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INDEPENDENT V. CHAIN AVERAGE Rx PRICE DIFFERENTIAL

Executive Summary

INDEPENDENT V. CHAIN AVERAGE Rx PRICE DIFFERENTIAL declined to 3› in 1985, according to the newly released 1986 edition of the NACDS-Lilly Digest of chain drug store operations. The 1984 retail price differential was 10›. The average prescription charge in chain pharmacies was $13.01 in 1985, up $1.11 (9.3%) from the average price of $11.90 in 1984, the Digest reports. In contrast, the 1986 Lilly Digest of independent drug store operations reported that the average prescription price in community pharmacies rose in 1985 to $13.04, up $1.04 (8.7%) from the previous year's average of $12 ("The Pink Sheet" Oct. 13, p. 10). Published by Lilly in cooperation with the National Association of Chain Drug Stores, the report presents summary data from 1985 operations of 746 chain pharmacies pharmacies across the country. The number of Rxs dispensed by the typical chain pharmacy totaled almost 50,000 during 1985, a 9.7% increase from the 1984 figure of 45,495. The ratio of new to renewed Rxs dispensed remained essentially the same as recorded last year. The average total sales of a chain store averaged just over $2.27 mil. and represented an 0.6% decline from the 1984 revenue, according to 1985 operating data. The figure represents the first time that the average NACDS-Lilly Digest pharmacy reported a decline in total sales when compared with the previous year's figure. Miscellaneous operating expenses showed a substantial increase both in dollars and as a percent of total sales when compared with the previous year's figure -- moving from 10.3% of sales in 1984 to 11.1% in 1985. The Digest reports that "data indicate that the increase in overall miscellaneous operating expenses resulted from higher expenditures for insurance, license, and taxes, as well as advertising and headquarters fee." Headquarters fee accounted for a major portion of the increase -- rising from 2.8% of sales in 1984 to 3.8% during 1985. Total wage package (manager's salary plus employees' wages), however, fell to 10.1% of sales -- down from 10.4% in 1984, representing the lowest total wage-package figure ever recorded by NACDS-Lilly Digest participants. The average floor area per unit increased almost 12% or 1,068 feet to 10,200 square feet in 1985. The report notes that the nonprescription area was responsible for virtually the entire increase. The 1986 edition will be the final issue of the chain digest. In a foreword, NACDS President Robert Bolger explains that the report "is no longer needed." The association has "recognized that chain store performance is better measured against corporate internal standards rather than digest averages, which are based on many, diverse stores."
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