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A Wonderland of Prices: What Pharmacies Pay for the Drugs They Buy

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Many of my previous posts have revealed some of the bizarre things that happen to prices in health care. I'm doing this because bizarre is great for a carnival, or for when you're rereading Alice in Wonderland, but it's hardly welcome when you're buying medications or getting billed by a hospital. I've shown, for example, that using your insurance to buy prescription drugs can often cost you more money than just paying retail. That's bizarre. And you've seen that sometimes the cost of just one particular dose of a one particular drug can skyrocket for a week or so then return to normal as though nothing had happened.

But those examples were only glimpses into the mysterious wonderland that is prescription drug pricing in this country. This week, prepare yourself for a tour down the rabbit hole and for a pricing system that would leave the Mad Hatter dizzy.

Until now, I've been giving you examples from my own research. But shortly after my last blog I found that there are others who are pursuing these same issues, but in a much bigger way. A pharmacy student named Dustin Ezell, from the University of Arkansas, emailed me a link to a site that gives the average price pharmacies pay for every preparation of every drug they purchase in the U.S. (part II of link). Here is a 138 page list of those prices.

Let's begin the journey.

As you go through this list, you probably won't be surprised to find there's a rather tremendous range in the price pharmacies pay for their drugs. Some drugs cost several hundred dollars a pill while others only about a penny a pill. You also know to expect that the brand named drugs are generally quite a bit more expensive than most generic drugs.

And there's nothing strange in discovering that it isn't just Costco and Walmart that get such good deals on many of the cheapest medications. For example, the average price all pharmacies pay for lisinopiril or simvastatin is $1-$4 for 100 pills. This means being charged a $10 monthly (30 pill) copay for these medications is hardly a good deal.

A little stranger is when we look at the price of different drugs that treat the same conditions. For example, if you're getting Abilify for depression, even the pharmacy has to shell out over $900 for a one month supply of some doses. Maybe Abilify is better for some people, but you might be cheered up to find out that, if you do as well on fluoxetine (generic Prozac) it costs as little as one dollar a month. I'm very serious when I say that spending $900 a month for a single medication might significantly add to depression.

But so far that's just strange, and I promised you bizarre! So how about this: take a 134 mg dose of fenofibrate, remove just 4 mg (now it's 130 mg) and the price quadruples. Can you even imagine selling a slightly smaller version of exactly the same pill for four times as much? Why would anyone do that? Because, as you would guess, there's no more difference between 134 mg and 130 mg than between Tweedledee and Tweedledum (so it's certainly not worth more money).

Going a little further down the rabbit hole we find 2 ml of ciprofloxacin ear drops cost pharmacies over $47, while 5 ml of the eye drops are only $3.79. What do you suppose would happen if the Queen of Hearts put eye drops in her ear? Actually, they'd probably work just fine. You need to be careful preparing a drug to go in someone's eyes (they're rather sensitive, you know), but if something works in the eye it will probably work in the ear. So, why do ciprofloxacin ear drops cost so much more than the eye drops?

Now, when you make a pill or capsule (which you swallow), or especially something you inject, you need to be extra careful that they're safe. That certainly doesn't explain why 20 mg fluoxetine pills cost 16 times as much as the capsules for the same medication at the same dose.

But what's so special about suppositories? Why do many of the prescription suppositories cost as much as 100 times more than the price of a pill for exactly the same medication (e.g. promethazine and prochlorperazine). Perhaps because all these prices come from a place where the Sun never shines? (Like a rabbit hole?)

But if there's one example that would make Alice shout that the drug makers are all just a bunch of playing cards, it has to be omeprazole. Omeprazole is an antacid. It's over the counter if you want a pill, but for a capsule you need a prescription. OK, pharmacies get the capsules for about 7 cents each. But, add bicarb to the capsule and it costs almost 150 times that. What is this wondrous "bicarb,'' which is worth almost $10 in each little capsule? Well, actually it's baking soda. That's right, the big yellow box with an arm and hammer that costs less than $2 a pound at your local supermarket. Or a tiny bit in a capsule for $10.

Of course these are just a few of the examples. But before we close the book on this very strange tale I'd like to answer the people who say this is just the drug market responding to scarcity or scale or supply and demand. Yes, there may be different economies or different scales. But, $10 for a sprinkle of baking soda?! Really?! And more importantly, there is no market where you don't know the prices and can't comparison shop. Doctors don't know, pharmacists barely know, and patients have almost no choice of what they're allowed to buy. Do you really think any of these bizarre prices would survive the light of day if people knew? Well, now you do know. Let's find out.