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227 Cards in this Set
- Front
- Back
what is demand based on?
what is it affected by (2 things) |
based on preception of need
affected by marketing and by price |
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price elasticity is sensitive to?
|
price increase
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Standardizing-
product is typically? while services are? |
standardized-tylenol is tylenol is tylenol-sometimes
services are not standardized |
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price sensitivity increase as ___________ increases
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switching costs
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services that require RELATIONSHIPS, have?
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HIGH switch costs
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4 more things affecting price
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pharmacy image
price as signal of quality non-monetary costs demand backward |
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price as a signal of quality means?
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high price=high quality
low price=low quality |
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what does non-monetary costs mean?
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travelilng
waiting searching for prod./service |
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what does demand backward mean?
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if given price, determine service profitability at offered price
ex-3rd party payers |
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reference price
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price consumer thinks is reasonable to pay
|
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reference prce
easier or harder to determine for products? for servicesS? |
easier to judge for product
services is harder |
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what are the strategies for maximizing long term profits
|
penetration pricing
price skimming |
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define penetration pricing
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sacrifice short term profits to build sales quickly
good for elastic demand |
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what is diapers an example of
|
loss leaders-penetration pricing
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what is price skimming
|
serving onlyfor ppl who pay higher prices
good for inelastic demand -pharm services, attorneys |
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pricing(valuing) pharm services
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estimate demand
calc cost of doing service fig out wanted profit set start price comapre price set with demand consider competitors response implement price monitor pt and comp respon. re-evaluate |
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price vs value
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price-cost of something
value-precception of worth |
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is it easier to communicate the value of a product or a service?
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service
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when presenting service prices to consumers:
time and expense-what do u bill for? |
bill for time + cost+ profits
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when presenting service prices to consumers:
resource-based relative value scale-what do u bill for? |
bill for time + intensity + effort
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what is fixed fee
|
fixed monthly fee=capitation
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define contingency pricing
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based on % of savings pharmacist save the payer
-pharm saved pt $100-so we charge $50, we are both happy |
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define bundling
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selling a bundle or group of products + services as 1 price
-cust thinks they r getting more value-health fair with 20 test cheaper than 1 at time |
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deinfe capitation
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bill out predetermined monthly fee for each pt enrolled
-not really for pharmacy, but good for services billing |
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MTM
-florida medicaid situation |
we only get paid if successful switch...could spend 2 hours with pt, but no switch=no pay
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define third-party
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an org. that reimburses a pharm or pt all/part of pt's prescription drug costs
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define private pay
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pt's pay out of pocket
-diminishing commodity-most is 3rd party |
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what are the 2 types of presciption drug insurances
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indeminity insurance
service benefit plans |
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define indeminity insurance
good or bad for pharmacy? |
pt pays the pharm directly nad later reimbursed by ins
good for pharmacy |
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define service benefit plans
good or bad for pharmacy? |
pharmacy is reimbursed directly from 3rd party with predetermined negogiated prices
bad for pharmacy |
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examples of 3rd parties
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private insurance
indigent care programs medicaid Med PartD |
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1990 reimburstment breakdown?
2009? |
90-private pay 59%, 3rd party 41%
2009-12%private, 88% 3rd party |
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breakdown the 2009 88%3rd party plan
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44% goverment
44% Other |
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3rd party % of total rx's thru years
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generally increases every year, but at 2006 it peaked and 2009 it was slighly lower
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why do PBM's exist?
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to establish networks
negogiate rebates with manu. formulary dev. + manage disease state management mail order/speaclity |
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decreasing % of private pay pt and rising 3rd party pts lead to?
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increase in bargaining power for 3rd parties
decrease pharmacist power to determine price of meds |
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Results of all this 3rd party taking over
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1,400 less indep pharmacies in 2010 vs 2005
chains cutting hours central fills, mergers |
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3rd party and PBM sit down and decide to change our rate to 50cents per rx. legal or illegal?
we do not accept this rate. illegal or legal |
legal for them to set price
illegal for us to deny this set price shoulda been Docs |
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in 2009-2011 the # of independents have?
