I post negative things about Wag. You and others, call me names. Now you cry about me gloating at you and other's pain. Grow up. If you do not care too much why are you posting here every freaking day? I post as I please some days I'm more active than others. It has more to do with how busy I am making pizzas rather than how up or down Wag is. My purpose here is to warn others not to put too much into this company because I am of the opinion they are not as honest as they say they are. I posted a long time ago that Generics may have a larger margin but a higher percentage of a lesser amount is not better overall. Guess what? Now that very subject is being talked about.
excuse me for injecting a point here....but Walgreen's doesn't sell "generics and name brands"....they sell PRESCRIPTIONS....
the overhead cost of selling $1 worth of drug is the same as a $10 drug...employee wages/insurance/building costs/electric...etc...and the business prices to recoup those costs. Then...if you are a reasonable businessperson....you want a return on your dollar investment in inventory sitting on your self. And so one puts a mark up on the cost of the drug in the bottle. After all...if you can't get a mark up on your inventory you might as well put you money in the bank and take the interest they will pay.
so lets say $10 overhead per prescription is built into pricing and 10% mark up on all drugs regardless of price.
$1 drug cost retails for $11.10.....$100 drug retails for $120.
WOW!!! the cheaper drug is marked up 11 times its cost while the more expensive only 1.2 times its cost.
WHAT A RIP.......NOT!!!!
It takes the same amount of time and effort to fill the $1 drug (generic) and the $100 (name brand)... and simply looking at the gross price and comparing to the INGREDIENT cost only is not looking at the total cost of filling the script.
This whole Walmart ploy has been a great PR coup...but nothing more...a tempest in a teapot.
The vast majority of rx's filled are insurance. We are just on the front wave of the baby boomer market. The total number of drug entities covered is about 90 (not 300).. of the top 50 drugs sold in 2005...only 20 of these are even on the Walmart list...and not all of the strengths of these at that (levothyroxine for example only the 25 mcg dose...out of about 10 different strengths sold).
This situation have been a great buying opportunity IMO over the last 2 days....
BTW....I have never worked for Walgreens/Walmart...but I am a pharmacist.....and I have no doubt that this negative buble will soon/if not already will have burst
In your example you have proven my point. The $120 script yeilds $20 gross profit. The $11.10 yeilds $10.10 gross profit. You'll have to sell twice as much to make up your costs to yeild your same net profit. Aren't pharmicists on the verge of over worked and in short supply? Not good.
Neggy, for a change you're not too far off with your remarks. I used to work for a regional chain back in the 80's, that figured out they were selling generics (Rx and OTC) too cheap. You don't want just a higher margin, you want a higher dollar profit. Believe me, that concept is not lost on Walgreen. Generics have been extremely profitable for them. Government and PBM's have let that situation exist for a long time because they wanted the chains to drive up utilization of generics, and their strategy has worked. Now that generics are 60% of the Rx market instead of 30% they are beginning to put pressure on generic retail prices. Wal-Mart's not the one applying the pressure, they are just reacting to what's been mandated by the feds. In 2007 state medicaid programs as well as Medicare part D will reduce generic reimbursements considerably. The big PBMs like Caremark, Medco and Express Scripts will likely follow the trend. Retailers will still be allowed to make better profits on generic than brand, but less dramatically so than in the past. Walgreen execs are well aware of this change in the landscape and while they publicly protest, I doubt they are really particularly worried, because increased volume, as usual, will more than make up for declining margins.