[Vision2020] Drug Prices

Fri Jul 16 02:22:40 PDT 2004

Janesta,
As a pharmacist I feel the need to comment...Don't blame the pharmacy.
There are many factors here and oversimplification can lead to wrong
conclusions.

1. In the last 20 years, the number of independent pharmacies has declined
precipitously for a variety of reasons, some of these being:
--an inability to compete with mass marketers (such as Wal-Mart and Costco)
that have the benefits of buying drugs in huge quantities at lower prices.
--an inability to keep up with the efficiencies of scale of mass
marketers.Mass marketers can afford a lower markup on the basis of filling
more prescriptions but charging less.
--an inability to survive on the reimbursement rate from insurance
companies. Again the economies of scale are a factor.
**In other words, if owning a pharmacy was super profitable, there would be
more independent pharmacies, not less.
2. As a rule, brand name drugs are marked up much less than generic drugs.
These common, highly visible and promoted drugs are often price checked and
sometimes sold even at cost or slightly below. There is no profit in that.
3. There IS room for profit when selling generic drugs. Generic drugs,
especially those generic drugs that are not commonly used, are about the
only place where a pharmacy can make money.
4. If every pharmacy had the same price for the same drug, that would
indicate price collusion between pharmacies,  an illegal act. So it pays to
price check, but it also explains why one pharmacy might sell a drug for
$10.00 while another sells the same for $50.00.
5. A large percentage of business for all pharmacies is paid for by
insurance companies, many of which employ benefit managers, and in all cases
reimburse at the lowest possible rate per prescription. Depending on who you
consult, it costs at least $4.50-$9 to fill a prescription where the drug
costs are -zero-; these are fixed costs. Many times the insurance
reimbursement does not exceed this amount, leaving generic drugs as the only
opportunity to make an profit.
6. Some stores, such as Costco use the pharmacy as loss leader to bring
customers into the store. Other stores try to make a reasonable profit.
There is nothing wrong with a pharmacy making a reasonable profit.

In summary, the pharmacy business is highly competitive, and nobody, I
repeat nobody, is making an obscene profit.

As to the actual cost of production verses the selling price, such facts are
misleading, even if true. Thankfully, the FDA has some standards that
commercially produced drugs be proved effective and safe (as opposed to
compounded medications that have no such controls). This proof is costly and
explains some of the price difference. This is not to say that I don't think
that some drug companies make obscene profits, because I agree that some do.
But you also have to realize that the costs of safety must be recouped
somewhere along the line.

If you want to have lower drug prices, then support laws banning
advertising. An incredible amount of money devoted to health care is wasted
on advertising.

Jim Meyer, RPh.

