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A warning about the price of generic drugs
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When I'm not hanging out on Marketplace Money, I'm over at the L.A. Times writing a column on consumer affairs. My most recent piece looked at the pricing of generic drugs. If you're like me, you probably figure that a generic is a generic is a generic. And the same generic from two different manufacturers will be priced pretty much the same because, well, they're the same drug. Apparently not.
In my column, I tell the story of a Southern California woman who went to a CVS story to fill a prescription for a generic antibiotic. She paid $4 and 30 cents. When she went in a couple of months later for a refill, though, CVS said she'd have to pay $165 for the same generic drug. But was it the same? Turns out not. The first time around, the drug was from one manufacturer. The second time around, it was from another. And the second manufacturer was charging a price 30 times higher than the first.
This is how I learned about what the drug industry calls the average wholesale price, or AWP. Jeffrey McCombs, a professor of pharmaceutical economics and policy at the University of Southern California, explained it to me like this:
"The AWP price is a made-up price. It's probably not real at all. I'm not sure that when it comes to the actual price that's paid by distributors or pharmacy chains, etc. are that different," says McCombs. "It's just like your hospital bill. There's no resemblance to reality whatsoever."
What's the takeaway here? It's this: Don't assume that just because you're buying a generic drug you're paying the lowest possible price. And if you don't like what you're being charged, don't be shy about taking your business elsewhere. A different drugstore might deal with a different manufacturer, and that can make a big difference for your pocketbook.
Mr. Lazarus, I heard your comments on the radio Saturday about a woman's experience with generic drug pricing discrepancies. I then read the newspaper article you wrote about the issue. I think you are a very smart guy and do a great job on the radio, but in this instance it seems there are dynamics of the generic drug market that you are missing. I only felt compelled to comment because your comments were accompanied by advice to consumers. I all for your best intentions of looking out for the consumer, but as a pharmacist, I want to make sure that patients are armed with accurate information before they shop pharmacies. I completely believe that when you went to people in the pharmacy business, they were tight-lipped about pricing practices. I can understand that you had to make some intuitive assumptions about how the generic market works. Unfortunately, like most healthcare, there is not much intuitive about drug pricing at pharmacies. I am almost positive there are unique issues at play in the woman's situation that don't apply to the vast majority of generic drug transactions. I would be happy to discuss these and in what situations price shopping would be appropriate.
The cheapest generics are often made in India. It wasn't all that long ago that our government told us we couldn't get prescription drugs from Canada due to uncertainty about the quality, but now my prescription insurer Caremark forces me to use CVS for long-term prescriptions and most of the CVS drugs are from India (as are Caremark's mail order drugs).Since I had a bad reaction to one generic from India, I try to insist on US or Canadian manufacturers, but Caremark gives me such a run-around that I am no longer taking medications that I have been prescribed.
