The New York Public Interest Research Group just released A Bitter Pill, their latest annual review of retail pharmacy prices throughout New York state. The data shed light on our health care system's unfortunate “soak the poor” model, which provides 4X profits for pharmacies from consumers lacking insurance coverage.
As I show below, a retail pharmacy’s usual and customary list prices to the uninsured far exceed the reimbursement levels received from third-party payers. When President Obama was in Philly yesterday bashing insurance companies, he forgot to mention that the uninsured cash-pay customer must pay list price for a prescription while those of us with insurance pay the least.
The extreme vitriol aimed at PBMs by independent pharmacy owners makes sense once you see my pharmacy profit math example below. It’s also a downside of health care reform for pharmacies—fewer uninsured consumers would depress pharmacy margins.
Someday, Walmart (NYSE:WMT) will finally decide to launch a brand drug retail pharmacy price war over the uninsured consumer, especially if the healthcare reform effort fails. The model below shows that it’s a realistic possibility.
THE PRICE STILL ISN’T RIGHT
The Prescription Drug Prices in New York State website allows consumers to compare the retail price of the 150 most frequently prescribed drugs at different pharmacies throughout New York. Price is measured as the "usual and customary" (U&C) price reported to Medicaid by a pharmacy. In theory, this site could help uninsured or underinsured consumers shop around for lower prices.
Alas, the NYPIRG once again found the data on the New York web site to be incomplete, outdated, or just plain wrong. How about $39,804 for an Ambien CR 12.5 MG prescription?
I wrote about this report last April in The Problem with Pharmacy Prices. The situation seems just as bad as ever.
Adding insult to injury, retail pharmacies don’t take the price reporting law very seriously. According to A Bitter Pill, no pharmacies reported prices for all 65 brand name drugs examined in the study. The average pharmacy reported costs for only 39 of them. Among a sample of 246 pharmacies, 82% (210 out of 246) failed to display the drug price website address, as required by law.
PHARMACY PROFITS: 4X FROM THE UNINSURED
According to the NY PIRG report, Plavix 75MG TAB is the most prescribed brand-name drug in New York City. The average retail price for Plavix 75MG at a New York City pharmacy was $189.29, presumably for a 30-day supply.
Below, I compare a pharmacy’s average profit per prescription for Plavix from an uninsured, cash-pay consumer to average profit under the New York State Medicaid program. As you can see, gross profit dollars are 4 times as large from the cash-pay consumer ($54.50 vs. $13.44).
See what I mean? (Click the chart to enlarge it.)
The pooled negotiating power and knowledge of a third-party payer (private or public) limits a retail pharmacy’s ability to earn excessive mark-ups on expensive products. Bummer.
This illustration is consistent with the figure shown in my much-loved post Why do pharmacy owners care about PBM transparency?. Note that those margin data include both brand and generic prescriptions, whereas the example above focuses on brand only.
Unfortunately, most uninsured consumers lack the knowledge and understanding about pharmacy economics to negotiate or ask for lower prices. I suspect most consumers also feel uncomfortable about asking a pharmacist for a lower price on a drug because they do not even realize how much money the pharmacy is making.
Cash-pay prescriptions are only about 10% of retail scripts, down from 63% just 20 years ago. I hope consumers who fall into this unlucky category will shop around and not just accept the prices posted at their local community pharmacy.
P.S. The photo above comes from an oddball website called Uninsured Wristband. Not an endorsement, just an acknowledgment.