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)|
|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|
|Total annual labor||$7,902,050||$7,163,641||$7,614,186||$6,374,939|
|Property and sales tax||$618,291||$714,029||$532,005||$453,973|
|Heating and air conditioning||$28,073||$49,201||$82,097||$96,479|
|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.|