A drug company recently had a recall of all products made from a specific facility. One particular medication (a controlled substance painkiller) has since gone into very short supply. There were 4 manufacturers of this medication, and with one of them doing a full recall, pharmacies have found themselves unable to fill most prescriptions.
I received my prescription last Thursday, and called and/or visited well over 100 pharmacies in several cities attempting to find anyone who had it. Most places (and my doctor) are saying that production should catch back up sometime in April. I did find 2 pharmacies that had received a partial shipment. I was recently laid off and do not have insurance…I was quoted $700 at one pharmacy and $1000 !!! at another…
The normal cost to fill my monthly prescription is $230-$250…
I’m in the state of Florida if that matters.
So, is it legal for a pharmacy to increase the cost of a medication 4-5x normal price if there is a shortage?
I don’t know about Florida, but I’m not aware of any Georgia law about this. At least, if there is a law that effects this it is not a pharmacy specific law.
BTW, I haven’t been working much lately, too busy with actual Pharmacy School. Do you mind if I ask what medication was recalled?
The medicine is Oxycodone IR, or Roxycodone (the original brand name).
It, by itself, was not specifically recalled…EVERY product made by Ethex at one particular plant was recalled due to “production issues”, which included their 15 and 30mg versions of this product. There are 4 manufacturers of the drug, and when one of them had to recall all their product, the current situation developed.
I knew this was price gouging, and I know Florida has price gouging laws in place in the case of a hurricane strike, but I wasn’t sure if there were any laws applicable here.
Oxycodone HCl of any strength is extremely hard to get these days. Ethex’s recall and cessation of manufacture really tightened the market. We order it weekly at my pharmacy, and out of the last 10 orders, we have received only one shipment.
Because of the shortage of oxycodone, we’re now experiencing difficulties in getting in related products – the oxycodone/APAP mixtures – due to doctors switching their patients to them because of the oxycodone shortage.
We field calls from people all day long about our stock condition, and we turn them all away. We just don’t have it, and when we do get it, we hold it for our regulars who have been getting it from us for a long time.
However, the local independents wait until they are in stock at the suppliers’ distribution centers and order huge quantities so they can fill the prescriptions. Their pharmacists are telling us this, and telling us that we could get it if we ordered it in large quantities.
We had one patient tell us the other day that they paid almost $1200 for their oxycodone at an independent, when our cash price would have been something like $246. I can’t say I blame them – demand right now so far outstrips supply that of course the market price has been driven up.
That’s the typical price from an independent store normally, $200-300…the independents are now charging $800-1200 for the same script.
I found a place with 15mg in stock, they got it changed for me to that and doubled the number, (of course paying for 2x as many pills shot my price up), I ended up paying $550…I have been told things should get better in April. Have you heard anything wrt that?
See the above article on price gouging, for a general answer.
However, note that this is not gouging under the FL definition, which covers only price hikes during a state of emergency (ie., natural disasters, famine, invasion, etc.)
Well, sort of. Except that government pays for almost half of health expenditures.
“In 2005, 34% of personal health care expenditures were paid by the federal government and 11% by state and local government; private health insurance paid 36% and consumers paid 15% out-of-pocket.” (45% state and local gov’t vs. 51% private insurance and consumers)
This doesn’t address the legality of the situation in the OP, but does provide a rationale why a government might want to regulate it. Because the government is picking up the part of the tab not paid by the patient. Private insurers typically have negotiated prices with drug companies, but Medicare (which makes up the bulk of federal healthcare spending) is prohibited by law from doing so. Whether that is good or bad is debated. But as a taxpayer I would not be so thrilled to subsidize opportunism in the already problematic opiate painkiller market.
Granted, there are some regulations, most of which are state dependent, but it shocks me how little Americans know of their own system and how little protection they have.
OP, feel free to tell me to buzz off, as this is a little bit of a hijack:
This is one aspect of classical economics that always seemed convincing to me. Isn’t price gouging a good thing? I mean, if you have a shortage, the only real options of determining who gets the products are favoritism, first-come first-served, or who will pay more. Each has its unfairness, but the price increase seems the most likely way of allowing the people who most need the item to obtain it.
