Note: These national averages are presented to give a composite picture of the average Lilly Digest pharmacy. Comparisons for analysis should be based on the operations of pharmacies of comparable sales and prescription size which appear in one of the 54 arrangements in the "Heart of the Lilly Digest."

TABLE 23.-AVERAGES OF PHARMACY OPERATIONS-1959-68 (BASED ON PHARMACIES REPORTING)—Con.

TWENTY YEARS OF PRESCRIPTION Department Data

LILLY DIGEST data clearly indicate that the prescription department continues to grow at a remarkable rate. Chart 16 graphically illustrates the steady uptrend in ratio of prescription sales to total sales since 1949. The past score of years has witnessed an almost threefold increase in this important statistic. On the basis of this information, it can be concluded that community pharmacists are, indeed, providing essential health services to their patrons.

The average LILLY DIGEST pharmacy gained in all categories listed in Table 24. The number of prescriptions and the prescription revenue rose substantially. A new high in prescription revenue, expressed as a percent of total sales, was recorded in 1968 at 43.2 percent. It is noteworthy that the figure for prescription ales per dollar of prescription inventory once again increased and represents an all-time high at $7.49. This statistic suggests effective control of the professional inventory, particularly when a comparison is made with the steadily falling sales return per dollar of stock in nonprescription merchandise.

TABLE 24.--PRESCRIPTION TRENDS IN LILLY DIGEST PHARMACIES

Note: These national averages are presented to give a composite picture of the average Lilly Digest pharmacy. Comparisons for analysis should be based on the operations of pharmacies of comparable sales and prescription size which appear in one of the 54 arrangements in the "Heart of the Lilly Digest."

FOCUS ON 1963

A new high in total sales volume was recorded by the average community pharmacy in 1968. The year also witnessed the continuation of several trends. Notably, there was a profit squeeze due to lower gross margins and higher operating expenses. Dollarwise, total income (proprietor's salary plus net profit) reached a record level, but percentage wise, the average community pharmacist's share of each sales dollar was the lowest ever reported.

Table 1 indicates that on the basis of 2,308 reports received, average total sales in pharmacies were almost $199,000, an increase of 5.6 percent over the prior year. Gross margin was at the lowest level in a decade, 35.7 percent of sales for the year.

Operating expenses were over 6 percent higher than in the preceding year and totaled 31.3 percent of all sales; this confirms a long-term uptrend. Partly as a result of greater sales, employees' wages again increased to a record high of more than $23,300, or 11.7 percent of sales. The total wage package, proprietor's salary plus employee wages, reached almost 20 percent of sales. Of the remaining expenses, taxes and miscellaneous increased 0.1 percent each, and advertising and depreciation each decreased by the same amount.

Inventory, although slightly higher in terms of dollars, decreased as a percent of sales to 17.7 percent. Table 2 indicates that nonprescription merchandise, which represents over two-thirds of total inventory, increased more than the prescription portion. However, the prescription inventory continued its trend toward greater sales productivity and returned $7.49 in sales for each dollar invested in stock. On the other hand, the productivity of other-than-prescription merchandise fell to a new low of $4.74 in sales per inventory dollar. Total inventory turnover remained unchanged at 3.7 times.

Once again the prescription department demonstrated growing strength and was responsible for the bulk of the sales increase. Prescription revenue during 1968 increased more than 9 percent in comparison with the 1967 figure and accounted for 43.2 percent of all sales. This share of total sales is the highest ever recorded and continues an uninterrupted uptrend that began over twenty-five years ago when the prescription department contributed only 12 percent of sales. Almost 23,000 prescriptions were dispensed during the year-a substantial growth over the 1967 figure. Renewed prescriptions accounted for 54.8 percent of the total, up from 54.5 percent in 1967. This increase confirms a long-term trend in the proportion of renewed prescriptions to total prescriptions. The average prescription charge rose 10 cents, to $3.76.

The prescription department continues to register remarkable gains in every significant area. The number of prescriptions, the prescription revenue, and the productivity of the prescription department inventory are rising substantially. The productivity of the prescription department floor area is keeping pace. Although the department occupied only 15 percent of the total floor space, it was responsible for more than 43 percent of all sales recorded in the pharmacy. Each square foot of prescription department space yielded over $265 in sales as opposed to $60 per square foot for the rest of the pharmacy. The indication is clear that the strength of community pharmacy lies in the area of professional services.

