Tuesday +20 (11:15 PM) Nothing to do with Jackie

Ok, this post really has nothing to do with Jackie. It is just an observation about the medical field. So if you are only interested in Jackie's condition you can skip this.

Mr. McGuire: I want to say one word to you. Just one word.
Benjamin: Yes, sir.
Mr. McGuire: Are you listening?
Benjamin: Yes, I am.
Mr. McGuire: Plastics.

Plastics, that's the word Mr. McGuire uttered to Benjamin in the 1960s movie, "The Graduate". Benjamin had just graduated from college and was looking for a lifetime career. In between his college graduation and moving into his final career choice he has an affair with the married, and much older, Mrs. Robinson. After my experiences with the medical profession I thought if I were to give advice to someone just graduating from college I might have just one word to say to them.

Are you listening?

Yes, I am.

Drugs!

It seemed a natural choice. Just as plastics were the future of America in the 1960s, drugs seem to be the future given all the aging baby boomers in the new millennia. For example, today I paid a $40 copay for a tiny bottle of eye drops. Of course this is probably reasonable. I'm certain billions of dollars were spent for research. Tens or hundreds of millions of dollars are spent each year for advertising these little miracles. The manufacture of such a crucial substance probably requires a factory the size of a shopping mall. Drugs would seem to be the perfect choice for a young person. Right?

Well after serious study I've concluded the single word of advice I might give to a college graduate wouldn't be: Drugs.

Nope!



Are you listening?



Yes, I am.



Coffee!

I came to this conclusion by observing the inner workings of the pharmacy here at the Mayo Clinic and the Starbucks across the street. When you go to the pharmacy there is rarely a line. Of course they have (and I counted the names on the wall) 52 pharmacists on staff from 8:00-5:00. Each pharmacist probably makes $150,000 per year. Starbucks always has a line to get coffee. They have 4 people. I think they are making about $8 per hour. The manager probably makes more.

Looking at the situation, I find that the costs associated for the development of coffee were incurred hundreds (if not thousands) of years ago. I'm not sure about IRS accounting rules for coffee research and development, but I think the costs have already been either expensed or amortized. Of course the IRS has some crazy rules and that might not be the case. More research is needed.

Advertising costs would seem to be lower for Starbucks. Why? Because I don't think they advertise. The only form of advertising I see is a small green sign with a goofy logo in the windows. They do invest in a large green sign for most locations that simply says, "Starbucks". Most of their advertising comes from opening up to 5 new stores every day.

In the case of drugs it is necessary to produce the drug in a giant factory, sell it to a distributor, sell it to a pharmacy, collect a little bit of money from the customer in the form of an insurance copay and then hope you can collect the major amount of money from a reluctant insurance company.

At Starbucks I pay cash. They import their own coffee and there is no wholesaler.

Now one might think that expensive drugs costing in the dozens or hundreds of dollars might be more profitable than coffee. I don't think so. My Mocha Frap Venti costs about $5.00 (I don't usually tip). I'm not certain, but if I were going to take bets I would bet the plastic cup costs more than the coffee. Last year Starbucks bought 312 million pounds of coffee from 28 countries. It is very likely they get a good deal on their coffee.

How much do drugs cost? Nobody knows for certain. Well, I suppose the drug companies and insurance companies know but they won't tell anyone. It is kind of like finding out what might be a fair price on a new car. Somebody knows what this price might be, but they ain't gonna tell ya! My guess is that by the time you add in research costs, advertising costs, distribution costs, etc. the cost of producing drugs is actually kind of high and the prices we pay really aren't out of line. I can't, in all good conscience, say that Starbuck's prices are fair. Common sense says that $5 for a cup of coffee is a little out of line.

Now if Starbucks is buying 312 million pounds of coffee they have to be buying lots of plastic. I couldn't find out exactly how much, but we know it has to be a lot.

So...maybe the advice in the 1960s: Plastics wasn't such bad advice after all. Especially if Benjamin landed the Starbucks account. But just between us I think I'll stick with my advice of...

Are you listening?


Yes, I am!


Coffee!