An internal rate of return approach to investigate pharmacist supply in the United States

A Theoretical Framework for Estimating the Rate of Return to a Pharmacy Education Anywhere

Undertaking a pharmacy education is an investment in human capital. Candidates trade off present versus future costs and benefits. They make this investment with the expectation of earning enough income throughout their worklives to make their undertaking financially worthwhile. Whether or not this occurs is determined by the rate of return. The aim of the current study was to construct a theoretical model to estimate the rate of return to a pharmacy education investment. Specifications for model assumptions, inputs, and outputs are discussed. The outputs are the rates of return, the inputs are the costs and benefits of a pharmacy education, and the assumptions illustrate the circumstances of the individual or group for whom the model is built. The rate of return is the annual percentage that equates the streams of benefits and costs over the investment span. The higher the value of the rate of return to a pharmacy education is, the more profitable is the investment. This theoretical model may be used to estimate the financial viability of pharmacy and compare it to the viability of other professions or to the viability of pharmacy among various locations.

The rate of return to a pharmacy education investment in the U.S

BACKGROUND

Potential pharmacy students need a financial frame of reference to compare alternative fields of study or even determine if studying is financially worthwhile.

OBJECTIVE

Estimate the rate of return to a pharmacy education investment in the U.S.

METHODS

A model is used to estimate the rate of return to a pharmacy education. It is formulated using exclusively present values (i.e., dollars at 2019 prices). Several assumptions are made regarding the individual getting the education, the costs incurred, the amount borrowed, and the benefits derived. The robustness of the model is tested using sensitivity analysis and the rate of return is recalculated each time.

RESULTS

The estimated real rate of return to a pharmacy education investment in the U.S., devoid of inflation and under the assumptions initially postulated in the model, is 4.89%. The nominal rate of return is 6.44%. Post-estimation sensitivity analysis shows that the real rate of return is relatively inelastic with respect to changes in eight inputs considered, thus indicating robustness in the results of the model.

CONCLUSIONS

The real rate of return estimated here establishes pharmacy as a financially viable occupation for young individuals possessing the aptitude and commitment to pursue a patient-centered career in medication management.

Disequilibrium and Human Capital in Pharmacy Labor Markets: Evidence From Four States

OBJECTIVES

To estimate the association between pharmacists' stocks of human capital (work experience and education), practice setting, demographics, and wage rates in the overall labor market and to estimate the association between these same variables and wage rates within six distinct pharmacy employment sectors. Wage estimation is used as a proxy measure of demand for pharmacists' services.

DESIGN

Descriptive survey analysis.

SETTING

Illinois, Minnesota, Ohio, and Wisconsin.

PARTICIPANTS

Licensed pharmacists working 30 or more hours per week.

INTERVENTION

Analysis of data collected with cross-sectional mail surveys conducted in four states.

MAIN OUTCOME MEASURES

Hourly wage rates for all pharmacists working 30 or more hours per week and hourly wage rates for pharmacists employed in large chain, independent, mass-merchandiser, hospital, health maintenance organization (HMO), and other settings.

RESULTS

A total of 2,235 responses were received, for an adjusted response rate of 53.1%. Application of exclusion criteria left 1,450 responses from full-time pharmacists to analyze. Results from estimations of wages in the pooled sample and for pharmacists in the hospital setting suggest that advanced training and years of experience are associated positively with higher hourly wages. Years of experience were also associated positively with higher wages in independent and other settings, while neither advanced education nor experience was related to wages in large chain, mass-merchandiser, or HMO settings.

CONCLUSION

Overall, the market for full-time pharmacists' labor is competitive, and employers pay wage premiums to those with larger stocks of human capital, especially advanced education and more years of pharmacy practice experience. The evidence supports the hypothesis that demand is exceeding supply in select employment sectors.

Use of labor economic theory to examine hours worked by male and female pharmacists

PURPOSE

The objectives of this study were to develop a theoretically derived model of hours worked by pharmacists and estimate the model separately for male and female pharmacists.

METHODS

A systematic random sample of 1,600 pharmacists from four states was mailed a survey asking about current and past employment information. Two dependent variables were studied: weekly hours worked and annual hours worked. Independent variables were categorized as economic variables (hourly wage rate, other income, total debt) and demographic variables (employment position, age, degree earned, marital status, number of children at home). A two equation multiple regression model was estimated with two-stage least squares regression.

RESULTS

A total of 541 pharmacists responded to the survey and data from 442 of the respondents were used in the analysis. Hourly wage rates were negatively associated with weekly hours worked for males. Other income and total debt were significantly negatively and positively associated, respectively, with annual hours worked by female pharmacists. The number of young children at home significantly reduced weekly and annual hours worked by female pharmacists. Female pharmacists earning a Pharm.D. degree worked significantly more hours weekly and annually. Age was significantly negatively associated with male pharmacists weekly and annual hours worked.

CONCLUSIONS

Economic variables had a relatively small effect on hours worked by male and female pharmacists suggesting that increased wage rates may not increase hours worked. Strategies to increase hours worked by females likely should focus on benefits to help females handle childcare issues.