Presciption Drug Costs... a Secret Conspiracy?

Factual Questions
1

Over the past five months, I have been on three different prescription drug policies - one private, paid by myself via COBRA, one state administered Medicaid, and the last Medicare with a “Medigap” policy that costs me nothing but allows me a co-payment of $5 for a prescription of generic drugs. There was also a period where my COBRA insurance ‘overlapped’ with Medicaid, and a period where I had Medicaid but the amount of a prescribed drug was determined by Medicaid and not my doctor.

There is a narcotic opioid - a generic drug - that I am prescribed for severe pain. It comes in the form of a nasal spray. The generic name of the drug is “Butorphanol Tartrate Nasal Spray” (found in the PDR as “Stadol Nasal Spray”). After going through numerous other painkillers, this one worked, so I have a standing Rx for it and get it and use it as needed - maybe 6 days in a months time. (And unlike God - I mean Rush Limbaugh, of course - I’ve not become addicted to the drug and have never abused it: I use it when I need it - an odd practice, I know, but I suppose that I was afraid that Rush would find out and have me ‘sent up the river’ if he found that I was doctor shopping or making illegal purchases of a controlled substance. I live in fear of the man, you see).

When I was on my COBRA plan, the receipt from the pharmacy indicated that the insurance company had paid $54.53 and I paid $10.00 as a co-payment.

When I had ‘overlapping’ coverage from both the COBRA insurance company as well as Medicaid, the receipt indicated that the ‘insurers’ had paid $185.99 for the medication and I paid $1 as a co-payment.

When I was on Medicaid, the receipt indicated that Medicaid had paid $125.57 for the medication and I paid $3 as a co-payment.

Because Medicaid had a monthly ‘cap’ on the number of times this Rx could be filled in a one month time period, I paid for it once out of my own pocket and I was charged $82.59 for the medication.

Now that I am on Medicare, part A and B, and have the ‘free’ Medigap policy through a well know insurer, the insurer is pays $62.22 and I make a co-payment of $5 per Rx. (BTW - I asked the Medigap insurer that signed me up how in the world they could make money by offering a pretty decent plan and charge not one penny for it and was told that they were reimbursed through ‘the government - from what you pay for Medicare Part B’)

Because of the brilliant Bush Administration prescription aid card that will be issued beginning in March of 2004, I believe, I am informed that I am eligible to receive the card and obtain “10 - 25% off the price of the retail cost of prescriptions.”

So I began a 2 week search to find where I could actually find the ‘retail price’ of this drug - the majority of my Google searches ended in links to Canadian mail-order pharmacies but, as this drug is a controlled substance, it can’t be ordered from Canada.

I’m quite happy to live the remainder of my days paying $5 for this drug but I am utterly confused about the discrepancy in the pricing - is the drug company or the pharmacy making the obscene profit? The price of the drug, I assume, isn’t dependent on the roller coaster of the Dow Index, so why did the price vary from $186.99 for a high and $64.53 for a low? An $122.46 price difference? Is the $82.59 that I paid - independently - the “full retail price of the prescription?”

This leads up to several questions: why, and how, are pharmaceutical manufacturers and/or pharmacies able to charge such differing prices for the same medication? It’s obviously a rigged game, but who makes the profit?

The second question is related to the newly issued Congressional Budget Reports gloomy outlook for the economy, and Medicare specifically, which states that “prescription drugs have been a major factor driving up costs, particularly in recent years.” Well - yeah! Why are drug companies (of which the government is supposedly one of the best customers) and/or pharmacies, screwed by paying - at a minimum - $125.57 for drug that an insurer can pay as little as $54.53?

Since this message board has some pretty bright people hanging about, I’m hoping that someone in the pharmaceutical industry (be it manufacturer or pharmacy) or anyone else that has knowledge of why these discrepancies are allowed (government employee, maybe? - Someone behind the Alien Autopsy conspiracy?) and help me understand what’s going on, exactly?

I just don’t get it.

I made a lot of money when I worked and paid far more in SS ‘taxes’ than I will ever be able to regain - I’m OK with that because I know that the money I put in will go to others. Because I was unable to work, my life savings were drained by medical bills and my only income now is from the SSA.

The fact is that the “retail price” prescription card would probably allow those pharmaceutical manufacturers who have a modicum of goodwill to do away with plans that aid low income patients dependent FOR OUR LIVES on non-generic drugs. If that happens, I’m screwed, because some drugs that I now receive that cost me $12 a month and are not covered under my Medigap policy would cost me - at the 25% discount rate - over $600 per month.

