Cost-Plus Pricing System for Pharmacy Profitability
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Solution Overview
Problem
The challenge in determining transparent and effective pricing for prescription medications is exacerbated by variability in medication costs due to differences in prescription sizes and dosages, leading to potential net losses or uncompetitive pricing for pharmacies, which complicates profit maximization and customer affordability.
Innovation Solution
A cost-plus pricing method using computer systems to calculate a net cost per unit, average units per prescription, and applying weighting factors and fixed dollar values to determine a marked-up price, allowing for differentiated pricing between generic and branded medications.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Ease of manufacture
If fixed pricing is setup based on the smaller prescription, then pricing is more affordable for consumers, but the pharmacy may be dispensing at a net loss
Solution Approach 1:
The patent applies dynamics by making the fixed price adjustable based on prescription size. Instead of a static fixed price, the system dynamically calculates a fixed price that varies with the number of units prescribed. The fixed price is set at a percentage (e.g., 80%) of the actual cost, where the cost is determined by the number of units in the prescription. This allows the pricing to adapt to different prescription sizes, ensuring affordability for consumers while preventing net losses for the pharmacy when larger prescriptions are dispensed.
2Loss of energy
If the pharmacy bases the pricing on the larger prescription, then they avoid net losses, but they may not be cost competitive on the smaller one
Solution Approach 1:
The system dynamically adjusts the fixed price based on the actual prescription size to maintain cost competitiveness. By calculating the fixed price as a percentage of the actual cost for each specific prescription, the pharmacy ensures that smaller prescriptions remain competitively priced while larger prescriptions are priced to prevent net losses. This dynamic approach allows the pharmacy to compete effectively across different prescription sizes without sacrificing profitability.
3Device complexity
If fixed cost prescription services limit the available medications to specific drugs where dosing may be more standardized, then pricing becomes more manageable, but the variety of medications available is reduced
Solution Approach 1:
The patent applies parameter changes by adjusting the pricing parameters based on the specific characteristics of each medication and prescription. Instead of limiting to standardized dosing, the system calculates costs and fixed prices based on the actual number of units prescribed for each medication. This allows the pharmacy to offer a broader variety of medications while maintaining manageable pricing through dynamic calculation based on prescription-specific parameters.
4Ease of manufacture
If pharmacies provide pharmaceuticals at a cost which cannot cover their expenses, then they can offer lower cost alternatives to consumers, but they must make up the difference from other sales
Solution Approach 1:
The system implements feedback by continuously monitoring and calculating the actual cost of each prescription and adjusting the fixed price accordingly. The fixed price is set at a percentage of the actual cost, creating a feedback loop that ensures the pharmacy recovers its expenses. This feedback mechanism allows the pharmacy to offer lower cost alternatives to consumers while automatically adjusting prices to cover expenses, eliminating the need to make up differences from other sales.
Data Source
AI summary
Systems and methods, specifically computer implemented systems and methods for determining cost-plus pricing for pharmaceuticals. Specifically, systems and methods which can provide for transparent pricing which helps to provide a reasonable profit for a pharmacy while also generally providing competitive or reduced cost prescriptions to individual patients.