Daylight on Prescription Drugs
Secrecy about costs leads many patients to pay more for medicines than they need to. But you can part the veil.
The vast range of new prescription drugs that has become available in recent decades is at the heart of the essential miracle of 20th-century medicine — the ability of doctors actually to do something about many formerly fatal diseases. Measured by their capacity for restoring health, some of these drugs would be bargains at any price. Nevertheless, there is ample evidence that many — perhaps most — Americans pay much more than they need to each time their pharmacist fills a prescription.
More than $4 billion worth of prescription drugs are sold in U.S. pharmacies each year. They are marketed in an atmosphere of extraordinary secrecy, quite different from that surrounding any other important consumer product. When it comes to determining whether a drug price is fair, most buyers are in the dark, and the pharmacists seem determined to keep them there.
The data assembled in the display overleaf, however, shed considerable light on the practical economics of the pharmaceutical marketplace. The figures highlighted in red are bench marks that can help you assess the reasonableness of the prices your own druggist charges.
Customers for prescription drugs — sick people, typically — are often in no mood, or condition, for a round of comparison shopping. Even if they were, prices are generally not advertised or posted. Some pharmacists, indeed, will not discuss price unless you have a prescription in hand. As often as not, the buyer has no idea what the product will cost until the sale is completed.
Drug manufacturers and pharmacists thrive in this atmosphere of economic blindman’s buff. Year after year, for example, drug companies’ profit margins and returns on invested capital rank first, or at worst second, among all 22 industries represented in Fortune magazine’s list of the top 500 industrial corporations.
Nevertheless, there are signs that some drug manufacturers are beginning to be embarrassed about the way their products are marketed at retail. The companies stress that retail pricing is out of their control. “Basically, our approach has been not to interfere with our product once it leaves our hands,” says a public relations man for Merck Sharp & Dohme, and a man from Smith Kline & French adds: “We can’t control what druggists want to charge.” However, James Russo, an official of the Pharmaceutical Manufacturers Association, speaks more freely. “It cannot go on forever like this,” he admits. “Something will have to be done. Anybody you talk to who says there isn’t a problem is simply not being straight with you.”
Virginia H. Knauer, director of the White House Office of Consumer Affairs, has launched a campaign to legalize the advertising of prescription prices on the grounds that “price competition can be a spur to reducing health costs.” The repeal of state laws banning such advertising, however, is actively opposed by the American Pharmaceutical Association, an organization of druggists. William Apple, the association’s executive director, contends that advertising would be a breach of “professional ethics” and could “mislead consumers to shop for price rather than value.”
A costly Free-for-all
Although doctors nowadays have a choice of some 10,000 prescription drugs, the 50 shown here account for over one-third of all prescriptions filled. The key figure for each of the 50 is the average retail price, compiled for Money by Wilcom Ltd., publisher of the Physicians’ Guide to Prescription Prices (1972) and, through a subsidiary, the forthcoming Consumers’ Guide to Buying Drugs by William Gulick. These red figures can give you some idea of whether your pharmacist’s prices are out of line with those of most of his colleagues. The range of prices found around the country by our own shoppers for each of the ten leading drugs is shown below the average price. The dosages we used are reported both by quantity and strength; for example, our Valium prescription called for 30 tablets of ten milligrams each.
Only seven of the 50 drugs here are “generic” products available from more than one manufacturer. But generic equivalents of 13 of the others are marketed, a few at considerably lower prices (see the table on page 34). In classifying drugs by type, we have chosen a common, but not necessarily the only, use for each.
Our calculations of markups are based on average wholesale prices, as listed in the Drug Topics Red Book. With generic drugs, many of which are available at widely varying prices, we chose the median wholesale price. On the average, pharmacists mark up the drugs shown by $2.64 per prescription.
This argument had more validity in the days when pharmacy was a kind of cottage industry —when “chemists” mixed and pounded their own medications from raw materials. Then, one druggist’s herbal potion might be quite different from his competitors’, and to advertise it might suggest invasion of the doctor’s province. But most pharmacists today are essentially merchandisers whose service consists chiefly of selecting from their shelves medicines already prepared by manufacturers, perhaps counting out the tablets, typing and affixing their own labels, and passing the bottles — and the bills — across the high counter to the customers.
