I want to mash together two apparently unrelated stories for you so that I can highlight problems for consumers and drug makers from the complex world of pharmacy drug pricing. My unanswered questions are at the bottom -- I'd love to get your thoughts, too.Story #1: Yesterday's Wall Street Journal reported that many drug makers have raised list prices by 10% to 15% over the past year. See Drug Makers, Hospitals Raise Prices.
Those of us with insurance will probably not feel the full effect of these increases thanks to the bargaining power of our third-party payers. Unfortunately, the mysterious world of pharmacy price-setting will magnify these increases and expose uninsured and underinsured consumers to ever bigger increases in out-of-pocket costs for their drugs.
Story # 2: Price shopping for the best deals at a pharmacy remains difficult, as shown in a new report (link below) about ongoing problems with New York state's prescription drug price comparison site. Judging by this report, uninsured and underinsured consumers need to pay extra close attention when shopping to fill their prescriptions. There are eye-popping variations in pharmacies' U&C prices for the same product in the same area.
NAME MY PRICE
The Prescription Drug Prices in New York State website allows consumers in New York to compare the retail price of the 150 most frequently prescribed drugs at different pharmacies. The price is measured as the "usual and customary" (U&C) price reported to Medicaid by a pharmacy. In theory, this site could help uninsured or underinsured consumers shop around for lower prices.
Not so fast.
The NY PIRG just released an excessively-titled report called The Price is Not Right: The Failure of New York State's Rx Disclosure Law to Offer Consumers Easy Access to Prescription Drug Prices
Here's a small sample of variation in average prices and the min/max range for Lipitor (10 MG tab) around New York state. Even within the same area, pharmacy list prices for a common drug can vary by 200% to 300%.
Bronx (NYC) = $106.64 (Range: $80.00 to $216.99)
Central NY = $101.08 (Range: $86.93 to $125.00)
Finger Lakes = $101.72 (Range: $51.12 to $136.78)
Western NY = $102.54 (Range: $79.40 to $156.60)
Gluttons for data can enjoy many more pages of price info in the full report.
NOT THE PRICE
What explains these huge disparities? Well, sometimes the data on the New York web site are often incomplete, outdated, or just plain wrong.
For instance, one pharmacy reports selling Ambien for $860,603!! Oddly, 5 of top 20 big pricing errors are Ambien-related. (See page 12) I guess someone is asleep over there.
The NY PIRG study reminds me of another article that I wrote last year called The Price Might Be Right, which looked at a report criticizing the pharmacy price web sites in 10 states (including New York). That study identified four key problems with the state sites:
- Infrequent and incomplete updates of price data
- Few reporting pharmacies
- Small number of drugs reported
- Inconsistent use of modern web search tools
Apparently, New York has not fixed these problems in the intervening 14 months.
The latest report also uncovered the fact that few pharmacies support the state's price comparison web site. Only 7 pharmacies in a sample of 55 pharmacies displayed the drug price website address, which is required by New York law. Surprised? No, me either.
HARD QUESTIONS
- How many uninsured or underinsured consumers overpay at the pharmacy by not shopping around? As I show in Pharmacy Profits and Wal-Mart, independent pharmacies earned 42% gross margins from cash pay scripts – more than twice the margin from third-party scripts. I'm not aware of any studies of consumer shopping behavior related to pharmacy prices.
- How easy is it for consumers to compare pharmacy prices? According to the report, New York pharmacies are only encouraged (but not required) to provide prescription prices to consumers over the phone.
- How much do drug manufacturers understand about the factors that determine a pharmacy's "usual and customary" price? Effective channel management starts with an understanding of true economics, including the way that the retail pharmacy price from an individual script gets divided between the manufacturer, the wholesaler, the pharmacy, a health plan, and/or the third-party managers who oversee the whole process.
I'm curious to know what Drug Channels readers think about this pharmacy price issue.