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acctually increased
|
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define
reimburstment rate |
based on formula in contract between pharmacy and 3rd party payer
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how is the reimburstment rate determined?
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product cost and dispensing fee
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what is actual acquistion cost (AAC)
|
price the pharmacy pays wholesaler or manu for drug product
this is proprietary,only the specific pharmacy knows it |
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define
Average Manufacturer Price (AMP) |
avg price the wholesaler pays the manu
proprietary, only wholesaler knows |
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define
average wholesale price(AWP) |
list price for what wholesalers charge pharmacies (overestimate/proprietary)
MOST USED |
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what is estimated acquistion cost
(EAC) |
3rd party estimate of what pharmacy pays wholesaler or manu
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what are the owner's personal pricing philosophy types
|
price oriented(deep discount)
non-price oriented (service oriented) |
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what are the objective of pricing philosophy
|
evaluate owners personal pricing philosophy
evaluate competition estimate desired profit consider affect of "outside forces" develop + implement price matrixes |
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example of outside forces
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3rd party reimbursement and mix
|
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what is price-oriented competition(pricing)
|
concerned with creating leader in a market they are more interested with TOTAL gross margin than indiv sales
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what is price oriented (deep discount)
|
owner can be very aggressive w pricing-want to be lowest price out there!
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what is non-price oriented competition(pricing)
|
selling price based on cost + merchandise + markup
or fee sufficent to reach desired product |
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what is non-pricing oriented competition concerned with
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gross margins for each individual product
|
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what is gross margin
|
difference between selling price and cost of product
SP-COP |
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what do you need to know to determine the SELLING PRICE
|
cost of item
operating expenses desired profit |
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what is fixed costs
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remains same regardless of VOLUME
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what are variable costs
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costs that change depending on VOLUME
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what are direct costs
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directly caused or resulting from providing the service
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what are indirect costs
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costs not from providing the service
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Rent is an example of?
points of care supplies is ? |
rent-fixed
points of care-variable |
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insurance is example of
pharmacist/manager salary |
ins-fixed
salary-variable if need to hire another pharmacist |
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utilites-fixed or variable?
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variable if V increases and you stay open later
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how to determine price for front-end
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selling price=item cost + operational cost+profit
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deteremine rx dept selling price
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selling price=med cost+operational cost(directly to rx dept) + profit
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front end: items include?
|
loss leader
impulse items private label herabl/supp prod mix, campanion sales |
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what is a loss leader
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selling for cheaper, BOGO
-want to sell image you are cheapest in town |
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wht are impulse items
|
DTD
strategically placed products you had no intention of buying |
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what are private labels
|
ex-walgreens brand-only can get at walgreens
|
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OTC actue vs chrontic
-which increases profits more |
some reason-acute increases profits more
|
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what are companion sales
|
ex-rack of flashlights on sale-suggesting batteries
|
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in Rx Dept, what increases profits?
gen vs brand? chronic vs acute meds? |
generic meds increase profits
acute meds increase profits |
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what are the strategies used for increasing profits in pharmacy
|
loss leader
gen vs brand meds chronic vs acute meds qty dispensed as a strategy companion sales |
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what are the pricing challenges for RX dept?
|
reimbursement from 3rd parties
external costs capitation |
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what makes up external costs?
