Managed Care - February 2008 - (Page 19) SNAPSHOT Choosing a city for mail order pharmacy hen 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.” W The highs and lows of operating a mail order pharmacy San Diego, Calif. (highest cost city) Phoenix, Ariz. Labor Weighted average annual earnings $48,066 Annual base payroll $5,767,920 Fringe benefits $2,134,130 Total annual labor $7,902,050 Electricity $252,540 Natural gas $4,615 Amortization $2,617,576 Property and sales tax $618,291 Heating and air conditioning $28,073 Shipping $23,597,190 Corporate travel $207,730 Total annual geographically variable operating costs $35,228,065 $43,573 $5,228,760 $1,934,641 $7,163,641 $138,732 $4,965 $1,854,776 $714,029 $49,201 $24,095,205 $196,117 $34,216,426 Willingboro, N.J. $46,315 $5,557,800 $2,056,386 $7,614,186 $245,016 $5,743 $1,515,171 $532,005 $82,097 $23,406,705 $207,748 $33,608,671 Sioux Falls, S.D. (lowest cost city) $38,777 $4,653,240 $1,721,600 $6,374,939 $138,231 $4,690 $1,261,083 $453,973 $96,479 $23,562,765 $146,565 $32,038,725 Source: A 2008 Comparative Cost Analysis for the Mail Order Pharmacy Industry, The Boyd Co., 2008. FEBRUARY 2008 / MANAGED CARE 19
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