What will happen to Pharmacists wages. Economic Analysis

This forum made possible through the generous support of SDN members, donors, and sponsors. Thank you.

BCole5

New Member
7+ Year Member
Joined
Jul 22, 2016
Messages
8
Reaction score
1
There is a lot of debate going on considering the future of pharmacy and a lot of people interested in the field are uncertain of the outcome. Here is an objective economic analysis from a pharmacy student that has a degree in economics. I encourage you to read the next 2 paragraphs but if you don't want to just scroll down to my scenarios and let me know if there is anything I missed. The first 2 paragraphs are just my analysis on the problem people are hopped up about which is too many pharmacy schools opening. If you are worried about this reading those at the end will give you more hope.

1. Increasing labor supply. Skilled labor exists and gets paid a lot more because there is a barrier to entry in the field. In an unskilled labor market there is a surplus of people willing to work so they pay a much lower wage. In any labor market, skilled or unskilled, if there is a shortage of people willing to work wages offered will go up until the position is filled. If anyone could become a pharmacist online in less than two years, you can imagine what would happen to the wage of a Pharmacist. It would drop lower and lower until the payoff of becoming a pharmacist (value - cost) is equal to the payoff of the next best thing someone can do. If making a salary of $120,000/year for the cost of 6-8 years of other potential earnings and around $100,000-$250,000 in tuition does not hurt the enrollment of all these new pharmacy schools, then we can expect a surplus of pharmacists and lower wages GIVEN ALL OTHER THINGS HELD CONSTANT.

2. Pharmacy School Failure. Right now it is very easy to get into pharmacy school but high tuition prices at these new private schools will result in less attendance and eventually failure. This is already happening in lots of California schools such as California Northstate who I have heard is in serious financial trouble. If we see a drop in wages for pharmacists then you can definitely expect less people to want to go into the field, and ultimately the most expensive pharmacy schools will fail. I am not certain how far this is from happening because schools could very easily lower their standards for applicants, which in my opinion, needs some intervention.

3. Supply and Demand for Pharmacists. Healthcare, in most aspects, functions like almost no other market. With respect to new drugs or medical devices, medical innovation comes at a price that Americans pay most of due to patents protecting people's ideas from getting ripped off and sold at a cheaper price. But with respect to healthcare services from providers it is very much like any other market. So lets analyze what will happen to pharmacist supply and demand based on some very possible exogenous scenarios.

If your not an economics buff just know that increase supply will reduce price and increase quantity, whereas increase demand increases price and increases quantity.

Scenario 1: Drug demand increases. Can be due to drug prices falling (even though most drugs have very inelastic demand curves), or there might be more elderly who need them, or more needed drugs in general.
Result: More prescriptions to fill, more pharmacists demanded, higher wages offered to satisfy shortage. Rule of Compliments

Scenarios 2: New legislation allows Pharmacists to prescribe birth control.
Result: Now pharmacists are effectively a substitute for others who can prescribe (ethical issues aside) and demand would increase for pharmacists and decrease for other providers. Overall this would lower health-care costs and increase pharmacist wages as long as it doesn't result in malpractice issues.

Scenario 3: Higher Admission Standards imposed by a governing body on Pharmacy Schools due to expanding role of Pharmacist requiring higher quality students.
Result: Shortage of Pharmacists, increase in pharmacists wages, and increase in overall healthcare costs for the consumer.

Analysis: 99.9% of people don't care how pharmacists are getting paid or if they can find a job. What consumers want is cheaper or higher quality healthcare which follow an inverse relationship typically. In my opinion, cheaper healthcare is what consumers are more interested in right now and it is where pharmacists can make the biggest impact by acting as a substitute and doing things like immunizations and prescribing. Many argue prescribing causes more problems and that is a very valid argument. But being able to do these things is the only way get the governing body to invoke regulation on making new pharmacy schools. This is because an oversupply of pharmacists benefits the consumer by reducing cost of pharmacy services. So from a regulators perspective: Oh well if all pharmacists need to do is put pills in the bottle then who cares how easy it is to become one! Or: Wow if pharmacists are writing prescriptions they better be smart and therefor we should only have the best graduates possible.