> Message: 5
> Date: Thu, 15 Jul 2004 21:22:49 -0700
> From: "JSullivan" <jsullivan at moscow.com>
> Subject: [Vision2020] Something else to talk about.............
> To: <vision2020 at moscow.com>
> Message-ID: <003d01c46aec$8e8a4930$bfb47e40 at Janestas>
> Content-Type: text/plain; charset="iso-8859-1"
>
>   This is rather long, but please.... read it!
>
>   Snopes said it is true.
>
>
>   Subject: Pharmacology Names
>
>   PLEASE READ
>
>   Did you ever wonder how much it costs a drug company for the active
>   ingredient in prescription medications? Some people think it must cost a
>   lot, since many drugs sell for more than $2.00 per tablet. We did a
>   search of offshore chemical synthesizers that supply the active
>   ingredients found in drugs approved by the FDA. As we have revealed in
>   past issues of Life Extension, a significant percentage of drugs sold in
>   the United States co>> dget Analysts out of ntain active ingredients
>   made in other countries. In our independent investigation of how much
>   profit drug companies really make, we obtained the actual price of
>   active ingredients used in some of the most popular drugs sold in
>   America.
>
>
>   The chart below speaks for itself.
>
>   Celebrex 100 mg Consumer price (100 tablets): $130.27 Cost of general
>   active ingredients: $0.60 Percent markup: 21,712%
>
>   Claritin 10 mg Consumer Price (100 tablets): $215.17 Cost of general
>   active ingredients: $0.71 Percent markup: 30,306%
>
>   Keflex 250 mg Consumer Price (100 tablets): $157.39 Cost of general
>   active ingredients: $1.88 Percent markup: 8,372%
>
>   Lipitor 20 m g Consumer Price (100 tablets): $272.37 Cost of general
>   active ingredients: $5.80 Percent markup: 4,696%
>
>   Norvasec 10 mg Consumer price (100 tablets): $188.29 Cost of general
>   active ingredients: $0.14 Percent markup: 134,493%
>
>   Paxil 20 mg Consumer price (100 tablets): $220.27 Cost of general active
>   ingredients: $7.60 Percent markup: 2,898%
>
>   Prevacid 30 mg Consumer price (100 tablets): $44.77 Cost of general
>   active ingredients: $1.01 Percent markup: 34,136%
>
>   Prilosec 20 mg Consumer price (100 tablets): $360.97 Cost of general
>   active ingredients $0.52 Percent markup: 69,417%
>
>
>   Prozac 20 mg Consumer price (100 tablets) : $247.47 Cost of general
>   active ingredients: $0.11 Percent markup: 224,973%
>
>   Tenormin 50 mg Consumer price (100 tablets): $104.47 Cost of general
>   active ingredients: $0.13 Percent markup: 80,362%
>
>   Vasotec 10 mg Consumer price (100 tablets): $102.37 Cost of general
>   active ingredients: $0.20 Percent markup: 51,185%
>
>   Xanax 1 mg Consumer price (100 tablets) : $136.79 Cost of general active
>   ingredients: $0.024 Percent markup: 569,958%
>
>   Zestril 20 mg Consumer price (100 tablets) $89.89 Cost of general active
>   ingredients $3.20 Percent markup: 2,809%< BR> Zithromax 600 mg Consumer
>   price (100 tablets): $1,482.19 Cost of general active ingredients
>   $18.78 Percent markup: 7,892%
>
>   Zocor 40 mg Consumer price (100 tablets): $350.27 Cost of general active
>   ingredients: $8.63 Percent markup: 4,059%
>
>   Zoloft 50 mg Consumer price: $206.87 Cost of general active ingredients
>   $1.75 Percent markup: 11,821%
>
>   Since the cost of prescription drugs is so outrageous, I thought
>   everyone I knew should know about this. Please read the following and
>   pass it on. It pays to shop around. This helps to solve the mystery as
>   to why they can afford to put a Walgreens on every corner.
>
>   On Monday night, Steve Wilson, an investigative reporter for Channel
>   7 News in Detroit, did a story on generic drug pri ce gouging by
>   pharmacies. He found in his investigation, that some of these generic
>   drugs were marked up as much as 3,000% or more. Yes, that's not a
>   typo.....three thousand percent! So often, we blame the drug companies
>   for the high cost of drugs, and usually rightfully so. But in this case,
>   the fault clearly lies with the pharmacies themselves. For example, if
>   you had to buy a prescription drug, and bought the name brand, you might
>   pay $100 for 100 pills. The pharmacist might tell you that if you get
>   the generic equivalent, they would only cost $80, making you think you
>   are "saving" $20. What the pharmacist is not telling you is that those
>   100 generic pills may have only cost him $10!
>
>   At the end of the report, one of the anchors asked Mr. Wilson whether or
>   not there were any pharmacies that did not adhere to this practice, and
>   he said that Costco consistently charged little over their cost for the
>   generic drugs. I went to the Costco site, where you can look up any
>   drug, and get its online price. It says that the in-store prices are
>   consistent with the online prices. I was appalled.
>
>   Just to give you one example from my own experience, I had to use the
>   drug, Compazine, which helps prevent nausea in chemo patients. I used
>   the generic equivalent, which cost $54.99 for 60 pills at CVS. I checked
>   the price at Costco, and I could have bought 100 pills for $19.89. For
>   145 of my pain pills, I paid $72.57. I could have got 150 at Costco for
>   $28.08. I would like to mention, that although Costco is a "membership"
>   type store, you do NOT have to be a member to buy prescriptions there,
>   as it is a federally regulated substance. You just tell them at the door
>   that you wish to use the pharmacy, and they will let you in. (this is
>   true, I went there this past Thursday and asked them.)
>
>   I am asking each of you to please help me by copying this letter, and
>   passing it into your own email, and send it to everyone you know with an
>   email address.
>
>   Sharon L. Davis Budget Analyst U.S. Department of Commerce Room 6839
>   Office Ph: 202-482-4458 Office Fax: 202-482-5480 Email Address
>   sdavis at docgov
>
>   Mary Palmer Budget Analyst Bureau of Economic Analysis Office of Budget
>   &Finance Voice: (202) 606-9295 Fax: (202) 606-5324
>
>   ***********************************
>
>   Thoughts, anyone????
>
>
>
>   Janesta Carcich
>
>
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