contact lens economics
Which is Better, One or Two?
BY GARY GERBER, OD
It sounds like a sixth grade math problem. Lens One costs you $31.50 per box, and you charge patients $45 per box. Lens Two costs you $11 per box, and you charge patients $25 per box. Which lens is more profitable? It appears the profit with Lens One is $13.50 and for Lens Two it's $14. So Lens Two is more profitable. Or is it? Two significant factors affect profitability beyond 'how much they cost' and 'how much you charge.'
Let's look at two extreme examples of consumption. RGP wearers are undoubtedly the most loyal of all contact lens patients. If you fit them successfully, you are effectively "stuck" with them forever. But, RGP profitability for your practice tends to be relatively low due to the longevity of most RGP lenses. Sure, they provide great acuity and eye health. They also last longer than most other types of lenses. This means patients' consumption of lenses will be relatively low, and they will typically replace only lenses that are lost or damaged. RGP wearers rarely perceive their lenses as "wearing out."
On the other side of the consumption spectrum we find that patients who wear daily disposable lenses consume a lot of lenses. Therefore, they replenish them much sooner than RGP patients. If each daily disposable lens a patient used cost the same and sold for the same amount as each RGP lens used, daily disposables would be much more profitable than RGPs because of their higher consumption rate.
When calculating profitability, it doesn't matter how many lenses you dispense if your patients don't change them when they should. If every patient was perfectly compliant with each modality we prescribed, then calculating profitability would be straightforward. But alas, that's not reality. Reality is that patients are less than perfectly compliant, and we must recognize that when calculating profitability.
Let's return to our original two lenses and apply some reality. Let's say that Lens One is a daily disposable, and Lens Two is a two-week disposable. By definition, we are assuming that the lenses will be worn as prescribed by modality, one day and two weeks. But here's where we need to examine the issue a bit closer. Several studies show that compliance for daily disposables is 92 percent. This means that 92 percent of patients dispose of their lenses every day.
Two-week wearers are reported to be woefully less compliant than daily disposable wearers. Only 48 percent comply. This would mean that across the board of all two-week wearers, patients are wearing their "two-week" lenses for almost one month at a time.
Where does this take us in our quest towards profitability? If we revisit our original two lenses and assume that each patient buys enough lenses to last him one year (eight 90-packs of daily disposables and eight six-packs of two-week lenses) we now have a very different profit picture after accounting for compliance.
Daily disposable patients will now generate $99 per year per patient, and "two-week" patients will generate only about $54. So the initial $0.50 difference we saw that favored two-week lenses now favors daily disposables by nearly double the profit margin.
If you'd like a spreadsheet of exactly how these numbers were derived, e-mail me at DrGerber@PowerPractice.com. I'll send back a spreadsheet you can use to plug in your own fees and witness for yourself the profound effect compliance has on your bottom line contact lens business.
Dr. Gerber is the president of the Power Practice a company offering consulting, seminars and software solutions for optometrists. He can be reached at 800-867-9303 or DrGerber @PowerPractice.com