In conclusion: Wages will decrease unless demand for pharmacists increases accordingly or there is an intervention on the supply. Pharmacists having more responsibilities will also be more reason for intervention on supply. Let me know your thoughts.

Members don't see this ad.
 
Read up on why "wages are sticky".

Wages just don't "get cut". Sure, they can be inflated away where there small/no nominal growth and over time inflation cuts the real wage. Or they will fire people. Or they will start new graduates with less hours. But nominal wages are rarely ever cut.
 
  • Like
Reactions: 3 users
So, based on your educated analysis, where would we fall on the scale from "doomed" to "DOOOOOOOOOOOOOOOOOOOOOOOMED"
 
  • Like
Reactions: 1 users
Members don't see this ad :)
Your scenario 2 only works because it leads to scenario 1. Do more people need birth control or do we make the access easier? With this do we get paid for the service or is it a cost of doing business to get more number 1. You are on the right thoughts on supply and demand but you also have to remember that there are big businesses involved that control a large chunk of the retail pharmacist market. A business is not a market and doesn't operate in the same fashion. Just because they have the ability does not mean they are willing. I bet if you ask the majority of the big pharmacies if they want to do MTM and check a box they'd say no, because the form the health plans are making or driving through CMS is not profitable but it's a necessary cost of business. More services that are added and are seen as a cost of business or market entry are not going to increase wages, if anything may either make you work harder for the same or you'll get paid less and get marginally more help.
I might be bias but this is typically the route that things go when we get expanded anything before we have the payment piece figured out. People jump to do the service, quickly drive a little incremental share and do it for free or below true cost and now the precedent has been set and it becomes a race to the bottom from there.
Now I'm all for expanded scope but in a very thoughtful manner and it must be accompanied with how the service will be reimbursed and at a reasonable market rate that can withstand the race to the bottom economics that is rampant across pharmacy.
 
Your scenario 2 only works because it leads to scenario 1. Do more people need birth control or do we make the access easier? With this do we get paid for the service or is it a cost of doing business to get more number 1. You are on the right thoughts on supply and demand but you also have to remember that there are big businesses involved that control a large chunk of the retail pharmacist market. A business is not a market and doesn't operate in the same fashion. Just because they have the ability does not mean they are willing. I bet if you ask the majority of the big pharmacies if they want to do MTM and check a box they'd say no, because the form the health plans are making or driving through CMS is not profitable but it's a necessary cost of business. More services that are added and are seen as a cost of business or market entry are not going to increase wages, if anything may either make you work harder for the same or you'll get paid less and get marginally more help.
I might be bias but this is typically the route that things go when we get expanded anything before we have the payment piece figured out. People jump to do the service, quickly drive a little incremental share and do it for free or below true cost and now the precedent has been set and it becomes a race to the bottom from there.
Now I'm all for expanded scope but in a very thoughtful manner and it must be accompanied with how the service will be reimbursed and at a reasonable market rate that can withstand the race to the bottom economics that is rampant across pharmacy.

I really appreciate your feedback! You said scenario 2 leads to scenario 1 you are correct because part of the cost of birth control is paying to see the doctor for a prescription. But with birth control being so widely prescribed already and being a cost effective thing for government to already subsidize, I do not think the amount of prescriptions written will go up a whole lot since we are looking at such an inelastic market for birth control.
The reason I bring up the birth control as an example is not because it increases the amount of prescriptions written but because it is cheaper and quicker to have a pharmacist write and fill a script all at once than to have a super busy MD do it. And yes you can imagine the incentive women to buy their birth control the same pharmacy they got the prescription at. But I don't see a significant increase of quantity demanded happening from increased access. Might be wrong though not an expert on birth control access.

As for your second point about more services and MTM being an increased cost of business. Checking the yes box on providing MTM would be checked by any rational business if insurance pays them a high enough amount to provide that. That amount depends on the profit of the next best thing the pharmacist could be spending their time on in terms of dollars. The real question is whether MTM saves the insurance company money by increasing medication adherence and preventing further costs from non adherence.

