Not surprisingly, prices vary greatly among pharmacies for many medications. The retail cash price variation could be as much as 45 times more from one pharmacy to the next, even within the same zip code, which is both outrageous and incomprehensible.
Worse yet, pharmacists may not be allowed to tell you if a drug is cheaper when you don’t use your insurance. That’s because pharmacists may be bound by “gag clauses” — imposed upon them by corporations known as Pharmacy Benefit Managers that set prices for drugs. The only workaround is for a consumer to ask the pharmacist specifically if there is a lower price.
You deserve better–especially when it comes to something as expensive and important as prescription medications.
Sometimes you could save money by not using your insurance, and instead looking for coupons online, shopping around, and paying cash. To find these savings, Consumer Reports has developed some specific questions that you can ask your local pharmacist. They’ve created an easy, downloadable card that you can print out and keep in your wallet with the three key questions to ask your pharmacist to help get you the lowest prices on drugs possible.
Asking the pharmacists directly doesn’t guarantee a cheaper price, but keeping pharmacists under gag clauses should not work. We need to demand transparency, accountability, and fair drug prices for everyone!
To learn more about pharmaceutical pricing, here is some information provided by GoodRx, a firm based in Santa Monica, Calif., that offers deep discounts on some medications. The company sends discount cards to physicians’ offices, but they can be obtained directly from the company’s website, (www.GoodRx.com) and an app. It advertises that it is about transparency, and if you’ve ever tried the company’s site or app, the service it offers is remarkable and simple to use. You plug in the medication you’re interested in, include the dose and quantity you’d like, and add your ZIP code, then a list of pharmacies with the GoodRx discounted prices is generated for easy comparison shopping. It tells you how far each pharmacy is from your current location and provides the discount codes; the phone, fax, and hours of operation for the pharmacy; and a link to a map with driving directions. And if driving to multiple pharmacies to get the best price on multiple medications seems too difficult, in what is just short of miraculous technology, the app allows people to enter in all their medications and shows the comparative prices for the bundle. In short, GoodRx is to medication pricing what Trivago is to hotel rates. The technology is impressive, and it’s worth noting that the founders of GoodRx previously worked in top positions at Facebook.
GoodRx offers “up to 90% discount” on the cash price of medications through its app, website, or discount card – all of which can be gotten for free. This triggers two questions: 1) Who pays for this difference in the medication cost, and 2) How does the company, with 95 employees, make any money?
Medications are made by a pharmaceutical company or, for generics, there may be many manufacturers. The medications are sent to a pharmaceutical distributor, such as McKesson, and it, in turn, sells and delivers the products to pharmacy chains, as well as to smaller, independent pharmacies. The pharmacies pay an acquisition cost for medications then set a price for these medications that are considerably – or even astronomically – higher than the acquisition price. This is the cash retail price, or in medicine, what is called the Usual & Customary (U&C) cost of the medication. The price may be neither usual, customary, nor reasonable, and it’s not necessarily the price the pharmacy expects to recoup on sales.
Every major insurance company contracts with a pharmacy benefits manager (PBM), for example, Caremark, Express Scripts, and Optum, to negotiate the cost of medications with each major pharmacy chain. Physicians are familiar with PBMs, who intercede by requiring preauthorization procedures for certain medications or by instituting stepwise requirements before they will allow pharmacy benefits toward the purchase of medications. When the PBMs negotiate with the pharmacies, they will negotiate for a discount off the pharmacy’s U&C charge for medication, perhaps a discount as much as 75% or 80%. The discount is not negotiated on a per-medication basis but as an across-the-board average, so for one medication, the insurance price may be 2% discount from the U&C cost, and on another medicine it may be 95%. There is a dramatic variation, more than you’d ever expect.
GoodRx gathers prices from many places, including partnerships with a number of PBMs. In addition to providing discounted prices for insured customers, the PBMs also include in their negotiations a slightly less-discounted price for cash-paying patients who present with a GoodRx card or coupon. You might be surprised to learn that discounted prices can often be less than the typical patient copay. For patients with high deductibles or when the copay is higher than the cost of the medication, it will often be less expensive for patients to use a GoodRx discount instead of their insurance. In cases of non-covered medications, GoodRx could be especially beneficial. And whether patients use either their insurance or a GoodRx discount, part of the cost of the prescription includes an administrative fee that goes to the PBM. When GoodRx cards are used, the PBM pays GoodRx part of that fee.
One example of an enormous cost discrepancy was provided a couple years age by Provigil (modafinil), a drug that promotes daytime wakefulness. Thirty pills cost just under $35 at Costco, while all other pharmacies were charging close to $1,000. Costco seems to base their prices on their acquisition costs and then raises them a certain percent. It’s one way to provide a fair price, but that doesn’t necessarily mean they always have the lowest price. They are one of the major pharmacies that list their drug prices on their website.
So what was in it for the PBMs? Why would Express Scripts be motivated to negotiate a discount in price for cash-paying customers outside of the insurance networks, and how did partnering with GoodRx benefit them? The answer, in part, lies with the fact that the GoodRx website and app allow patients to comparison shop and go to pharmacies with lower prices. If patients use their insurance, the insurance company is paying less; if they don’t use their insurance because they learned the cash cost is less, then the cost burden has shifted from the insurance company entirely to the patient.
So what’s in it for the pharmacies? Why would they be willing to accept less money from a patient bearing a discount card? Pharmacies want to honor their contracts with PBMs, and the U&C prices are set high to enable negotiation so that they still make some profit. Most people couldn’t afford to pay the high U&C, but they can’t lower them for individual cash-pay customers because that would violate their agreements with PBMs, Medicare and Medicaid. With the GoodRx price, they still make a profit, and people in drugstores buy other items as well. Pharmacies are usually happy to work in this manner, for they get more patients; moreover, in certain areas, a prescription that costs over $15 may never be picked up. Many pharmacies are frustrated; they want a fair price where they can make a profit, and every year, 200 million prescription orders are left at pharmacies, and the medicines are never picked up. Non-adherence to medication comes at an enormous cost in this country – roughly $300 billion in medical expenses. Making medications more affordable is one way to circumvent this problem.
Although GoodRx has only 95 employees, how do they generate sufficient income? A portion of the PBM’s administration fees go to GoodRx, some comes from advertising revenue, and finally, GoodRx provides technology for the PBMs and charges for this service.
So here are some suggestions to acquire better drug prices before risking bankruptcy!