Prescription pricing is certainly in need of

reform.

SEVENTY PER CENT WITHOUT PROFIT!

Since then the price of potassium iodide has risen greatly. At that time the cost was such that, in accordance with the Evans rule, which we shall dwell upon later in this report, the prescription should have brought a price of ninety cents to yield a satisfactory measure of profit. With those druggists who set a price in excess of ninety cents we have no quarrel at all, but it remains a somewhat significant fact that 70 per cent of them all were ranged below the ninety-cent figure. In other words, only 30 per cent of a considerable number of druggists would have made a decent profit on this prescription, whereas in many cases an actual loss would have been suffered.

Much the same condition of things has been found to be true time and time again.

In Detroit, a year or so ago, twenty-five druggists were separately asked what they would get for one fluidounce of a saturated solution of potassium iodide. The prices ranged from fifty cents to a dollar and a quarter. And at the same time the cost of the

*Report of a Special Committee presented at the Atlantic City meeting of the American Pharmaceutical Association.

iodide was about thirty cents an avoirdupois

ounce.

And so we might go on citing conditions, only to reach the same conclusion—that there is a great and needless disparity in prices, an utter lack of scientific cost calculation, and frequently an absence of actual profit.

If prescription pricing were to be put on a scientific basis, as it ought to be and might be, prices would be more or less uniform everywhere, and it would not be possible to find such wide differences as are disclosed by every investigation that is undertaken. How can such a scientific system be elaborated?

COMMON MISTAKES.

First let us consider some of the present evils.

Chief among them is the old custom of making a flat price. Many druggists are still following the practice of charging 30 cents, say, for a two-ounce mixture; 40 cents for a threeounce mixture; and 50 cents for a four-ounce mixture.

This flat-price system is fundamentally wrong. To charge 60 cents uniformly for four ounces of medicine, regardless of greatly varying costs, is little less than absurd. One might as well get 15 cents an ounce for every fluid extract, whether it costs him four cents or

forty. He might as well ask a uniform price of twenty cents for every box of stationery whether it costs him ten or sixty.

Then, too, we often find a man who bases his price for a prescription on the size of the dose. For a given mixture he will get a dollar if teaspoonful doses are ordered, and fifty or seventy-five cents if dessert or tablespoonful doses are indicated. There may be cases where this sort of thing is excusable, but not often.

Many druggists, again, are getting no more for prescriptions than they obtained fifteen or twenty years ago. In the meantime conditions have changed radically.

In the first place, the old days when galenicals comprised almost the entire materia medica have largely passed into history. For

eign synthetics and domestic pharmaceutical specialties have come into use—and they usual ly cost more money. The expense of doing business has greatly risen during the last decade, and we have here a subject which has enlisted the keenest study of economic experts in all the large mercantile establishments throughout the country.

During the last two years, moreover, nearly the entire world has plunged into a great war, resulting in a steady and marked advance in the price of nearly everything. Has the druggist compensated himself for these advances by charging higher prices for his own goods? In many cases we fear that he is failing to do so, especially with prescriptions.

WHERE THE TROUBLE LIES.

The trouble is twofold: in the first place, the average druggist has only a vague idea of what it costs him to dispense a particular prescription; and in the second place, he doesn't have nerve enough to charge what he ought. Both faults are fatal.

This ignorance of costs is well-nigh universal-not only in the drug business, but everywhere else. The statement was made the other day at a big convention in Philadelphia

that 2000 out of 2400 wholesale and manufacturing concerns were found to be losing instead of making money. If larger companies of this kind do not know what it costs them to do business, how can we expect the retailer to be well informed? And yet he has got to be well informed in the future if he is going to avoid economic destruction.

Take, for instance, the comparatively small item of prescription containers. In these days a container frequently costs ten or fifteen cents. A druggist will often put up an ounce of an eye mixture in a dropper bottle, where the bottle itself costs him ten cents, and then ask only twenty-five cents for the product. Some of the ointment jars are now very expensive, but the druggist doesn't stop to think these things out and doesn't realize what his costs are.

The time consumed in dispensing a prescription is often an important factor. An hour's time may be required, and if this labor doesn't return its due profit, the transaction is certainly an undesirable one. The prescription equipment is often ample, and involves a steady loss

on the investment that must be adequately compensated if the prescription business is to return its fair yield of profit.

DON'T FEAR YOUR COMPETITORS!

But, as has already been stated, many druggists hesitate to get what they should for their prescriptions out of fear of what their neighbors and competitors will do. With this policy of fear it is difficult to be at all patient. As a matter of fact, the big down-town druggist, who is usually looked upon as one's greatest competitor, gets far better prices for prescriptions than does the small neighborhood apothecary. Of the truth of this statement there isn't any doubt at all.

Furthermore, we have repeatedly found it to be the fact that a man who had the nerve to

charge decent prices for his prescriptions

would be located right across the street from another druggist who charged little more than half as much, and yet the high-priced man would be walking away with nearly all the business. He had confidence in his goods. He gave prices without any apology. He stood on his dignity. He gave the very best of service, used the finest of containers, and did every

thing as it should be done.