As for the race to the bottom economics you certainly have a point, especially when we have a fee for service payment system. What I foresee happening one day is more small and privately owned pharmacies opening and competing with bigger chains and here is why. The bigger chains currently win because they have better contracts with drug manufacturers and can save money on drugs, or at-least I assume. But with an expanding role there will be way more room for smaller pharmacies to enter the marketplace. This will now be more possible because even though won't have as good of margins on drugs sold, they will have just as good margins on whatever services they provide. This makes entry into the marketplace easier and with more pharmacies open for business more pharmacists will be demanded.
 
Read up on why "wages are sticky".

Wages just don't "get cut". Sure, they can be inflated away where there small/no nominal growth and over time inflation cuts the real wage. Or they will fire people. Or they will start new graduates with less hours. But nominal wages are rarely ever cut.

You are right sir and starting new graduates with less hours is for sure the route they would go at the big chains. But keep in mind if I am starting a new pharmacy store and need to hire a pharmacist and 30 equally qualified people apply, I will probably realize the amount of people interested will not go to 0 if I offer them a lower wage than the average. Bigger chains do not cut current wages because they do not want to piss off employees, a very big part of why wages are sticky.
 
I really appreciate your feedback! You said scenario 2 leads to scenario 1 you are correct because part of the cost of birth control is paying to see the doctor for a prescription. But with birth control being so widely prescribed already and being a cost effective thing for government to already subsidize, I do not think the amount of prescriptions written will go up a whole lot since we are looking at such an inelastic market for birth control.
The reason I bring up the birth control as an example is not because it increases the amount of prescriptions written but because it is cheaper and quicker to have a pharmacist write and fill a script all at once than to have a super busy MD do it. And yes you can imagine the incentive women to buy their birth control the same pharmacy they got the prescription at. But I don't see a significant increase of quantity demanded happening from increased access. Might be wrong though not an expert on birth control access.

As for your second point about more services and MTM being an increased cost of business. Checking the yes box on providing MTM would be checked by any rational business if insurance pays them a high enough amount to provide that. That amount depends on the profit of the next best thing the pharmacist could be spending their time on in terms of dollars. The real question is whether MTM saves the insurance company money by increasing medication adherence and preventing further costs from non adherence.

As for the race to the bottom economics you certainly have a point, especially when we have a fee for service payment system. What I foresee happening one day is more small and privately owned pharmacies opening and competing with bigger chains and here is why. The bigger chains currently win because they have better contracts with drug manufacturers and can save money on drugs, or at-least I assume. But with an expanding role there will be way more room for smaller pharmacies to enter the marketplace. This will now be more possible because even though won't have as good of margins on drugs sold, they will have just as good margins on whatever services they provide. This makes entry into the marketplace easier and with more pharmacies open for business more pharmacists will be demanded.

On MTM it's not about making money... it's table stakes to be in (favorable) network. When you "advocate" for wanting to do the service it's assumed you really want to do it. When you don't have favorable rates, your hand will be forced.

Good luck to independents. For years the strategy has been to offset with front end. The death of the retail (thanks Amazon) is here. Brace. There is no margin on MTM. Sure get a little extra revenue but the cost of services will drown you unless you are using your local college of pharmacy and perpuating the problem.
 
Simple: no raises (let inflation catch up)
 
  • Like
Reactions: 1 user
Dude,Just like real doctors who takes board exam every few years , have NAPLEX score valid for only 5 years this will make lot's of old lazy Rph loose their lic. And more skilled and competent pharmacist will be in the profession.
 
  • Like
Reactions: 2 users
Highly doubt the wage will decrease significantly enough to make people quit, but hours may be cut and graduates will be unemployed...which means less money for the majority. Literally just a few years ago, the BLS growth for pharmacists were in the 14-20%. Pharmacy was a great profession, but now it dropped to 3%. Suddenly everyone thinks it sucks.

All professions has had this type of issue. I remembered a professor once told my class in ugrad about the major saturation of dentistry in the mid 1900s. During his time, no one wanted to become a dentist because they weren't nearly paid as well. Dental hygiene and cosmetic dentistry weren't as important as they are today. Schools began to close down and now dentistry is desirable with higher demand. But even with less schools than pharmacy, apparently they still have a saturation issue now because it's way more expensive to go to even a state dental school. Building a practice also takes a large chunk of change on top of student loans. But it's definitely not as dire as pharmacy. Maybe failing pharmacy schools will eventually close down, but that won't be for a long while.