And I guess one thing that really peeves me - no, pisses me off - is that in whatever manner the ‘legal’ drug deals are contracted, someone involved is screwing you - the people that are working and paying taxes - by charging YOUR GOVERNMENT for nearly three times the amount of money charged to private insurers.

Why? How?

Any insight would be appreciated.

2

Dunno about prescriptions, but I have had a doctor’s (optometrist) office charge me more for an appointment because I had a particular type of insurance which they knew would pay the extra.

I was so appalled that I reported them to the insurance company, and they were subsequently investigated and charged with insurance fraud. I’m no fan of the insurance industry, but fraud just makes it all so much worse for everyone.

So in answer to your question, there may well be a “gouging” margin which differs depending on who’s picking up the tab for the medicine and how much they’ll tolerate. If so, it would not surprise me to discover this was pretty much universal.

3

This is a complicated picture, and I haven’t seen all the pixels myself. I can show you pieces of it. Here are some of the things that influence drug prices.

The government health care programs in Canada, the UK, and others drive a hard bargain with drug makers to get low prices. The higher prices in the US are, in effect, subsidizing the patients in Canada. The drug companies can sell to Canada at little or no profit, as long as we Yanks kindly make up the difference.

Drugmaking is a risky business. Every company has a lot of research projects going at the same time. Most of them don’t make it to market. For every Vioxx® or Prilosec®, there were 19 failures. Even on the winners, the testing and approval process eats up years of the patent rights.

In the US, some of the Pharmacy Benefit Management (PBM) companies do a better job than others in bargaining with the drug companies. In hopping from one situation to another, you have seen this.

Now, politics. Drugmakers and insurance companies have teams of lobbyists nudging Senators and Members of Congress. They also direct money into campaign funds. When the prescription drug benefit law was hammered out in Washington, the drug lobbyists declared a victory. When they’re happy, maybe you won’t be. All that leverage might be the reason Medicare is willing to pay such a high price for your drug. Or maybe not; as I said, I haven’t seen the entire picture.

In all, I wouldn’t really call it a secret conspiracy. Most of it’s quite public, and it’s legal. Some parts of the picture may look ugly, but it’s not at all criminal.

4

First of all I learned recently not all drug stores are priced the same. I recently lost insurance coverage so I pay for my own. I found taking the same prescription between 2 Osco(affiliated with Sav-On) netted me two different prices. CVS was the highest.

My last insurance I had to pay $25.00 for a generic and $35.00 for a Brand (only applicable when no generic was available). My doctor gave me Valium which of course is filled as generic diazapam(sp?). I was charged $25.00 for it. I asked the pharmacist tech what is the outright cost. He said $6.80. So I informed him not to shoot it thru my insurance and I just paid the $6.82 for it.

Shopping for presciptions is one option if you know which drugs are cheap. For instance Penicillin is cheap. At least the simple kind is. I’m sure there are new versions more expensive.

I recently have switch all my meds and stopped taking one for my asthma as it is over $110.00 a month for it. I will just use my inhaler more often. What can you do eh?

5

I found something interesting this morning. If you go to http://www.theorator.com/bills108/hr3677.html you’ll see that Representative Darlene Hooley of Oregon has introduced a resolution “To amend the Federal Food, Drug, and Cosmetic Act to require that each prescription drug sold at retail bear a label that states the full retail price of the drug.”

I’ve emailed her to see how best to petition the Congressional Representatives in my state to support the resolution. I’ve asked for her help, too, in pointing me towards finding out how drug manufacturers, pharmacies, insurers and government work together to determine who pays what - and at what percentage - to who.

Four points:

  1. While I understand that drug research costs an enormous amount of money for some drugs, I know that a great deal of drug research is done at taxpayer expense - subsidies and grants from various department agencies. But it doesn’t seem we taxpayers ever get any sort of “deal” on our investment. (And I also assume that the cost of the manufacture of generic drugs is far less as there are no R&D costs to factor into the pricing of the drug).

  2. I still don’t understand how a pharmacy (in the case I cited, CVS) or a drug company (in the case I cited, a pharmaceutical manufacturer called “Mylan®”) can charge such vastly different prices to an individual, different insurers, and the government. It still stinks, to me, and suggests that there is no level playing field and that deals are being made that rather resemble a fixed game - I’m just not certain who is in on the fix and who is benefiting from the fix - CVS or “Mylan®” in this instance.

