Prompted by a Client’s questions about Category M and the formula that goes behind it to drive Pharmacy profitability, we asked Charles Joynson, WaveData MD, to have a closer look at Category M to see if he can make any sense of it.
Initially that we assumed that the average Drug Tariff price for Category M products would be relatively constant through time. However, this wasn’t what we saw at all, which presumably means that sales volumes are a major part of the picture. However, looking at the reimbursement prices alone showed us that there were strange four year boom and bust cycles going on in Category M reimbursement.
Cycles also apply to the market prices Manufactures and Wholesalers achieved for the Category M products. This means that there are good times to be a Manufacturer, and bad times. For example sales prices hit peaks in September 2017, February 2019 and July 2023, but lows in August 2015, August 2018 and February 2022.
For Pharmacies and Dispensing Doctors, there were some very noticeable bad times when profitability went severely negative for a period. These included September 2017, December 2018 and September 2022. However, profitability continues to be severely squeezed since the last low point and doesn’t look as if it’s going to recover any time soon. This links in with the knowledge that Pharmacies are having a very tough time at the moment and many are closing.
In the past we would have thought that four year cycles might have linked in some way with production cycles. However, in the run-up to an election, and with parliaments lasting about four or five years each, we wonder if there isn’t something political in these boom and bust cycles.
