Pharmacy non-prescription medications are typically priced by adding a markup percentage to their cost. This method of marking up prices on medications and other items is just one of many ways a pharmacy can make a profit from their consumers. The markup will inevitably vary based upon that particular pharmacy's pricing strategy.

Let's say a medication or other item costs the pharmacy $1.00. If they then mark it up for retail by 50% the markup amount is$0.50 and the cost to the consumer, excluding any applicable taxes, is $1.50. Similarly, if a peice of candy costs the pharmacy$0.05 and the markup percentage is 400% then the markup amount is $0.20 with a cost to the consumer, excluding any applicable taxes of course, of$0.25. The formula for calculating the price of an item after markup is:

## Price of Item After Markup

$$\text{(Cost} \times \text{Markup decimal fraction)}$$ $$\text{+ Cost}$$

$$(\1.00 \times 0.50) + \1.00 = \1.50$$

$$(\0.05 \times 4.00) + \0.05 = \0.25$$

## Markup Percentage on Item

$$\frac{\text{Selling Price – Cost}}{\text{Cost}} \times 100$$

$$\frac{\1.50 – \1.00}{\1.00} \times 100 = 50\%$$

## Gross Profit on Item (in General is)

$$\text{Selling Price – Cost}$$

$$\0.25 – \0.05 = \0.20$$

## Gross Profit Percentage on Item (in General is)

$$\frac{\text{Selling Price – Cost}}{\text{Cost}} \times 100$$

$$\frac{\0.25 – \0.05}{\0.05} \times 100 = 400\%$$

## Net Profit on an Item

$$\text{Selling Price -}\text{ (Cost + Overhead)}$$

$$\0.25 – (\0.05 + \0.01) = \0.24$$

The usual & customary price (or U&C) is what a pharmacy charges a customer for a prescription that isn't discounted or paid for by a third party. The U&C is a formula that is usually determined by the corporation running the pharmacy and applied at the time of filling a prescription. Typically, this formula makes use of adding a “professional fee” to the pharmacy's acquisition cost. This fee is based upon an “average wholesale price(or AWP). Let's use the following AWP lookup table to determine an example U&C:

AWP Professional Fee
≤ $10.00$5.50
> $10.00 and ≤$55.00$6.00 >$55.00$7.00 If the AWP for 300 capsules of acetaminophen 500 mg is$2.00, what is the U&C price of the prescription? Well, according to the AWP lookup table anything less than $10.00 will have a professional fee of$5.50 aded to it. In this case, this brings the total retail price up to ($2.00 +$5.50) = \$7.50. You can read more about average wholesale price courtesy of Drugs.com here.