Generic Drug Prices—All Over the Map

Did you know that the price you pay for a generic drug can vary by as much as 447 percent (or $749) depending on where you shop? When Consumer Reports called 200 pharmacies around the country to get prices for five blockbuster drugs that had recently gone off patent their investigators found that a month’s supply of generic Lexapro (the antidepressant escitalopram) cost just $7 at Costco yet $119 at RiteAid. Generic Lipitor (the cholesterol-lowering atorvastatin), was $15 at the online and $144 at Target.

Naomi Freundlich has written an outstanding post about the wild variations in pricing on There, where she reveals that even a breast cancer drug can fetch $450 at one store (CVS) and $14 at a “local, independent drug store.”

Freundlich concludes that such disparities are not a sign of “free market competition.”“Without price transparency there is no free market —only bargains for those with the means to research prices or those lucky enough to use a nearby pharmacy that offers lower prices on generic drugs. For the millions of other Americans—many uninsured or with large deductibles—who have never considered that prices on their generic medications could vary so dramatically, the so-called free market is a sham.”

I would add that just as the government regulates prices for other necessities –namely gas and electricity—we should join the rest of the developed world, and regulate drug prices


Haggling for Health Care


Below, a guest post by Naomi Freundlich. Long-time readers will remember Naomi as the person who helped me write HealthBeat before we both left The Century Foundation in 2011. She now has her own excellent blog,  Reforming Health

In this piece, she describes what it is like to live with a high-deductible health plan and find yourself bargaining with doctors when trying to get care.

Let me add that beginning in January of 2014, comprehensive, affordable insurance will be available in the Exchanges– along with subsidies. This should mean that no one will have to sign up for a plan with a $4,000 deductible ($8,000 out of network) plus co-pays.

(Though I realize that some upper-middle-class families who earn just a little to much to qualify for a subsidy may have a hard time finding affordable insurance in the Exchanges. But so far, the pricing in states like California and Colorado is encouraging. I’ll write more about this as we find out more about how much insurance will cost in other state Exchanges) 

Nevertheless, next year some health care providers may try to charge patients more than the insurer will pay. This is called “balance billing.” In that case, patients will need to shop for physicians who accept the insurers’ reimbursement as payment in full.

My guess is that most heatlh care providers will discover that there just are not enough very wealthy patients out there (even in New York City), able and willing to pay more than either Medicare or an insurer will pay.  

by Naomi Freundlich

I’m not a big fan of bargaining and my half-hearted attempts to get a better price for a used car, garage sale find or contractor’s service have been mostly unsuccessful. There’s always that nagging feeling that the seller is laughing with delight once I’m gone, thinking, “I really pulled one over on that rube!”

And so it has come as somewhat of a shock to me that medical care has become the new garage sale, as far as haggling goes.

First we found out that hospitals have “chargemasters” that hold the list prices for everything from knee replacements to aspirin tablets, and that these prices differ wildly between hospitals; even those in the same city. We also know that insurers, both private and Medicaid and Medicare, never pay these list prices but instead bargain with hospitals to pay substantially discounted prices. The only ones not getting in on the discounts are the uninsured or under-insured people who get hit with the full list price of hospital care.

The same thing happens with doctor bills. If you’ve ever compared what your doctor bills your insurer with what your insurer actually agrees to pay, it’s clear that there is a lot of bargaining going on. If the list price of an office visit is $125, the insurer pays $60; for a $200 lab test, the insurer reimburses $70, and so on.

A recent New York Times article,  “The 2.7 Trillion Medical Bill,”  focuses on the cost of colonoscopy to help explain how health care spending can be so much higher in the U.S. than other developed countries. In the article, patient bills for their colonoscopies ranged from a hefty $6, 385 to a whopping $19,438. Meanwhile, their insurers all negotiated the price down to about $3,500. As Elizabeth Rosenthal of the Times notes, ” this is still far more than the “few hundred dollars” that a routine colonoscopy costs in Austria or Italy.

Why do we have such price inflation here in the U.S.? Our for-profit health care industry has a lot to do with it, as does the maddeningly unregulated nature of the business.  Rosenthal writes: “A major factor behind the high costs is that the United States, unique among industrialized nations, does not generally regulate or intervene in medical pricing, aside from setting payment rates for Medicare and Medicaid, the government programs for older people and the poor.”

David Blumenthal, president of the Commonwealth Fund tells the Times; “In the U.S., we like to consider health care a free market.” He adds, “But it is a very weird market, riddled with market failures.”

Now back to haggling. In the last year, my family—like many others in the nation—has been covered by a high-deductible insurance plan. Before our plan kicks in to pay for doctor bills, prescription drugs or diagnostic tests, we must meet a $4,000 in-network deductible. After that, we still have co-payments and also face an out-of-network deductible of $8,000. Now responsible for so much out-of-pocket health spending, I’m face to face with Blumenthal’s “weird market.” It’s a market where no one tells you the price of office visits beforehand, doctors have no idea how much an MRI they’ve just ordered is going to cost, and you end up paying dearly for not being an aggressive shopper.
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