Some states do implement a Clinical Pharmacy Practitioner (CPP), so I guess it's possible to expand the role of pharmacists, but it will not be as impressive as pharmacy schools make them out to be. Anything can happen.
 
I have said this before....it is not just about wages. It is also about how your employers will treat you knowing there is a line of pharmacists waiting to take your position. That is harder to deal with than getting hit with a $5/hour pay cut.


Sent from my iPhone using SDN mobile app
 
Pharmacists missed out on the prescibing boat, and belatedly getting BCP prescribing won't change that. RPH's can't compete with PA's and NP's when it comes to prescribing.

Dude,Just like real doctors who takes board exam every few years , have NAPLEX score valid for only 5 years this will make lot's of old lazy Rph loose their lic. And more skilled and competent pharmacist will be in the profession.

Difference is, doctor's aren't required to be board certified--certainly there are financial incentives for them to be board certified, but doctors's are allowed to practice without being board certified.

Also, there is no reason to think the majority of pharmacists couldn't get board certified, if that were required. There would be plenty of expensive preparation courses that would quickly get an older RPh up to speed.
 
  • Like
Reactions: 1 user
Pharmacists missed out on the prescibing boat, and belatedly getting BCP prescribing won't change that. RPH's can't compete with PA's and NP's when it comes to prescribing.



Difference is, doctor's aren't required to be board certified--certainly there are financial incentives for them to be board certified, but doctors's are allowed to practice without being board certified.

Also, there is no reason to think the majority of pharmacists couldn't get board certified, if that were required. There would be plenty of expensive preparation courses that would quickly get an older RPh up to speed.

I disagree. There is no way some of our old-timers could ever pass BCPS. The skill set just isn't there. Nor is the desire. They are just cashing checks until they are forced out. It would force them into retirement.
 
I disagree. There is no way some of our old-timers could ever pass BCPS. The skill set just isn't there. Nor is the desire. They are just cashing checks until they are forced out. It would force them into retirement.

Then you might be surprised at what people will do when they have the financial incentive. Most old-timers are working because they literally can not afford to retire (most baby boomers spent all their money like there is no tomorrow, expecting SS to take care of them.....since it's not, they literally can not afford to retire.) Myself and people in my generation (Gen X) will probably be retiring before the baby booming pharmacists ever can afford to.

Also, just curious, are you currently BCPS certified?
 
2. Pharmacy School Failure. Right now it is very easy to get into pharmacy school but high tuition prices at these new private schools will result in less attendance and eventually failure. This is already happening in lots of California schools such as California Northstate who I have heard is in serious financial trouble. If we see a drop in wages for pharmacists then you can definitely expect less people to want to go into the field, and ultimately the most expensive pharmacy schools will fail. I am not certain how far this is from happening because schools could very easily lower their standards for applicants, which in my opinion, needs some intervention.

Care to elaborate on the financial trouble part? CNSU has an allopathic medicine program now. 100% private loans is insane but still... 300k in private loans... yeah.

CNSU grads, doing work no one else wants to do, like work for Walmart or CVS... where are all the new UoP grads?
 
Then you might be surprised at what people will do when they have the financial incentive. Most old-timers are working because they literally can not afford to retire (most baby boomers spent all their money like there is no tomorrow, expecting SS to take care of them.....since it's not, they literally can not afford to retire.) Myself and people in my generation (Gen X) will probably be retiring before the baby booming pharmacists ever can afford to.

Also, just curious, are you currently BCPS certified?

Perhaps I am just clouded by my current co-workers. Every single one of our old-timers are millionaires. They aren't working for themselves, they are working because they are shoveling money at their children for their 2nd degree, house downpayment, etc. And yeah, it makes me jealous because I didn't have handouts like their children have.

Yes, I am BCPS. 2013.
 
Perhaps I am just clouded by my current co-workers. Every single one of our old-timers are millionaires. They aren't working for themselves, they are working because they are shoveling money at their children for their 2nd degree, house downpayment, etc. And yeah, it makes me jealous because I didn't have handouts like their children have.

Yes, I am BCPS. 2013.

This is so me! not millionaire yet but I am fascinated with the idea of stewarding multi-generational wealth, while others spend into oblivion.
 
Top