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Pastimes : Clown-Free Zone... sorry, no clowns allowed

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To: Box-By-The-Riviera™ who wrote (178144)	7/8/2002 4:26:24 PM
From: Knighty Tin	Read Replies (3) of 436258

JG, Here's the difference: Medco tells the pharmacies what the co-pay is on each drug in each size in each of thousands of individually negotiated employer plans. If the pharmacies collect too much or too little based upon that sometimes very complex computation, the buck stops at Medco and they have to make it right. It is part of the service a service co. provides. Stores collect taxes, but the state sets the rate. If the rates were variable and collected on a matrix basis, as are drug co-pays, then the stores might very well have to recognize the revenues and the liability. The question of which method to use depends upon a company's focus. If you want to tout your stock, you keep your profit margins artificially high by not recognizing the co-pay. If you want to impress potential and current clients with how much you provide them and the liability you take off their books, you recognize the revenues and the liabilities. So, if Merck did the wrong thing, it was in providing too nice a picture to clients, not to investors.

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