
(AWP)
 Calculate inventory turnover rate
 Calculate depreciation
 Demonstrate understanding of
capitation fee and AWP plus fee
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Introduction
 As a pharmacy technician you need to be
familiar with the aspects of the day-to-day
operations of the pharmacy.
 The costs involved in running the
pharmacy are many.
 While providing a service to the patient is
important, the pharmacy must also make
money in order to stay in business.
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General Business
Considerations
 All businesses have costs associated
with day-to-day operations.
 The pharmacy’s income earned from
sales must be higher than the
operational costs in order for the
pharmacy to be profitable.
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General Business
Considerations (cont.)
 Multiple operational calculations are
used to run a profitable pharmacy.
 You will learn how to calculate the
following:





Overhead costs
Profits
Gross profits
Net profits
Discounts
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Overhead
 The pharmacy’s overhead is all costs
associated with the pharmacy’s business
operations. These costs include:







Employee salaries
Rent
Utility bills
Insurance premiums
Inventory/Supplies
Discounts
Sale items
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Overhead
(con’t)
 The total cost of the overhead is used to
calculate the pharmacy’s profit.
Example:
Annual Overhead Costs
Employee salaries
Rent
Utilities
Insurance
Inventory/supplies
Annual overhead total
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$125,000.00
$24,000.00
$12,000.00
$6,000.00
+$732,000.00
$899,000.00
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Profits
A profit is the difference between
overhead expenses and income
earned from sales. To calculate a
profit you subtract the pharmacy’s
overhead costs from the income
earned from sales.
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Review and Practice
Profits
Annual sales
$1,548,370.00
Annual overhead costs – $899,000.00
Annual profit
$649,370.00
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Gross Profit
 Gross Profit is the difference of the
purchase price the pharmacy paid for
products, for example medication,
and markup price, which is the selling
price.
 To calculate the gross profit you
subtract the pharmacy’s purchase
price from the selling price.
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Review and Practice
Gross Profit (con’t)
Azithromycin 250 mg 6 tablets (Z-pak)
Selling price
$13.99
Purchase price
–$4.57
Gross profit
$9.42
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Net Profit
 Net Profit is the difference of the
selling price, and the purchase price
plus a dispensing fee, which is used
to offset the overhead costs used to
fill prescriptions.
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Net Profit
(con’t)
 The dispensing fee per prescription is
determined by each pharmacy on the
basis of the company’s profit needs.
It can be a set fee or a percentage.
 To determine the net profit, you
subtract the purchase price and the
dispensing fee from the selling price.
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Review and Practice
Net Profit (con’t)
Azithromycin 250
Selling price
Purchase price
Dispensing fee
Net profit
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mg 6 tablets (Z-pak)
$13.99
–$4.57
–$4.00
$5.42
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Discount
 A discount is a reduced price from
the normal selling price.
 Drug manufacturers may offer the
pharmacy a discount for purchasing
large quantities of certain
medications.
 The pharmacy may also offer
discounts to its customers.
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Discount
(con’t)
 To determine a discounted price, you
multiply the selling price by the
discount percentage, which will give
you discount amount, then you
subtract the discount amount from
the selling price.
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Review and Practice
Discount (con’t)
The selling price for 1 bottle of 1000 tablets of
medication is $50.00. For orders of 5 bottles
or more the manufacturer offers a 10 percent
discount. What is the discounted price for 1
bottle?
Solution:
1. Multiply the selling price by the discount percentage.
2. Subtract the discount amount from the selling price.
$50.00
–$5.00
$45.00
The discounted price is $45.00
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Inventory
 A detailed list of all items for sale and
their cost is called an inventory.
 The pharmacy must maintain an
accurate inventory list.
 It is extremely important to maintain
adequate amounts of medications and
supplies such as pill bottles, labels,
and prescription leaflets.
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Inventory
(con’t)
 Keeping the inventory at optimal
levels helps to ensure prescriptions
are filled and that medications move
off the shelf quickly.
 To maintain a balanced profitable
inventory, the value of inventory on
hand should not exceed the cost of
items sold during a specified time
frame.
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Turnover
 Turnover is the number of times an
item is sold from inventory. When a
pharmacy opens, there is an initial
cost to stock it, and then there is a
cost to maintain the stock based on
the pharmacy’s sales.
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Turnover
(con’t)
To determine the turnover rate you
simply divide the annual inventory
purchases by the average inventory
value.
Annual inventory purchases
= turnover rate
Average inventory value
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Review and Practice
Turnover (con’t)
If the pharmacy’s average current stock on hand is
worth $200,000.00, that is the average inventory
value.
Determine the turnover rate.
Annual inventory purchases
= turnover rate
Average inventory value
1, 000, 000.00
5
200, 000.00
Turnover rate = 5
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Depreciation
 Depreciation is a decrease in the
value of an asset based on the age of
the asset in relation to its estimated
life.
 The depreciation value is calculated by
using the value of the item when it is no
longer usable or when it is considered
disposable.
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Depreciation
(con’t)
EXAMPLE
A car that is 20 years old and is no
longer drivable, but it has some value
based on parts that could still possibly
be used elsewhere, or sold for scrap.
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Depreciation
(con’t)
 There are two types of assets:
current assets and long-term assets.
 Any asset that will be converted into
cash or consumed within one year is
considered a current asset.
 Items that are not able to be converted
into cash or consumed within a year,
such as equipment and store buildings,
are considered to be long-term assets.
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Depreciation
(con’t)
 Over time, long-term assets lose their
value from repeated use and basic
age of the item.
 To determine the depreciation value
of any given property, use the
following formula:
total cost-disposal value
Annual depreciation =
estimated life
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Review and Practice
Depreciation (con’t)
The pharmacy purchases a refrigerator to store
medication for $700.00. The estimated life of the
refrigerator is 8 years and the disposal value is
$100.00. Determine the annual depreciation value.
$700.00  $100.00 $600.00