There isn't anything at all in this fear of what a competitor will do. It is folly to consider the question. The successful druggist, by virtue of the very fact that he is a success, is a druggist who realizes the necessity of charging decent prices for his prescriptions. Therefore, one need not fear the competition of any successful or large store. The only druggist who gets low prescription prices is the unsuccessful man—and competition from him isn't really competition at all. It doesn't need to be

considered.

THE EVANS RULE.

Now we come to the point where we may consider the proper method of pricing prescriptions. Many systems have been advocated from time to time, and the National Association of Retail Druggists has adopted a schedule which is to be commended. The only fault we find with this schedule is its complexity. Practically the same result is to be secured by what has become known as the Evans rule, and this is very simple to remember and very easy to apply.

The Evans rule is merely this: Get a profit

approximating 100 per cent on the cost of the bare material and container, and then charge a dollar an hour for actual time consumed in compounding.

If every druggist in the United States were at once to adopt this rule, were to apply it universally, and were to base it on a proper knowledge of the actual cost of material and container, he would make a satisfactory profit on his prescription business.

EXCEPTIONS TO THE RULE.

Of course this rule, like every other rule under heaven, should be applied with some discretion. There are exceptions to every rule. There ought to be, for instance, a minimum figure beneath which the druggist should never go. Some of our correspondents have suggested fifty cents as this minimum figure. In other words, they have taken the position that a druggist should never, under any circumstances, dispense a prescription for less than fifty cents. We are inclined to think, however, that this minimum is rather high.

Another exception to the rule should be made in dispensing a proprietary preparation. Here the patient often knows what the product is, and knows the price of it. Furthermore, to put up such a prescription is really not to do any scientific work, or to expend much time. and labor, and a large profit is perhaps not excusable. At any rate, it isn't expedient.

Perhaps, too, other exceptions may be made in the case of very inexpensive or very costly mixtures. Some druggists believe that one should be satisfied with a smaller profit where unusually expensive substances are involved, and that compensation may be realized where rain water is present in larger volume. There may be something in this contention, but we are inclined to think that the idea has always been overworked.

It seems to us that prescription pricing ought substantially to be like the pricing of anything else. The price should be based on the cost, plus expenses, plus a reasonable net profit. Any other method is artificial. Any other method is unjust and uncertain. This is the simple rule followed by every capable merchant and manufacturer, in every line of trade, and with every class of goods.

Passing by the Evans rule, we may say that other methods have been worked out here and

there by different druggists. Thus Cornelius Osseward, of Seattle, arrives at the average cost of dispensing every one of his prescriptions. He does it in this way: he takes the entire cost of his prescription department for any one year, including, presumably, every item like rent, light, heat, labor and all the rest of it, excepting the cost of material and container, and then divides this amount by the number of prescriptions dispensed during the same period.

He has found that, in his own case, it costs him an average of fifteen cents to dispense every prescription, and he keeps this amount constantly in mind whenever he fixes a price. He reasons that if he adds fifteen cents to the cost of material and finishing, and then sticks on his net profit, he can't make a mistake. This is all right, except that, as will readily be seen, it is unwise to attach such an average expense to a prescription unless it is, as we might say, an average prescription. For one prescription might involve an expenditure of only five cents, and the very next one an expenditure of fifty cents. Doubtless Mr. Osseward thoroughly understands this and governs himself accordingly.

A good deal of significance attaches to the average price yielded by prescriptions. When taken individually, prescriptions differ widely, but when a large number of them are grouped together, they average up pretty much the

same.

We have found that in the case of the larger druggists, who thoroughly understand their costs, and who get good prices, the average price received runs from sixty to sixty-two cents. With the usual druggist, on the other hand, the average is fifty cents or less. Here you find proof of the statement already made in this report, namely, that the ordinary druggist doesn't get as much for his prescriptions as the big dealer does who is supposed to be a

cut-rate man.

MR. NITARDY'S INVESTIGATION.

An investigation made by F. W. Nitardy a year or so ago showed that 10,000 prescriptions, collected from ten different stores, averaged fifty cents each. The average cost of the material and containers was twenty-one cents. and the average expense was eighteen cents. This meant a total cost of thirty-nine cents for

a prescription that brought fifty cents. An An average net profit was left of only eleven cents. If, now, the average price of fifty cents were to be increased to sixty cents, the net profit of eleven cents would then become twenty-one cents. In other words, if the druggist could add an average of ten cents to the price of his prescriptions, he would practically double his net profit!

Let us apply the Evans rule to the situation. The material and container cost twenty-one cents, and by starting with a 100 per cent advance on this cost we arrive at forty-two cents. We charge one dollar an hour for labor, and, assuming that the average prescription consumes twelve minutes, we have an item here amounting to twenty cents. We thus arrive at a selling price of sixty-two cents. This, significantly enough, is just about the average reached in the most successful stores, and it would mean a net profit on every prescription of twenty-three cents instead of eleven cents.