Seems like a smarter policy would allow the price increase in a time of emergency shortage, but tax a percentage of profit from the increase and use that money to pay for things that prevent emergency shortages.
In the link I gave to the Florida site there is a section where you can report abuse. I would go ahead and report it, even though it doesn’t exactly fit the situation.
The pharmacy, if they cannot get the drug from the company directly, must purchase it from a wholesaler who has it in stock. This wholesaler adds its markup. :o If it cost more, you pay more.
Is the cost that the pharmacy pays to the supplier increasing during this shortage? If so, then the pharmacy may not be making any more profit than it usually does.
I think it would be more accurate to say that the price mechanism is the most likely way of allowing the people who are willing to pay the highest price for the item to obtain it.
Now, for some items low in supply, like Bugatti Veyrons, “need” and “willing to pay the highest price” might be pretty much the same thing. But i think it’s a bit problematic to make the same argument for medicine. I mean, presumably the people who have prescriptions for the medicine in question all need the medicine, at least according to their doctors. And, presumably, their medical need for it is largely independent of whether it costs $250 a month or $1000 a month.
It is indeed possible that some people with prescriptions have a more urgent medical need for the drug than other people. Some folks might be able to get by without it, or might be able to use some other drug to control their pain, while for other people, oxycodone might be the only possible alternative. But, again, this need is presumably independent of the patient’s ability to pay; it could be that, of all the people in the United States prescribed oxycodone, the person who has the greatest medical need for it is someone who has no health insurance and who can’t afford to pay more than $200 per month for it.
Obviously this is completely unworkable, but ideally what you would have in a situation like this is a nationwide triage system that determined how badly each patient needed the medication, and allocated it accordingly. Obviously, as i said, this is impossible. Also, because the medicine is prescribed by doctors, but is actually provided by pharmacists, the people dispensing the drug have no way of knowing who, in medical terms, needs it most. For them, it makes sense to simply provide it to those who can afford to pay for it, either directly or through their health insurance plans.
On your more general point about price gouging, i actually tend to agree with you a little bit, despite my somewhat socialist tendencies. It’s not that i support price gouging, as such; but i do think that it’s interesting when people (just talking in general here) claim, on the one hand, to support the free market, and then start complaining when the price of scarce products goes through the roof.
“Price gouging” is, in many cases, simply a rhetorically-loaded term for a change in price resulting from a sudden inward shift in the supply curve.
Personally, i think that things like providing medicine should not be left to the price mechanism alone, and that there are greater goals than simple efficiency when it comes to allocating medical resources, especially in a country where there are, for the most part, plenty of resources to go around. Sure, doing this will necessitate difficult decisions about things like “essential” versus “non-essential” care, and similar thorny issues. But just because these things are hard doesn’t mean that we can’t do them.
How are you going to do that? A windfall tax on that specific product? Or a general, across-the-board tax increase on pharmacy and drug company income?
And what, exactly, would you do to prevent the shortages? Do you want the government to get into the production of prescription drugs, in order to stockpile them? Because people who are opposed to things like a single-payer health system and government provision of healthcare aren’t especially likely to support a plan where government competes with private companies in the drug business.
Again, i personally have no problem with a system where the government helps to allocate health resources, but it seems somewhat counterproductive to argue that allowing the supply/demand mechanism to work and then simply taxing the hell out of the beneficiaries is any better, in either economic or political terms, than doing something to alleviate the fluctuations in the first place.
Absolutely. It is just my contention that “willing to pay the highest price” correlates best to “most just recipient.” It doesn’t even correlate that well, but it does so better than first-come first-served which is the alternative to price increases.
My point isn’t really about whether a socialist medical system would be better (which is obviously a very complicated question). I’m just comparing the available alternatives in our current system, out of which price increases seems to come ahead of first-come first-served.
I would use the same model as price gouging, which is product-specific. You use the last 3 months of pricing information and marginally tax the difference between that price and the emergency price for a certain period.
Government need not produce drugs in order to stockpile them. The government could subsidize companies to produce emergency stockpiles, or spend the money preventing the things that cause the shortages (better regulatory oversight, spend money on infrastructure to minimize effects of national disasters, etc.).
Well, you wouldn’t tax it so much that there is no longer a marginal incentive to raise prices in times of shortage.