  3. Concerning the new prescription drug law: there’s no doubt in my mind who will benefit - the drug companies. And since I’m not going to be around in 2006 (I think?) to enjoy the “full benefits” my concern is for those who will be paying taxes at the time the benefits kick in (for a truly scary glimpse into the future, go to the Congressional Budget Office home page - http://www.cbo.gov/Index.cfm - and read The Long-Term Budget Outlook just issued. The gist of it is “short of a miracle, we’re going to have to raise taxes substantially, so we better start getting the taxpayers clued in and ready so it won’t come as a shock.”

  4. I sympathize with being unable to purchase drugs that are often necessary to sustain life. My pharmacy is CVS and were I to purchase all drugs prescribed for me on a monthly basis, the cost would be just over $1,100 (just $300 shy of my Social Security Disability income). So I skimp on the brand name drugs, only take 1/4 of the insulin that is prescribed, have learned how to cut into thirds some of my non-generic heart medications, etc. I’ve applied, now, to all four companies that manufacture my non-generic drugs for assistance but I’ve been told those applications can take at least two months to process.

I’m thankful that my disability income is so high - I was paid high salaries and thus paid more into disability than the majority of people my age. And if I ever get my disability back pay which was awarded in my judgment, I’ll be fine for the rest of my life. But what about you guys in your 30’s? The age at which one receives SS is going to have to be raised considerably from what I read in the CBO report - it’s not inconceivable that those in their 30’s won’t be eligible for Social Security until they’re at least in their 70’s. And as for private retirement income, it’s beginning to seem as if the “mattress investment” scheme might be the safest bet - much safer than a 401(k) or company controlled retirement plan.

There are many people like myself who need drugs to live from day to day. Medicare does well by me, but I don’t want to think that anyone is going to die - now or in the future - because they lack the resources that SHOULD (to my way of thinking) be made available to them. I want to know how things work, I guess, so that I can judge whether or not these things work well and, if not, how to affect change.

6

It’s interesting that you should mention Prilosec… the OTP version, available in tablet form, is comprised (as I understand it) of the same ingredients as the capsule version available by prescription. 20 MG Prilosec is also now available in a generic capsule format under the name of Omeprazole, which my doctor prescribed, thinking that my insurance would cover it as a generic drug.

It seems, however, that either Medicare or my Medigap insurer does not yet recognize Omeprazole as a generic drug, so my cost for a 30 days supply was a little over $115. When I was picking up my ‘bag of drugs’ from my ‘dealer’ I asked one of the pharmacists about the matter and he came down to the cash register, reached around front, and handed me a colorfully packaged 28 day supply of Prilosec OTC. “Same thing,” he told me, “just two pills less.” And just $17.84. I asked him if he could just keep the Rx and he smiled and said “sure” and I saved $97. And I guess that’s why I’ll continue shopping at that particular CVS - they’re open 24 hours a day and all the pharmacists that work there know me - and help me save money whenever possible.

7

The reason drug prices are so high in the USA: the US government PROHIBITS hospitals and large drug store chains from banding together and negotiating lower prices! This is because:
-the drug industry invests huge sums of money in buying up congressmen and senators, and has a huge lobbying organization
-the industry prices new drugs higher to recover its development costs; these high costs are borne by USA consumers (not Canadian or European ones)
Case in point: my mother takes a popular antibiotic for a chronic condition…this stuff has been around for years! The R&D costs were amortized long ago…yet, when she changes insurance carriers, the price went from $16.00/month to OVER $36.00/month! This is gouging. sure and simple. Her solution? She bought it from Canada…forless than $10.00!

8

Any websites out there doing a legit unbiased cost comparison?

I bet anyone who did could become real popular, especially in light of some claims that some drugs are cheaper than the co-pay for some insurances.

Do insurance companies/medicare/medicaid release lists of how much they are willing to pay for various medications?

9

I have several times had drugs that cost less than the co-pay (common painkillers and antibiotics) and the POS/Pharmacy system automatically charged me just the actual cost.

10

But if that’s the case then why are drug prices radically different? Are all drug stores and hospitals charged $X for a drug and then charge $Y, $Z, $T, $U to different insurers (and individuals?). Are the pharmacies the gougers? Or are they allowed to make deals with insurers but PROHIBITED from making deals with drug companies?

