Sharyl: The Skenderian family has been in the pharmacy business for about eighty years. Today, Joe and his brothers operate Skenderian Apothecary in Cambridge, Massachusetts.
Joe Skenderian: We have the same pharmacists that have been working here, some of us for 20 or 30 years and, of course, some of the patients go back to my grandfather. And so we see multiple generations and we really do get to know them.
Sharyl: Even with all that history, he has a hard time answering one of the most perplexing questions in modern medicine: how are prescription drugs priced?
Joe Skenderian: Pricing in the pharmacy industry, it would take more time than we would ever have to cover in an afternoon and it really does take a book to go over how convoluted it is.
Sharyl: We wondered if the pharmaceutical industry could explain it simply, so we asked their trade group, PhRMA, to explain how medicine is priced. They declined to be interviewed but sent us this video.
Drug Industry Video: First the drug company sets the price. But they don’t sell directly to patients. They sell to drug wholesalers who then resell to pharmacies where you buy them, usually paying a small co-pay instead of the actual price of the drug.
Sharyl: Where it really gets complicated is when it comes to the mysterious middlemen between the drug makers and the pharmacies; giant companies called Pharmacy Benefit Managers. They’re hired by groups offering insurance, whether they’re company employers, unions or the government.
Drug Industry Video: That’s why they hire pharmacy benefit managers or PBMS which reduce costs by negotiating rebates and other discounts from drug companies.
Sharyl: That’s where things become very murky. So again, we sought some clarity.
Sharyl Attkisson: What determines the pricing of these drugs?
Barbara Anthony: It depends on a number of things. Number one, you have the price that the manufacturer sells to wholesalers. Then wholesalers sell to other middlemen…and other middlemen. Eventually, it goes down to the drug store. Everybody along that chain puts a markup on it.
Sharyl: Barbara Anthony is a health care cost expert at Pioneer Institute public policy think tank. She and her Boston-based team conducted a survey to figure out how to get the best prescription drug prices. It’s impossible to answer for every insurance plan, but with more people paying out of pocket for their medicine, they started by asking about cash prices.
Barbara Anthony: We chose 44 pharmacies all around the state of Massachusetts. We called. We pretended to be consumers. We were self-pay. We wanted to make that clear. We were paying cash on the barrel head here and we asked for the price of 5 generic drugs and 3 brand name drugs from each of these pharmacies. And we obtained the price as best we could.
Sharyl: When they were able to get the information over the phone, they ended up with some important and surprising results. There were wide, unpredictable variations in drug prices that, to the average consumer, have no rhyme or reason.
Barbara: Anthony: We found some staggering differences in price.
Sharyl: Amoxicillin, it’s a popular antibiotic, what were the price ranges for that?
Barbara: Anthony: We were shocked at the range. This is a generic drug now not talking about brand name. It’s a generic antibiotic.
Sharyl: Amoxicillin ranged from $4.00 to more than $20.
Attkisson: There’s a very popular generic to control cholesterol; Atorvastatin. According to your study, you found prices as low as $4 at one pharmacy but $199 at another pharmacy, an outlier?
Barbara Anthony: Independent stores were selling this drug for 10-15 dollars. All of the chains we looked at were higher. They were 70, 80, 90 over $100. This is the same drug. It’s a generic drug. It is very cheap.
Sharyl: Patanol is a popular eye drop medication. There was a wide range in price on that too?
Barbara Anthony: Patanol range was just all over the place. It’s a very popular drug for allergies, and things of that nature. It relieves eye discomfort. We found that the price ranged from $65 dollars to $345.
Sharyl: Other findings: prices varied the most among generics -- not brand name drugs. Drugs often cost more at stores in pricey neighborhoods due to overhead. And big chains didn’t always offer the best deal.
Barbara Anthony: The idea that chains are always cheaper than independents just isn’t true. Plenty of independents sell drugs below the price that chain pharmacies sell them and so it really does pay for consumers to pick up the telephone and call the independents. And what we found is that the independents do give you the price on the phone.
Sharyl: And just because one drug is cheaper at a store doesn’t mean all of its drugs cost less. In Pioneer Institute’s survey, a Walgreens had one of the lowest prices for Amoxicillin but another Walgreens had the highest price for Patanol eye drops. Anthony says online coupons and discount plans are critical to shaving off cost; But she advises avoiding ones that ask for fees or private information.
Barbara Anthony: You can save 40, 50, 60 dollars sometimes by using these coupons. My advice though is be careful about which ones you choose. If they want a lot of personal information from you, if they want money to join, red flag. Stay away from that.
Sharyl: As it turns out—the big chains offer lots of discount plans but don’t make it easy to find out about them.
Barbara Anthony: Large chains can do a much better job of telling consumers that they accept discount coupons and that they have discount programs. There are no signs in these stores that let you know this and I don’t know how consumer are supposed to know this be aware of the fact they can actually get discounts on their drugs.
Sharyl: Here’s what the Pioneer Institute survey found: CVS has a discount program for customers who self-pay, but it wasn’t well-advertised on its website. Customers have to ask for it in person and have the cashier ring up the drug to find out the price. Target phased out its generics-for-$4.00 discount when CVS acquired their drug store operations in 2015. Now Target is under the CVS discount program. Walgreens offers some discounts to members who pay $20 a year for an individual and $35 for a family. Their website gives prices for specific drugs. Walmart offers certain generics listed on their website for $4 for 30-day supply and $10 for 3-month supply. And Rite Aid has a free “Rx Savings Program” that offers discounts for certain generics listed on their website. One more tip you may not have thought of: You might be able to haggle over price at independent pharmacies.
Barbara Anthony: We found that independent stores offered to match price, they were willing to negotiate actually so as not to lose business.
Joe Skenderian: We do our best to say if you come in, if something costs $15 and I tell you it costs $17, well, tell me you’re paying $15. I’d rather get paid $2 less and get the business and have you come in.