|
contracts + agrrements
audits cash flow issues |
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PRICE
from consumers perspective |
all for nothing
|
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PRICE
from providers perspective |
nothing for all
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when will service/prod be provided:
consumer |
perceived VALUE>PRICE
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when will service/prod be provided:
provider |
pice>= COST + PROFIT
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define price
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sum or amt of money or its EQUIVALENT for which anything is BOUGHT,SOLD or offered for sale
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Price vs Cost
definitions |
price is used for concrete objects for sale
cost-purely objective term-finacial calculations |
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define value
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worth of something in terms of exhcanging for other things
to regard or esteem highly an estimated valuation to rate according to relative estimate of worth or desire |
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example of tangible objects
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the pills
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benefits of tangible object
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positive health outocme, improved QOL
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what is marketing myopia
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fixation on the provision of tangible object(pills)
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what prevents marketing myopia in pharmacy
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TOTAL product concept-looks at product in terms of 3 components
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what are the 3 components of total product concept
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1-core product
2-epected product 3-augmented product |
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define core product
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benefit from bInding of tangible product, info, and services to meet underlying consumer needs
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define expected product
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what consumer expects to recieve-right drug in reasonable time
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what is augmented product
examples |
anything provided beyond consumer expectations-delivery, MTM
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what are the 2 wys to set the price
|
value focused pricing
cost based pricing |
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what is value focussed pricing
|
something thats highly valued will cost more
value is how you feel about it |
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what is cost-based pricing
|
probably NOT sure
setting price based upon cost to us and added profit |
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watermellon example
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dumb
start with 6 watermellons sell for $1=$6, then can buy 3 more and sell for $3, then buy 1 more watermellon sell for $1 WHAT??? |
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define MAC-maximum allowable cost
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max cost 3rd party will pay for multisource drug
ceiling |
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define WAC-wholesale acquistion cost
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list price for what manu charges drug wholesalers
-overestimate/proprietary |
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what do 3rd parties want to use to reimburse
|
they want to used AAC, but can't
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why can't 3rd parties use AAC
|
cause proprietary info
varies between pharmacies diff to admin reimbursements |
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what does the 3rd party use for reimburstement
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use AWP
AWP-18%+$2 dispensing fee |
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what does the 18% represent
|
usually pharmacises get discount on AWP
3rd parties ESTIMATE the % a pharmacy gets |
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another formula 3rd parties use?
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WAC
WAC+3% + $2 dispensing fee |
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WAC, is a
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alternative method insurances use to determine "true" cost of meds
|
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who determines the MAC
|
the goverment or the insurance companies themselves
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what is the deficit reduction act of 2005
|
change to reimbusement formulas using AMP to gov MAC list instead of AWP
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switching from AWP to AMP does what?
|
will lead to MUCH LOWER reimbursement rates
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what mechs do u use to determine acepting or decling 3rd party contract
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1.calc cost of dispensing Rx
2.Avg Net Profit comparison 3.Differential Analysis 4Pro Forma Analysis |
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step 1-Cost of Dispensing
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gather expenses
labor expenses, direct expenses, and indirect expenses COD=(Labor exp + dir exp + indir exp)/# of Rxs dispensed in 1 yr |
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example COD
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was about $11.94
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step 2 -avg net profit comparison
define it |
when u compare profit from new contract to profit form old
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step 1 of avg net profit comparison
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pharm gets drugs at AWP + 28% disc
COGS is 54.24 AWP-28%(AWP)=54.24 AWP=75.33 |
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now calc the current avg reimbursement
AWP-15% + 2.50 |
current contract is AWP-15% + $2.50
75.33 - .15(75.33) + 2.50=66.53 |
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calc new avg reimbursement
AWP-20% + 1.00 |
75.33- .20(75.33) + 1.00 =61.26
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now calc the avg net profit
formula? |
avg reimbursement rate-avg COGS-Cost of disp.=net profit
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current net profit =
new net profit |
66.53-54.24-11.94= .35Net profit
66.53-54.24-11.94= -(4.92) Net profit |
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STEP 3 Differential Analysis
takes into accoun for? |
some expenses are fixed and will not change regardless of RX volume
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step 1 of Conducting Differential Analysis
eq for avg gross margin? |
1-calc differential reventue(avg gross margin)
avg gross margin=avg reimbursement-COGS |
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step 2 of conducting differential analysis
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calc average variable costs-labels and techs are considered variable
.17 per vial and label/RX 1.74 for tech per RX .17+1.74=1.91 |
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step 3 of conducting differential analysis
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calc contribution margin
|
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equation for contribution margin?