You know, in one way, I do understand how an aspirin with a ‘street price’ of less than 3¢ costs me $5 in a hospital - it has to be dispensed, a nurse has to prepare it, prepare paperwork that it was received and delivered, and then put it in one of those little dosage cups and physically deliver it to my room. A lot more work involved in a hospital setting than in a retail pharmacy setting.

But I still don’t see why there is such a difference in pricing that is dependent solely, it seems, on what company (or government agency) is paying the majority cost of the same medication with the same overhead involved for the pharmacy. I guess it’s the pharmacy that’s making the killing? Charging whatever the the company being charged is willing to pay?

I still don’t understand the lack of an available ‘sticker’ price on prescriptions, either. I understand why the price of corn may be different from one supermarket to another and why the price may fluctuate from season to season, but most drugs - these days - aren’t patent elixirs with contents that may depend on rainfall. So why no price tag availability?

11

None that I’ve found - some price comparisons on Canadian pharmacy sites, but they have a vested interest, of course, in selling the medications, so the prices they post are ‘retail’ in comparison to their prices to show you how great a savings that you receive by ordering from them (and I’m guessing that the ‘retail’ price quoted isn’t from a drug company but rather garnered from retail pharmacies in the US).

My guess is that such lists probably exist but that they’re closely guarded negotiated pricing lists that are contracted and not available to individuals. i DO know that Medicaid, for example, publishes lists available on the web of the NAMES & QUANTITY of drugs that they will pay for… and then is you have that list, you find that they won’t pay for the 40 MG tablet of the generic Prilosec that your doctor has prescribed yet will pay for the 20 MG tablets. And insurance companies do offer ‘preferred’ drug lists - and if your medication isn’t on that list, they won’t pay for it. (Sometimes you have to ask for a copy of that list, sometimes it will be in your insurance coverage packet of documents that you receive upon enrollment).

12

Yep - that’s been my experience with the CVS I’ve been using for 15 months now. Monday I dropped up an Rx for amoxocillin (sp?) and went through the drive-through to pick it up that evening, handing the attendant my normal $5 co-payment. I was ready to drive away when she asked if she should just put the change in the bag, as the cost was only $4.20.

But - as my original post indicatively asks: what keeps CVS from charging my insurance company $15 along with my co-payment of $5 for that same drug? Is it simply because the medication that I mentioned in the original post isn’t as commonly used, or is there an actual retail price somewhere near the lowest price charged? Is CVS making a huge profit on those drugs so that they can afford to be benevolent in pricing common antibiotics?

I’m still ‘not getting’ the big picture here…

13

I am not happy about the cost of drugs but if you look at them like any other comodity, it will make more sense(not complete just more sense). Why does the Advil in the gift shop of the hotel cost $9.00. (for 24 pills). Because it is a convenience.

During my unemployment I have been doing some scattered work here and there and a LOT of companies are being less than forthright with their employees.

For instance one recently put out a memo to their employees saying their UNICARE plan would still be an HMO BUT have a $2,000.00 deductible FIRST. Now that is just plain lousy insurance. Did UNICARE really cause this? NO. I was helping corporate audit books…

The company saw a chance to SWITCH plans and that is almost impossible for anyone to detect as those already enrolled switch. The card indicates the plan is different but who looks. Instead of paying the $1.19 per paycheck per employee cost UNICARE would have charged to keep the same plan the company took it upon themselves to opt for a plan that saves them $10+ dollars per paycheck per employee. Of course they blame UNICARE in their memo to employees. Not true. They opted for truly lousy insurance.

So the different drug prices can reflect 100s of different plans in one system.

I’ve seen plans that won’t pay anything for Brand Drugs. Only Generic. Brand are YOUR responsiblity. Can they do this? Yes, it’s called having lousy insurance.

Another company I looked thru substitued Hospitlization Only for Major Medical. Hospitilization insurance is pretty cheap even on your own.

Also suppliers can have something to do with price differences. For instance my Ziac (generic - bisoprolol) which had two different prices at the same drug store chain (both Osco in Chicago) may have been because one Osco uses the generic for Ziac made by Genev the other uses made by Mylan. They look different in shape but work the same.

Unfortunately companies, drug companies and the like count on you to be stupid, impatient, or just give up in frustration and that is WHY they can get away with it.