In these circumstances it is hard to see how anybody except the industry is protected by laws that keep the patient from learning that the identical product may be available down the street for several dollars less. And, as a number of recent studies have shown, differences of that size are the rule rather than the exception. Money’s own shoppers, pricing the most commonly prescribed drugs at stores in twelve communities across the country, found dramatic differences not only from one region to another (a prescription for the painkiller Darvon cost $2.37 in one Chicago store, $4.75 in a New Jersey suburb) but from town to town, and even from store to store within the same community. To take an extreme example, in Alhambra, a middle-income suburb of Los Angeles, one Main Street drugstore quoted a price of $10 for 50 250-milligram tablets of the antibiotic Polycillin; another, also on Main Street, asked $20.
Many price discrepancies seem to reflect nothing more than the chaotic state of the pharmaceutical market, but our survey did suggest some patterns. Drugstores in wealthy suburban areas, for instance, routinely charge more than those in middle- or lower-middle-class neighborhoods. Some “discount” drugstores included in our survey had only a tenuous claim to the title. Several were cheaper than regular pharmacies for only about half of the drugs surveyed, and in some instances discount stores actually charged more. Ghetto pharmacies were expensive. Valium, a tranquilizer, cost $7.50 at one large pharmacy in New York’s Harlem. At a store five miles south in Rockefeller Center the same prescription went for only $5.85.
Even if prices were publicized, of course, not all druggists would charge the same amount. Stores with high rents or disproportionately large numbers of employees would still need to cover these special costs, as would stores providing home delivery. Pharmacies in high-crime areas, where pilferage is a problem and insurance rates are high, would presumably continue to offset these expenses by kicking up prices.
But in the present secretive atmosphere, other less defensible discrepancies flourish, some of them evidently the result of racial prejudice. Blacks, who constitute a captive clientele in most ghetto stores, often pay more than whites in the same store. In our survey, a pharmacist on Chicago’s South Side charged a shabbily dressed black $9 for 30 capsules of Darvon and 30 of Librium, and curtly denied his request for an itemized receipt. The day before, a well-dressed white man with the same prescription was charged a dollar less, served with a smile and given a receipt. In Englewood, New Jersey, a druggist filled a white journalist’s Darvon prescription for $4.50, then charged a well-dressed black $6.50 for the same dosage 15 minutes later. When the black complained, the druggist blandly explained the white’s lower price: “Oh, that was a professional discount.’’
The industry does have its mavericks. Last month Pathmark, a large eastern supermarket and pharmacy chain, began posting prices of 100 frequently prescribed drugs and sued to overturn laws banning drug price advertising in New York, New Jersey and Connecticut. Despite an outcry from local pharmacists, the Massachusetts attorney general’s office ruled last year that Osco Drugs, a national retail chain, had not violated state regulations against advertising by posting its prices for common prescriptions. The Boston Association of Retail Druggists is still protesting a city regulation, passed last year, that requires all drugstores in Boston to post prices of the 100 biggest-selling medicines in a conspicuous place and to charge all customers the posted prices. Pharmacists’ groups have also spoken out against a proposal by New York City’s consumer-protection agency for a similar law there.
Without waiting for laws of this type to spread nationwide, you can take a number of practical steps now to avoid paying unreasonably high prices for medicines. Among them:
- Make a practice of discussing the economics of health care with your physician. Let him know that you are concerned with the price of good health and ask what any treatment or prescription is likely to cost. Most doctors will gladly discuss costs if they are asked, and some will suggest ways in which they can be minimized. (Until recently, most physicians had little more information than their patients on the retail prices of many drugs. Some doctors have been surprised to learn that certain common drugs cost more than twice as much as others sometimes prescribed interchangeably for the same symptoms.)
- Similarly, ask your pharmacist what a particular prescription will cost before he fills it. If you feel the price is too high — or if he refuses to give you the price in advance—try another store.
- Ask your doctor for samples. Physicians get free samples of drugs from the salesmen who visit their offices, and most are willing to pass some along to their patients. If your drug needs are small, your doctor may have enough in his desk to save you the cost of a prescription.
- Get two prescriptions for drugs you will be reordering. Leave one with a drugstore that delivers and take the other to a discount store. If the discount store is cheaper, buy the drug there and use the regular pharmacy for emergencies.
- If your doctor approves, buy in quantity. A prescription for 100 pills is often more economical than one for 25. If you will ultimately need a large quantity of any given medicine — if, for example, you are a diabetic who needs maintenance doses of Orinase— you will save money if you make one purchase rather than several.
- Encourage your doctor to prescribe generically. There may sometimes be good reasons why he wants you to have a brand-name drug rather than its unbranded chemical equivalent, but not always. If he decides on second thought that plain penicillin g might do you as much good as Pentids (Squibb’s brand of penicillin g), you may save over a third of the price of the prescription.