January 8, 2016

Why Do Drug Prices Rise So Far So Fast? What Can We Do About It?

A December article in Consumer Reports carried this headline:
Save Money on Meds: 6 Tips for Finding the Best Prescription Drug Prices. Prices can vary widely from store to store, even in the same town. The trick is to shop around.
We’ve all seen recent stories about sensational drug price increases, like this headline from the September 20, 2015 edition on the New York Times: "Drug Goes From $13.50 a Tablet to $750, Overnight."

The drug in question in that case was Daraprim, a 62-year-old mainstay for treating life-threatening parasitic infections. The suddenly-famous culprit was former hedge fund manager Martin Shkreli, founder and chief executive of the start-up Turing Pharmaceuticals.

Turing’s sudden notoriety was just the most sensational recent news about drug costs. As the Times article explained, “…there is also growing concern about huge price increases on older drugs, some of them generic, that have long been mainstays of treatment.”

Here are just a few example cited in the Times piece:
  • Rodelis Therapeutics acquired Cycloserine, a drug used to treat dangerous multidrug-resistant tuberculosis, and promptly raised the cost of 30 pills from $500 to $10,800.
  • Valeant Pharmaceuticals acquired the heart drugs Isuprel and Nitropress, and soon raised their prices by 525 percent and 212 percent, respectively. 
  • U.S. Senator Bernie Sanders (VT) and U.S.  Representative Elijah E. Cummings (MD) reported that the price of a bottle of the antibiotic doxycycline went from $20 in October, 2013, to $1,849 just six months later. 
Healthcare experts, pharmaceutical reps, and consumer advocates explain the drastic hikes in various ways:
  • Actual product shortages (for various reasons)
  • Greed – charge what the market will bear
  • Business strategies – purchase old, neglected drugs and transform them into pricey “specialty drugs.”
  • Changes in a consumer’s insurance coverage
  • No competitors selling the same (or even similar) product (an issue exacerbated by the consolidation of large drug companies)
  • FDA monitors – if they uncover “issues” -- occasionally shut down drug manufacturers, causing shortages.
  • Drug manufacturers sometimes stop making certain drugs to redirect resources to other products.
  • With tightened FDA quality controls, drug companies must invest more in quality systems.
  • People don’t shop around. According to a Consumer Reports poll, only 17% of consumers actually compared prices at different pharmacies. That tendency to “pay whatever price” certainly doesn’t stimulate price competition.
And there are at least as many reasons why prices for the same products – brand name and generic -- vary so significantly from one pharmacy to another… even in locations just across the street from each other. We’ve covered that topic on the blog before. Here’s just one example from several years ago: Hidden Drug Costs.

So, What did Consumer Reports Do?
Here’s the explanation of their methodology:
In our national price scan, secret shoppers made more than 300 phone calls in all, to more than 200 pharmacies in six cities and their surrounding areas across the U.S. They requested prices for five common generic drugs: Actos (pioglitazone), for type 2diabetes; Cymbalta (duloxetine), an antidepressant also used to treat muscle and bone pain; Lipitor (atorvastatin), for high cholesterol; Plavix (clopidogrel), a blood thinner; and Singulair (montelukast), for asthma. What we found was startling. In short, prices can vary widely from retailer to retailer, even within the same ZIP code.
In brief, what did CS conclude?
  • Drugs could cost as much as 10 times more at one retailer vs. another.
  • The price isn’t always set in stone.
  • Retail pharmacies don’t really expect anyone to pay those high prices.
Finally, What did Consumer Reports Recommend as their “Smart Strategies for Savings”?
  • Skip chain drugstores. For all five drugs we priced, the big pharmacy chains consistently charged the most. Among all of the walk-in stores, Costco offered the lowest prices. You don’t need to be a member to use its pharmacy, though joining can net you more discounts.
  • Support independents. Though you might think that mom and pop stores usually charge higher prices, we found that wasn’t always the case. In fact, we found some real bargains at local independent pharmacies, as well as some higher prices. We also found wide fluctuations at supermarkets, another place you might not expect to save. Another advantage of independent drugstores: We often had luck asking for a lower price, where pharmacists might have more flexibility to match or beat competitor’s prices.
  • Don't always use your health insurance. Many chain and big-box stores offer hundreds of common generics at prices as low as $4 for a 30-day supply and $10 for a 90-day supply for people who pay out of pocket. Sam’s Club even fills some prescriptions free for members. Check the fine print: There may be a small fee to sign up, and not all discount programs are open to people with Medicare, Medicaid, or Tricare insurance. And keep in mind that when you bypass your insurance, money spent on your medication won’t count toward your deductible or out-of-pocket maximums.
  • Always ask "Is this your lowest price?" Victor Curtis of Costco told us that its contracts for Medicare Part D plans prohibit pharmacists from offering a better cash price to a customer unless a customer asks. And Rite Aid told us that their pharmacists process prescriptions through insurance unless customers tell them to do otherwise. Usually we found that asking can prompt the person on the phone to dig a bit for any available discount programs, cards, and coupons. Check back often, because prices and offers may change. And never assume that one pharmacy’s “discounted” price is lower than another’s regular price.
  • Seek a 90-day prescription. For drugs you take long term, it can be more convenient and even cheaper. For example, if you use insurance, you’ll pay one co-pay rather than three. And for discount generic drug programs, paying $10 for a 90-day supply works out to less than $4 every 30 days.
  • Look online. If you’re paying out of pocket, check GoodRx.com to learn its “fair price” and use that to negotiate if a pharmacist quotes you a higher price. You can also fill a prescription with an online pharmacy. The one we shopped, HealthWarehouse.com, had the lowest prices overall. Just be careful about the one you choose. Only use an online retailer that clearly operates within the U.S. and displays the “VIPPS” symbol to show that it’s a Verified Internet Pharmacy Practice Site. Most sites that bill themselves as “Canadian” are actually fake storefronts selling low-quality or counterfeit products. Internet pharmacies based in other countries that advertise heavily discounted medications are almost never legitimate, according to the National Association of Boards of Pharmacy (NABP), a nonprofit organization that accredits pharmacy websites. Once you’ve verified that a retailer is legit, read terms carefully. For example, HealthWarehouse.com ships to all 50 states; others may not. And you’ll have to wait for shipping.
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On February 15, 2015, Forbes published an interesting article, Why Are Generic Drug Prices Shooting Up?

The Forbes article doesn't mention the primary reason drug prices are so high in the U.S. Big Pharma spends more than any other industry lobbying and buying politicians with cash contributions. And it works.

Just a couple of examples. The U.S. is the only country in the developed world with laws that prohibit its government from negotiating prices with drug manufacturers. And the only other country in the world that allows direct-to-consumer drug ads is New Zealand, a nation of just over four million people. In both countries, the ads promote the more expensive name brands.

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