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CM=avg Gross margin - AVG variable cost
7.02-1.91=5.11 |
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if the CM number is positive what does this mean
|
you should accept the contract
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STEP 4-PRO FORMA ANALYSIS
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determine net profit margin if u accept or decline offer
takes into account overall impact on net profit |
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basic elements of 3rd party contract include?
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-provider rights and responsibilities
-transmiss of claims process -requirement for pharm participation in 3rd party network |
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provider right and respons include?
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proper records
collecting pts copays complying with 3rd party formularies complying with agreement provisions maintaining proff standards |
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what to make sure of when signing contract with 3rd party?
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3rd party reimbusrement cycle is NOT longer than pharmacies payment cycle to vendor
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what is an assigment clause
|
contracts make pharmacies required to accept this
means pharmacy agrees to charge pt no more than amt specifed |
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what is most favored nation clause
|
requires pharmacies to extend lowest cash price or reimbursement rate to 3rd party
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all-products clause
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requires pharmacy to participate in all of 3rd party plans if it wants in
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Audtiing
red flags for 3rd parties |
days supply errors
missing sig only used as directed bait + switch not reversing 3rd party claim if not picked up |
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DAW codes
0 1 |
0-no product selection indicated
1-must be DAW-subs not allowed |
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DAW codes
2 4 5 |
2-Subs allowed-pt wants brand, gen is available
4-subst allowd-generic not in stock 5-subs allowed-brand given as generic |
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DAW codes
6 7 |
6-override
7-subs not allowed Drug mandated by law-negative formularies |
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avg sales per sq foot?
|
3,500 square foot for $1,227
|
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avg sales rx price
avg person owns how many pharmacies |
$58.11
1.6 |
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whats the avg hours and days per week for pharmacies
|
55H
6DAYS/WK |
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what is the avg % of generic RXs dispenses
|
69%
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typical number of employees in community pharmacy
|
11
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whats the national avg wage for pharmacists
per H |
$52.43/H
|
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the national avg to dispense is
|
$11.97
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in 2009 what percent operated at a loss
|
21%
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top 25% made how much owners discrentionary promit margin
owners discrentionary PM equation |
> 9.4%
Net profit+owners comp before taxes / total sales |
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the most offered service in 09 was? followed by?
|
delivery
followed by DME |
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avg number of compunds done per day went from 4 to
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7 per day
avg price is $35.50 |
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avg inventory turns
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12 per year, and want it to increase each year
meansure how quickly u sell merch to make cash |
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what are the 4 distinguishing characteristics of services
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intangibility
inseparability variabillity perishability |
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characteristics of services
intagibility |
unlike goods, services cant be seen, held or felt before purchases
|
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characteristics of services
inseparability |
produced and consumed at same time
provider and pt are both part of service experience |
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characteristics of services
variability |
experience depends a lot on who does it
training addresses consistency of high quality service |
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characteristics of services
perishability |
inability to store services
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image of the facility, this includes?
|
even the employees
|
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what are the services needs in community pharmacy
|
chronic diseases, prevention and screening, populations(spaish, geri)
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what are service needs in hospital pharm
|
process improvement, financial mangement, clinical
|
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what is CDTM
|
collaborative Drug Therapy Management-its a growing phenomena
formal agreement btwn Docs and Pharmacists to perform clinical services -Fl is included |
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T or F
There are many innovations, but far fewer inventions |
False
many inventions, less innovations |
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define innovation
|
commercial exploitation of new or improved product/service
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what is the ROLE of marketing strategy
|
to minimize RISK and realize OPPORTUNITY
|
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from the view of the conumer:
when will consumers consume |
perceived value>Price
|
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when will service be provided
view of providers |
price>Cost+Profit
or Profit>Price-Cost |
|
examples of
commodities goods services experiences |
commodities-coffee
good-Nescafe service-McDonalds Experience-Starbucks |
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what driives customer loyalty and profit
|
their experiences
random exp->predicatbale->branded->cust loyalty |
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whats the diff between predicatble exp and branded exp
|
both are consistent and intentional
Branded-is differentiated and valuable |
|
The customer statisfaction model
|
triangular top to bottom
achieve cust delight(exceed expectations)-cust loyalty satisfy cust needs(cust satisfaction)-develop cust confidence meet basic cust requirements-prevent cust complains |
|
CMO of Dells quote basically says?
