How do we set Sequencing Recharge Rates?
The Core's recharge is determined based on the following precepts:
The Sequencing Core is expected to provide the best possible service at the cheapest possible price. Unlike a true business, we must break even - no profits or losses are allowed. This has some clear consequences regarding our recharge structure. We simply set the recharges to recover our expenses as closely as possible. Each sample must bear a roughly equal share of the cost burden (with certain exceptions detailed below).
So what goes into the calculation of our recharge?
Here's how I go about it:
The Office of Financial Analysis Approves the RechargeWe must document our expenses to the OFA in order to gain their approval for a proposed recharge rate. If they see inappropriate expenses or inordinate costs, they will deny the request. That office also periodically audits our accounts to verify that we are maintaining neither an excess of funds nor a deficit.
It is impossible to anticipate all expenses and to accurately predict the number of samples we'll be processing. Thus, there is some error in the spreadsheets. The Bottom Line for a Core is (i) the Clients' satisfaction, and (ii) the account balance sheet. We have to constantly monitor the balance of our recharge account, and weigh it against encumbrances. If we run a profit, we must not only stop overcharging, but must give our clients the benefit of any excess funds. That means we periodically have to decrease our recharge rate.
Subtle PointsThe Sequencing Core has been fortunate in that we have maintained an outstanding rate of growth over the last 5 years, and more growth means better efficiency. Consequently our per-sample recharge has dropped from $100 (1993) to $50 (1994) to $35 (1995), $30 in ~1996, $25 in 1997, $20 then $16 in 1999, $10 in 2001, then $8 later in 2001, $6 in early 2003, $5.20 in mid-spring 2003, $4 in late summer, 2003. We even temporarily went to $3 in Jan '07 for a few months. Most recently, April '10 saw a drop to $3.60 per lane.
Each of these decreases were due to growth in Core size, to growth in client base and to improvements in cost efficiency.
Growth requires a bit of risky maneuvering, in fact. Whenever I decrease the recharge rate, I in fact drop it below the break-even point. We actually are losing money for a few months. Price drops, however, also promptly stimulate business, so we soon are back in the black due to growth.