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Branded or generic: what one store earns, and what a reimbursement cut does

You run the case. Read the prompt, answer questions from the notes below, and share data only when the candidate asks for it or gets stuck. Score at the end.

Case timer

00:00

Target length:

1. Read the prompt aloud

Read it slowly, then pause. Let the candidate ask questions before they structure.

Maple Street Pharmacy (a fictional US pharmacy) fills 60,000 prescriptions a year: 90 percent generic and 10 percent branded. A typical generic costs it USD 7 and is reimbursed at USD 25. A typical branded medicine costs USD 985 and is reimbursed at USD 1,000. Each prescription takes about USD 11 of pharmacist and staff time, labels and packaging. What does the store earn from prescriptions before rent and overheads? Then payers cut what they pay for generics by USD 2 each. What happens?

2. Answers to clarifying questions

This case has no scripted clarifying answers. Answer from the prompt, and say "assume what you think is reasonable" if the prompt does not cover it.

3. A model structure

Compare the candidate's structure with this one. A different split can be just as good if it is clean and fits the problem.

Prescription contribution = gross profit per script x scripts, minus the cost of filling them
- Gross profit per script = reimbursement minus the medicine's cost, for generics and for brands
- Yearly gross profit = generic scripts x their gross profit + branded scripts x theirs
- Contribution = yearly gross profit minus filling cost per script x all scripts
- Test the change: lower generic reimbursement, same costs

4. The working, step by step

Each step shows how a strong candidate works it out. Share a new fact from it only when the candidate asks or is stuck, and let them do the math: the result in the dark box is what they should reach.

Step 1: Generic gross profit per script
What a strong candidate does: USD 25 paid, USD 7 cost.
Generic gross profit (USD): 25 - 7 = 18
Step 2: Branded gross profit per script
What a strong candidate does: USD 1,000 paid, USD 985 cost.
Branded gross profit (USD): 1,000 - 985 = 15
Step 3: Branded gross margin
What a strong candidate does: USD 15 on a USD 1,000 sale.
Branded gross margin (fraction): 15 ÷ 1,000 = 0.015
Step 4: Yearly gross profit
What a strong candidate does: 54,000 generic scripts at USD 18 and 6,000 branded at USD 15.
Yearly prescription gross profit (USD): 54,000 × 18 + 6,000 × 15 = 1,062,000
Step 5: Contribution after filling costs
What a strong candidate does: Minus USD 11 for each of 60,000 scripts.
Prescription contribution (USD): 1,062,000 - 60,000 × 11 = 402,000
Step 6: After a USD 2 cut on generics
What a strong candidate does: Generic gross profit falls to USD 16; nothing else changes.
Contribution after the cut (USD): 54,000 × 16 + 6,000 × 15 - 60,000 × 11 = 294,000
Step 7: Fall in contribution
What a strong candidate does: The drop as a share of the starting contribution.
Fall in contribution (fraction): (402,000 - 294,000) ÷ 402,000 = 0.2687

The recommendation to listen for

At the end, say: "The CEO walks in. What is your recommendation?"

Maple Street should treat generic reimbursement as its main profit risk and push volume and services, because a USD 2 cut per generic removes about 27 percent of its prescription contribution, from USD 402,000 to USD 294,000. First, generics bring most of the gross profit dollars even though branded medicines bring most of the sales value. Second, the cost of filling each script does not fall when payers pay less. The risk is that more volume at squeezed rates only adds work. As a next step, add paid services such as vaccinations and move routine refills to cheaper channels such as automated filling or mail order.

Risks a strong answer names: Expensive branded medicines also tie up cash in stock for each unit held; Payers can cut fees again, or steer patients to their own mail-order pharmacies.

Score the candidate

Score each criterion from 1 to 5. A 2 or a 4 sits between the descriptions.

This case has no exhibit. Score Exhibit reading on how the candidate used the data you gave them: did they pick out the number that matters and say what it means?

Structuring

1: No clear structure, or a memorized framework that does not fit the problem.
3: A sensible structure, but with some overlap, a gap, or no clear priority.
5: A structure built for this problem, with no overlap and no gaps, a stated hypothesis, and a clear first step.

Math

1: Frequent errors, no units, or needed heavy help to finish.
3: Right answers but slow or messy working, or one error caught late.
5: Accurate and clearly narrated, with units, a sense check, and what the number means.

Exhibit reading

1: Read the chart aloud without finding the number that matters.
3: Found the key number but gave only part of the so-what.
5: Pulled the right number quickly and said what it means for the case.

Synthesis

1: Summarized what was done, with no clear answer.
3: Gave an answer, but with weak reasons or no next step.
5: Answer first, then two or three reasons with numbers, the main risk, and next steps.

Communication

1: Hard to follow: long silences, no signposting.
3: Clear most of the time, with some rambling.
5: Calm and concise, signposted each step, and checked in with the interviewer.

Total

0 out of 25

Score all five criteria to see the band and the feedback template.

Next: another case in Partner mode

Swap roles and run the next case, so you both practise answering and scoring.

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