|
cust is informed by peers not Markerters-listening to cust is best marketing
|
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Sum up a poor experience
|
Lemon-
one mistake after another didn't get moneys worth bumpy ride may/may not complain |
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sum up a good experience
|
Diamond-
worth repeating value for money |
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when creating value, what is most critical challenge for service firms?
|
to differentiate themselves from competitors
|
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when creating value, great companies have
|
their own unique identities and value proposistions
|
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What are the 4 characteristics of the value proposition
|
4C's
Clear, Consice, Credible, Consistent over time |
|
Value Propositions
examples |
Visa-everywhere you want to be
brief thought of company-like misson statement |
|
companies excelt by practicing?
|
1 of 3 value disciplines
|
|
Value Discipline:
customer intimacy |
value:service
image driver:relationship image: best friend |
|
Value Discipline:
product leadership |
value:quality
image driver: unique attributes image:best product/service |
|
Value Discipline:
operational excellence |
value:cost
image driver:low cost image:best deal |
|
designing a value proposition, use?
|
the SQIP diamond
Service Image Value Price Quality these are all the benefits the consumer is obtaining |
|
Applying the SQIP approach
|
Value=Benefits(S+Q+I)-COSTS
Costs= Price-(travel time, parking time, nonmonetary costs) |
|
Assessing a services value position:
Discount Value |
Benefit:Low
Cost: Low |
|
Assessing a services value position:
Best Value |
Benefit:High
Cost:Low |
|
Assessing a services value position:
Fair Value |
Benefits:middle
Costs:middle |
|
Assessing a services value position:
expensive value poor value |
Benefits:High
Cost High Benefits:Low Cost High |
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buying behavior
|
processes and acts of ppl buying/using products
|
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consumer buying behavior
define |
behavior of ppl who buy products for personal use, NOT for business purposes
|
|
Consumer buying decision process
1+2 |
1-problem recognition-ppl aware of diff in desired state and actual condition
2Informational search-internal-search memories for answers -external search-info from outside sources |
|
consumer buying behavior
define |
behavior of ppl who buy products for personal use, NOT for business purposes
|
|
Consumer buying decision process
3 |
evaluation of Alternatives
-Consideration set-brands seen as alternative -evaluative criteria-objective/subjective things important to buyer -framing alternatives-making a feature look more important to inexp buyer |
|
situational influences on buying process
|
factors that can shorten,lengthen, or termin process
major factors-physical environ, social envior, time perspective, reason for buying, buyers money mood |
|
Consumer buying decision process
1+2 |
1-problem recognition-ppl aware of diff in desired state and actual condition
2Informational search-internal-search memories for answers -external search-info from outside sources |
|
Consumer buying decision process
3 |
evaluation of Alternatives
-Consideration set-brands seen as alternative -evaluative criteria-objective/subjective things important to buyer -framing alternatives-making a feature look more important to inexp buyer |
|
social influences on buying decision:
family influences |
consumer socialization-person acquires knowledge and skills to function as consumer
|
|
situational influences on buying process
|
factors that can shorten,lengthen, or termin process
major factors-physical environ, social envior, time perspective, reason for buying, buyers money mood |
|
social influences on buying decision:
family influences |
consumer socialization-person acquires knowledge and skills to function as consumer
|
|
social influences on buying decision:
family decision making processes |
autonomic-equally shared decion making
husband dominant-he makes decision wife domin-she makes syncratic-decision made jointly |
|
reference groups
|
group that + or - affects values, attitudes, or behavior
|
|
reference groups:
membership aspirational diassaociative: |
membership-social group u are part of
aspir-social group u think you are apart of, but r NOT dIssa-do NOT want to be identified in |
|
social class
|
group of ppl with similar social rank
-have common behaviors |
|
reference prices
|
any price set against other price -SHOPPING Around
may be internal-memory |
|
price-quality inferences
|
using price as indicator of quality
some companies use exclusivity and scarcity to justify premium prices |
|
Consumer adoption process
innovators: early adopters: |
2.5% of population
highly educated than avg 13.5% of pop slightly above avg in educ |
|
Consumer adoption process
early majority: |
34%
many informal social contacts NOT INNOVATORS |
|
Consumer adoption process
late majority |
34% of pop
skeptical below avg social status |
|
Consumer adoption process
laggers or non-adaptors |
16%
tradition bound friends and neighbors r info sources |
|
who could be your greatest marketer?