Why not use the Evans rule? It is simple. It is just. Properly and wisely used, it will result in making the prescription business yield its fair measure of profit, and it would put the small druggist on all fours with the big druggist who gets decent prices for his prescrip

tions.

HARRY B. MASON. F. W. R. PERRY.

To the foregoing report Mr. George M. Schettler, a member of the committee, adds the following by way of comment and amplification:

1. Since the advent of war costs, prescriptions priced carefully according to the Evans rule have increased from an average of 62 cents to an average of 72 cents. This fact constitutes an important qualification of the statements made in the report of the committee.

2. War costs, in a way, are a great blessing to the retail druggist. They have made it necessary for him to advance his prices all along the line, and if he is wise he will keep them up permanently.

3. And yet there is another consideration. How far can prescription prices be carried without diminishing the number of prescriptions written? Probably 75 per cent are for patients whose incomes average less than $5

daily. The necessary family maintenance consumes nine-tenths of this, and as a rule there is no reserve in the ordinary family treasury for the payment of doctors' bills. Whenever we get an increase in price, therefore, we also help to bring about a diminished consumption.

4. Why should we not get relatively larger prices on inexpensive medicines that are used in minute doses or with great care? Why is not Fowler's solution worth as much to the patient over the prescription counter as Burnham's solution of iodine? Should we not charge as much for one drachm of ointment of yellow oxide of mercury to be used in the eye. as for one ounce to be used on the skin?

5. How much should be charged, in addition to the regular price, for the extra labor necessary on Harrison Law prescriptions?

6. Too many druggists make a rule of cutting under the indicated N. A. R. D. price on repeat prescriptions.

7. If we are to hold our prescription clerks to the task of scientific pricing of their work, it is up to the management to provide them with the means of determining costs quickly and accurately. This involves the marking of all prescription merchandise, the use of up-todate price-lists, etc.

8. That the subject of prescription pricing needs far more study than has so far been given to it, and that many druggists are losing money without knowing it, are facts easily disclosed by a little consideration. A prescription department capable of dispensing one hundred prescriptions daily requires the services of three clerks and one boy. Scientific work such as preparing salvarsan solutions, manufacturing, making analyses, etc., would call for still more help. Labor for such a department would cost $14 a day. Rental at 10 per cent, which is a minimum figure in a prescription pharmacy, means $7.50 more. Merchandise will average $38.50. One hundred prescriptions would bring in $75 approximately. Thus we have a profit left of $15 daily, against which must be charged the cost of administration and such overhead expenses as insurance, taxes, breakage, fuel, light, advertising, telephone, etc., etc. Such a department as is here indicated would find it exceedingly difficult to show a net profit of $10 daily, even with prescriptions priced at the high average of 75

cents.

PRIZE ARTICLE: BY GIVING MORE AND BETTER SERVICE.

BY ASHER M. HAWK.

Mail-order houses display their goods by means of pictures and text in the various catalogues which they send out to customers from time to time. We druggists can make a more direct appeal to patrons by displaying the goods themselves and by describing them with word of mouth.

But we, too, can make use of pictures for helping increase sales. We can use them in conjunction with our window and store displays and in our newspaper and circular advertisements. Perhaps our illustrations may not

Asher M. Hawk.

be quite so attractive as those used in the mailorder catalogues, but this shortcoming will be more than offset by the displays of the actual goods which accompany the pictures.

The mail-order people simply force us to make our displays more attractive-something that can be accomplished in the majority of

cases!

The buyer from a catalogue-house has small chance for redress if his purchase proves unsatisfactory; he must abide by his choice from the printed catalogue. In the local store, how

Monthly Department of

PRIZE QUESTIONS AND ANSWERS

ever, he can actually see the goods before he buys and decide whether or not the article is exactly suited to his needs. And even after the purchase is made, in case of dissatisfaction almost any druggist will glady exchange wares which are in a salable condition. These facts should be forcibly impressed upon our custom

ers.

THE PERSONAL CONTACT.

Literary talent and persuasive skill of the highest order are employed by the mail-order houses in compiling their descriptions. However, these creations are lethargic alongside of the impression made by a real live man whose voice tells about the goods, gives sound advice, answers questions, and whose hand places the goods before the eyes of the buyer. A thorough familiarity with the goods we handle and the development of a reasonable amount of salesmanship will build a business asset against which no catalogue-house can wage successful competition.

On a smaller, and consequently more thorough, scale we can use the methods adopted by the mail-order houses. Attractive circulars mailed to customers-not shoved under their doors-are of great assistance in bringing attention to certain goods. Such circulars may be used to introduce new goods, to advertise special sales, or, in the form of a personal letter, to advertise the prescription department.

The establishment and maintenance of a quick and efficient delivery system is a factor against which mail-order houses cannot cope. Bicycle messengers and reliable boys help to hold city or town customers. Recent postal regulations have made it possible to render quick service to country trade. The telephone, too, should be an inseparable ally in this commercial warfare.

CREDIT TO RELIABLES.

We can, with safety, give credit to deserving customers. This establishes a bond of loyalty which the difference of a cent or two in price

cannot sever.