Eye-popping generic pricing disparities

There’s more evidence today to support my recommendation that we stop providing health insurance coverage for routine items such as maintenance medications. The cash price for generic Zocor is all over the place, according to Why Generic Doesn’t Always Mean Cheap in the Wall Street Journal.

Reporter Sarah Rubenstein contacted several retailers to find out their cash price on a 30 day supply of 20 mg generic simvastatin, the newly off-patent version of Merck’s Zocor statin. Here’s what she found:

  • Rite Aid: $131.99
  • drugstore.com: $125.00
  • CVS.com: $108.99
  • walgreens.com: $89.99
  • Wal-Mart: $55.84
  • costco.com: $11.96
  • Sam’s Club: $6.97

Amazingly, a number of these companies changed their prices once they found out the Journal was looking at this topic.

  • CVS dropped to $79.99 as part of “an ongoing price analysis”
  • drugstore.com dropped to $27.99 as ‘part of a regular review’
  • Rite Aid decided not to stand by its original price, but wouldn’t give the actual price

Have you ever heard of such disparate prices for a commodity like gasoline? Generics really have to be identical to one another –that’s the law. Gasoline stations are at least able to rationalize their price differences with little gimmicks like detergents and other additives.

The high-priced companies offered explanations that are totally bogus:

Walgreen spokesman Tiffani Bruce… says profit margins on generics help the pharmacy chain make up for much smaller profits — or even losses — on branded drugs. The beginning of a generic’s availability “represents a small window where drugstores are able to recover from the weight of carrying all these unprofitable prescriptions,” Ms. Bruce says.

Come on! If Walgreen can’t make money selling prescriptions they are in trouble.

“We don’t sell snow tires,” says Mike DeAngelis, a spokesman for CVS/pharmacy. “The core of our business is the pharmacy.”

Is Costco ripping people off on tires all of a sudden to subsidize drug prices? I asked a friend who told me he was able to buy some fancy Michelin tires at Costco for less than at his local “discount” tire center. Not only that, but Costco filled the tires with nitrogen rather than air, which means Costco has actually invested more than your typical shop in providing good service.

Costco was forthright in its discussion with the reporter:

[E]ven at such prices, Costco is making a profit. Charles Burnett, senior vice president of pharmacy at Costco, says the company can acquire the 30-tablet, 20-milligram dose of simvastatin for $2.71. He says the price on costco.com today will fall to $10.66. Patients are allowed to use the pharmacies of clubs such as Costco and Sam’s Club, even if they aren’t members.

At the roughly $100 per month drug store price, simvastatin is about $1200 per year. Many people will need insurance to pay for that. At the $7 Sam’s Club price or $10.66 from Costco, it about $100 per year. Insurance isn’t even worth the bother.

Let’s scrap insurance for low-priced purchases and turn on the shopping power of consumers to drive down prices for routine items.

March 13, 2007

7 thoughts on “Eye-popping generic pricing disparities”

  1. You’re so right on about pricing. And the fact that stores ‘rethink’ their prices when confronted should be illegal!!

    I found out about the wild swings in pricing when my dog was put on prozac! The pricing went from hundreds of dollars to roughly $12 for 500 generic tabs at Costco. It’s all part of the circle jerk that is our healthcare system. The insurance companies agree to exorbitant prices, then insurance costs soar and who are the real losers? People who don’t have coverage.

    Great expose. Now let’s get this national and often!

  2. Eye-popping numbers EXCEPT for one thing: insurers have a vested interest in making sure that patients stay compliant with maintenance drugs – because the cost of non-compliance is a much more expensive stay in the hospital. That’s why insurers cover those things, and it’s why the “cash price” for drugs is meaningless in the marketplace for the insured. The insurance companies are not paying anything close to that price because, for them, the “value” of the med is higher, or at least different.

    For whom is a drug “worth” more? A single uninsured patient on whom the consequences of taking or not taking it solely rest? Or on a single insured patient, for whom there are consequences of taking or not taking, as well as consequences for the pool in which he is rated, the insurer that is paying the bill, and the shareholders of the insurer. That’s an interesting debate, don’t you think?

  3. It becomes relevant in the insured market when people scratch their heads and ask, “Why is my co-pay more than the cash price? Should I really be buying this kind of insurance?”

    Sure the health plans pay less than retail, but they’ve been so focused on the price difference between brand and generic that they haven’t pushed as hard on generic prices as they could have.

  4. Pingback: Consumers’ role in pharma | WorldHealthCareBlog

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