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Rx DRUG SALES GROW 7%, ACCOUNTING FOR 62% OF TOTAL PHARMACY SALES IN 1985, LILLY DIGEST FOR 1986 REPORTS; PRE-TAX NET PROFITS DIP FOR FIRST TIME SINCE 1972

Executive Summary

Prescription revenue as a percentage of total pharmacy sales rose to 62% in 1985 from 60% in 1984, according to the newly released 1986 edition of the (ITALICS)Lilly Digest, a report on independent pharmacy operations for 1985. "The professional area of the business attained a new record high in sales revenue" for the second consecutive year, the survey reports. The pharmacy department "has been a major contributor to the financial success of community pharmacy operations, and pharmacists must make every effort to ensure the department's growth and vitality," the digest states. The Lilly Digest is an annual report of community pharmacy operations for the preceding year. The 1986 edition is based on a compilation and analysis of data surveyed from 1,378 drug stores nationwide. Prescription volume also climbed in dollars, to $369,595 from $345,435. The increases in Rx sales in terms of dollars and as a percentage of total sales occurred despite a 1.5% drop in the number of total prescriptions dispensed, to 28,347 from 28,776. The increases were made possible by a rise in the average charge per Rx drug, to $13.04 in 1985, up from $12.00 in 1984. Pharmary Sales Volume Directly Related To Number Of Hours Open, Survey Finds Rx drug sales per hour the average responding pharmacy was open for business grew 7%, to $114.64 from $107.14, the digest reports. Again, the increase occurred despite a dip in total prescriptions dispensed, to 8.8 from 8.9 per hour. However, other sales per store hours open declined by 0.7%, to $69.58 from $70.06 per hour. Overall, the survey found that "the number of hours a pharmacy is open is directly related to sales volume." The average community pharmacy was open 62 hours per week in both 1984 and 1985, the report notes. Drug stores with annual sales under $450,000 "were open fewer than 60 hours per week," stores with annual sales in the $450,000-$1 mil. range were open 60-68 hours per week, and those with annual sales greater than $1 mil. were open 71-78 hours per week, the report states. "Management's decision to remain open longer apparently is based on the profitability of the extended hours. Additional operating expenses must be offset by sales generated during the extra hours, or net profit will be reduced," the digest comments. The gross margin for the average community drug store in 1985 increased to $193,663 -- $5,107 over the 1984 figure of $188,556. However, gross margin as a percentage of sales slipped from 33.0% to 32.6%. "Total expenses fell to a record low of 29.8% of total revenue," the digest reports. "This reduction was the result of a decline in employees' wages, which more than offset an increase in proprietor's salary and in miscellaneous operating costs. The combined effect of these changes was that net profit before taxes fell 4.7% in dollars to equal 2.8% of total sales," the report states. Gross margins in dollars have risen steadily since 1976, up more than 78%, the digest reports; however, "total expenses have also risen over the period but at a faster rate, up about 81%." Consequently, "although net profit before taxes rose approximately 50% in dollars, it has shown a steady decline from 3.6% of sales in 1976 to 2.8% for 1985," the report states. "For the first time since 1972, net profit fell in dollars when compared with that of the previous year" -- by $812 (4.7%), to $16,563 (2.8%) in 1985 from $17,375 (3.1%).

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