|
word of mouth-advocacy marketing
|
|
4 steps of strategic planning
|
define mission
external assesmentof O,T Internal assesment of S,W establish priorities on objectives |
|
define market
|
set of actual and potential buyers
|
|
define target market
|
grp that a firm markets its goods, services, or ideas to statisfy their specific needs
|
|
any marketing strategy must include a
|
detailed target market
|
|
STP process
|
segmentation
targeting positioning |
|
define segmenation
|
process of classifying cust into groups which share 1 common characteristic
|
|
define targeting
|
evaluating segments attractiveness and selecting one or more segments to enter
|
|
define positioning
|
product to occupy a clear, distinctive and desirable place
|
|
examples of segmentation
|
pts with similar:
illnesses stage of illness age group gender |
|
advantages of segmentation
|
forces marketer to analyse and consider both needs of market and companys liability-it informs company about its customers
rsources used to best advantage |
|
segments need to be?
|
identifiable and measurable
accessible substantial differntial and responsive viable and actionable |
|
Steps in segmentation, targeting, and positioning
|
Segmentation
1-ID bases for segmenting market 2-develop profiles of segments Targeting 3-develop selection criteria 4-select target segments Positioning 5-devlop position for each target segment 5-develop marketing mix for each |
|
levels of market segmentation
|
mass marketing
segment marketing niche marketing micromarketing |
|
what is mass marketing
|
same offering to all consumers
no segmentation |
|
what is segment marketing
|
diff services to one or more segment
some segmentation |
|
what is niche marketing
|
diff services to subgroups within segments
more segmentation |
|
what is micromarketing
|
services to suit tastes of indiv. and locations
complete segmentation |
|
what are the bases for segmenting consumer markets
|
geographic
demographic-age,gender psychogrpahic-social class,lifestyle behavioral-usage rate,loyalty |
|
what are the traditional approaches to market segmentation
|
mass marketing
differentiated marketing -multisegment approach -market concentration approach niche marketing |
|
mass marketing strategy
|
single marketing mix for 1 total market
all cust in the market |
|
multisegment strategy
|
more than one marketing mix and more than one market segment
|
|
market concentration strategy
|
single marketing mix and focus on a single market segment
|
|
niche marketing strategy
|
single marketing mix focused on a small subgroup-segment A1 of A
|
|
OTHER market segmenttion strategies
|
1:1 approach
mass customization-spec tailored to large group permission marketing-agree to receive certain messages(opted in) |
|
relationship marketing
goals and outcomes |
shifts focus to CREATING VALUE
outcome is customer retention its ongoing, looking to generate new value to keep cust, marketers must show care AFTER purchase goal of trad. marketing is ts cust acquistion |
|
what are the key relationship variables
|
commitment
cooperation informational exchange dependence Trust |
|
efforts to maintance and enchance cust relationship
|
make realistic promises 1st time
enable employees to deliver on promises keep promises |
|
what forms the basis for the relationship
|
moments of truth:interactions are opportunities to keep or break a promise
|
|
concept of Therapeutic relationship recognizes?
|
that the pt has responsibilities not just the provider
|