Annual depreciation value =
8
8
Annual depreciation value = $75.00
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Reimbursement
Considerations
 Pharmacies are often reimbursed for
prescriptions by insurance companies.
 The pharmacy signs a contract with the
insurance company and the reimbursement
amounts are predetermined.
 The reimbursement amount may be based
on a set price for specific medications, on
the actual cost of a medication, or the
average wholesale price of a medication.
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Reimbursement
Considerations (con’t)
 The pharmacy must submit a claim to
the insurance company for
reimbursement.
 Most claims are filed electronically by
using an ICD-9 code (International
Classification of Diseases) and the
amount of reimbursement is paid per
prescription according to the agreed
upon contract.
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Average Wholesale Price
(AWP)
 The average wholesale price
(AWP) is the average price that
pharmacies pay for medications
purchased from a wholesaler, based
on national averages.
 The AWP is often used by insurance
companies to calculate the amount a
pharmacy is reimbursed for a
prescription.
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Average Wholesale Price
(AWP) (con’t)
 Pharmacies often purchase larger
quantities of fast selling drugs from
wholesalers to get a discount,
bringing the cost of the medication
below the AWP, in turn giving the
pharmacy a higher net profit.
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Review and Practice
Average Wholesale Price (AWP)
(cont.)
The AWP is $75.00 per 100 capsules. The
insurance company will pay AWP per capsules
and a $2.00 dispensing fee. What is the AWP
for 30 capsules?
1. Determine the AWP per capsule.
$75.00
 0.75 cents/capsule
100
AWP per capsules = 75 cents
2. Determine the AWP for 30 capsules.
.75 cents  30  $22.50
AWP for 30 capsules = $22.50
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Capitation Fee
 A capitation fee is a set amount of money
that is paid monthly to the pharmacy for a
patient by an insurance company,
regardless of whether the patient receives
zero prescriptions or multiple prescriptions
during the month.
 The pharmacy must fill all of the patient’s
prescriptions, even if the cost exceeds the
monthly fee.
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Capitation Fee
(con’t)
The pharmacy agrees to a monthly capitation fee
of $300.00 for a patient.
The patient fills two prescriptions this month. One
costs $125.00 and the other costs $82.50.
Determine if the pharmacy made a profit.
1. Add the total costs of the prescriptions.
$125.00
+$82.50
$207.50
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Capitation Fee (con’t)
The pharmacy agrees to a monthly capitation
fee of $300.00 for a patient.
The patient fills two prescriptions this month.
One costs $125.00 and the other costs
$82.50.
Determine if the pharmacy made a profit.
2. Subtract the total cost of the prescriptions from the
monthly fee received by the pharmacy.
Fee paid to pharmacy
$300.00
Total cost of prescriptions
–$207.50
Profit to pharmacy
$92.50
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Calculating Correct Costs
and Correct Change
 In retail pharmacies it is the pharmacy
technicians’ responsibility to collect
payment for prescriptions.
 Basic math skills are used in manually
calculating correct costs and correct
change.
 Calculate the cents first, up to the next
dollar, and then calculate the dollars to the
amount that patient gave you.
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Calculating Correct Costs
and Correct Change (con’t)
The total cost of a single prescription is
$3.95.
The patient gives you $5.00, you
need to give 5 cents (a nickel) to
equal the next dollar amount of $4.00
and $1.00 (1 dollar bill) to equal the
total amount the patient gave you of
$5.00.
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Calculating Correct Costs
and Correct Change (con’t)
Example:
Determine the total correct cost of the prescription(s)
and the correct change to be given.
1. Add the total costs of the prescription(s).
$125.00
+$82.50
$207.50
2. Subtract the total cost of the prescriptions from the
amount given to you from the patient.
Patient gives
$210.00
Total cost of prescriptions
–$207.50
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Calculating Correct Costs
and Correct Change (con’t)
Determine the total correct cost of the prescription(s)
and the correct change to be given.
1.
2.
3.
Calculate the cents due to the patient.
Calculate the dollars due to the patient.
Add the dollar and cents amounts.
Patient gives
Total cost of prescriptions
$210.00
–$207.50
Change due to patient: $2.50
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Operational Calculations
As a pharmacy technician you need to be familiar
with the aspects of the day-to-day operations of
the pharmacy.
While providing a service to patients is important,
the pharmacy must also make money in order to
stay in business.
THE END
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