Pharmacy Math: Markup, Discount, and Pricing Calculations

Pharmacy Business Calculations

While most PTCE math questions focus on dosing and compounding, some questions test your understanding of pharmacy pricing and business calculations. Understanding markup, cost, and reimbursement helps you process prescriptions accurately and understand the financial side of pharmacy practice.

Key Terms

• AWP (Average Wholesale Price) - A benchmark drug price used for insurance reimbursement calculations
• WAC (Wholesale Acquisition Cost) - The manufacturer's list price to wholesalers
• AAC (Actual Acquisition Cost) - What the pharmacy actually pays for the drug
• Dispensing fee - A fixed fee added to the drug cost to cover the pharmacy's overhead for processing the prescription

Markup Calculations

Markup is the amount added to the cost of a product to determine the selling price.

Markup Percentage = ((Selling Price - Cost) / Cost) x 100

Example: A drug costs $20 and sells for $28. Markup = ((28 - 20) / 20) x 100 = 40%.

To find selling price from cost and markup: Selling Price = Cost x (1 + Markup%)

Example: Cost $50, markup 30%: Selling Price = 50 x 1.30 = $65.

Discount Calculations

Discount Percentage = ((Original Price - Sale Price) / Original Price) x 100

Example: Original price $80, sale price $60. Discount = ((80 - 60) / 80) x 100 = 25%.

Insurance Reimbursement

A common reimbursement formula: Reimbursement = (AWP x Discount%) + Dispensing Fee

Example: AWP = $100, discount = 15%, dispensing fee = $2.50. Reimbursement = ($100 x 0.85) + $2.50 = $85 + $2.50 = $87.50.

Gross Profit and Net Profit

• Gross Profit = Revenue - Cost of Goods Sold
• Net Profit = Revenue - All Expenses (COGS + overhead + labor + other costs)

Business math questions may be less common on the PTCE than dosing calculations, but they are easy points when you know the formulas. Practice with PTCB practice problems.