Pharmacy Finances 101: Rebates, Ordinary Commercial Terms, Kickbacks

Pharmacy Finances are Easier Than You Think

Our current financial model has remained largely the same, but our profession has greatly changed. Rebates, Ordinary Commercial Terms, Kickbacks - Whatever the name, they all mean the same. Why are the finances within pharmacy kept so secret? Let’s discuss how money is actually made within pharmacy and what it means for YOU. Whether you are a staff pharmacist, pharmacy student, or any other position within pharmacy, it is crucial that you understand how pharmacies keep their lights on.

Thought experiment for pharmacy finances

The situation below highlights the money returned from ordinary commercial terms (OCTs) if a store conducts 100 prescriptions/day with an average acquisition cost of $10 per prescription.

In this example, ODB = Ontario Drug Benefit, which is the Ontario’s drug coverage program

In the next example, these are the rebates if a store conducts 100 prescriptions/day with an average acquisition cost of $40 per prescription.

In this simplified model, rebates potentially add $730,000 in gross profit to a pharmacy without any added work.

Last modified May 17, 2022

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