The average size of all Digest pharmacies reporting data on floor space was 2,134 square feet, a figure essentially unchanged from 1967. It is not apparent from these data what the floor-space distribution among pharmacies is; however, it is well known that the long-term trend is toward larger physical layouts.

The economic future of community pharmacy is in the direction of increasing sales and expenses. Gross margins are falling and payroll expenses are rising, with the result that net profit is declining. All trends point to the need for greater managerial effectiveness in expense control to insure profits and, therefore, economic stability.

Average pharmacy owner's income rose 9.2% to $26,943 in 1969, an increase of $2,274 over his $24,669 "take" the year before, according to a preliminary Lilly Digest report. The report covers 1,143 community pharmacies, about half the total Digest sample. It showed that the average proprietor's salary accounted for $17,401 of his total pre-tax income, up from $15,896 in 1968. As a percent of sales, however, his income dropped slightly, from 12.4% to 12.3% in 1969.

Gross margins in the average pharmacy rose from 35.7% in 1968 to 36.4% last year. A corresponding decline in the ratio of cost-of-goods to

sales rather than retail price increases-accounted for the higher margins, the Digest explained.

Net profit remained unchanged at 4.4% of sales despite the better margins, due to spiraling operating expenses which jumped from 31.3% to 32% of sales. Employee wages were the chief factor in the increased expenses, climbing nearly 16% during 1969, from $23,383 to $27,089. A recent Digest special supplement indicated that gross margins and operating expenses increase as competition intensifies ("The Pink Sheet" March 23, page T&G-5). The average pharmacy's total sales hit an all-time high of $219,782, up 10.5% over 1968, the report said. Rx sales paced the increase, climbing 12% v. 9.3% for non-Rx merchandise, continuing "an uninterrupted long-term uptrend in Rx revenue as a percent of sales." Rx volume increased from 43.2% of sales to 43.8% last year. The number of Rxs dispensed rose 9% to an average 24,897 for "a substantial increase of 2,049 Rxs,' the Digest said.

Average Rx charges jumped 11¢ in 1969 from $3.76 to $3.87, accounting for at least part of the larger margins. New Rxs increased 10.5% to 45.8% of the total while refills posted only a 7.8% gain, reversing the long-term trend toward faster refill Rx growth. R. A. Gosselin's Natl. Rx Audit showed a similar reversal. The final Lilly Digest computations will be completed and distributed to pharmacies in September.

Brand Names Favored 13-to-1 by Indiana Pharmacists who answered a questionnaire for Butler U. College of Pharmacy's Pharmacy Administration Dept. Of 1,300-42% of Ind.'s registered pharmacists living in Ind.-91.5% answered "no," 7% said "yes" and 1.5% had "no opinion" to the question: "Would you be glad to see the end of the 'brand name era'?" The survey also showed:

95.4% lacked "complete confidence" in the therapeutic equivalency of generically equivalent drugs made by "all mfrs."-v. 3.7% "yes" votes.

88.2% were opposed to a federal formulary limiting Rxs that could be dispensed under Medicare & Medicaid programs-v. 10% for.

73.5% against v. 14.8% for price controls in conjunction with a federal formulary at the mfr.'s level, and 75% against v. 13.5% for such controls at the community pharmacy level.

Many of the pharmacists indicated that the demise of the brand-name era would curtail free enterprise in the pharmaceutical industry, according to PhD Pharmacy Administration Prof. Dale Doerr and PhD Pharmaceutical Chemistry Associate Prof. Melvin Weinswig, who conducted the survey.

A number of pharmacists, the professors reported, indicated they would not accept generic equivalents for their own families and questioned whether the lay public would have the opportunity or ability to choose for themselves. A limited number of the pharmacists indicated opposition to differential pricing at the mfr.'s level, the survey revealed, while some favored price controls at the community pharmacy level if the professional fee were utilized.

LOUISIANA STATE ON GENERICS, PERCENT OF WHOLESALE

FDC REPORTS "THE PINK SHEET"

DRUGS AND COSMETICS

(A specialized weekly for executives in the drug, cosmetic and related industries, Published by FDC Reports, Inc., 1152 Natl. Press Bldg., Washington D.C. 20004, Phone Metropolitan 8-4463.)

Mr. MERLIN R. WILSON,

U.S. SENATE, Washington, D.C., November 10, 1966.

Executive Secretary, Louisiana State Pharmaceutical Association,
New Orleans, La.

DEAR MR. WILSON: I have received your letter of October 12 in which you included a copy of a resolution stating your association's opposition to "any legislation which would require the use of generic drugs" and directing that a copy