Thursday, October 06, 2005

ARE YOU PAYING TOO MUCH FOR YOUR DRUGS?

ARE YOU PAYING TOO MUCH FOR YOUR DRUGS?

From the land of the well-intended forward comes this basically true one from my cousin Joe LoPue. I'm editing it down for your convenience:

Let's hear it for Costco! (This is just mind-boggling!) Make sure you read all the way past the list of the drugs. The woman that signed below is a Budget Analyst out of federal Washington, DC offices. [Editor's note: According to this conservative website, the woman exists, but has nothing to do with the report.]

Did you ever wonder how much it costs a drug company for the active ingredient in prescription medications? Some people think it must cost a lot, since many drugs sell for more than $2.00 per tablet. We did a search of offshore chemical synthesizers that supply the active ingredients found in drugs approved by the FDA. As we have revealed in past issues of Life Extension [Editor's Note: Think they have a viewpoint? Well, do ya, punk?], a significant percentage of drugs sold in the United States contain active ingredients made in other countries.

Celebrex: 100 mg
Consumer price (100 tablets): $130.27
Cost of general active ingredients: $0.60
Percent markup: 21,712%

Claritin: 10 mg
Consumer Price (100 tablets): $215.17
Cost of general active ingredients: $0.71
Percent markup: 30,306%

Keflex: 250 mg
Consumer Price (100 tablets): $157.39
Cost of general active ingredients: $1.88
Percent markup: 8,372%

Lipitor: 20 mg
Consumer Price (100 tablets): $272.37
Cost of general active ingredients: $5.80
Percent markup: 4,696%

Norvasc: 10 mg
Consumer price (100 tablets): $188.29
Cost of general active ingredients: $0.14
Percent markup: 134,493%

Paxil: 20 mg
Consumer price (100 tablets): $220.27
Cost of general active ingredients: $7.60
Percent markup: 2,898%

Prevacid: 30 mg
Consumer price (100 tablets): $44.77
Cost of general active ingredients: $1.01
Percent markup: 34,136%

Prilosec: 20 mg
Consumer price (100 tablets): $360.97
Cost of general active ingredients $0.52
Percent markup: 69,417%

Prozac: 20 mg
Consumer price (100 tablets) : $247.47
Cost of general active ingredients: $0.11
Percent markup: 224,973%

Tenormin: 50 mg
Consumer price (100 tablets): $104.47
Cost of general active ingredients: $0.13
Percent markup: 80,362%

Vasotec: 10 mg
Consumer price (100 tablets): $102.37
Cost of general active ingredients: $0.20
Percent markup: 51,185%

Xanax: 1 mg
Consumer price (100 tablets) : $136.79
Cost of general active ingredients: $0.024
Percent markup: 569,958%

Zestril: 20 mg
Consumer price (100 tablets) $89.89
Cost of general active ingredients $3.20
Percent markup: 2,809

Zithromax: 600 mg
Consumer price (100 tablets): $1,482.19
Cost of general active ingredients: $18.78
Percent markup: 7,892%

Zocor: 40 mg
Consumer price (100 tablets): $350.27
Cost of general active ingredients: $8.63
Percent markup: 4,059%

Zoloft: 50 mg
Consumer price: $206.87
Cost of general active ingredients: $1.75
Percent markup: 11,821%

The "writer" says that "everyone should know about this," and, of course, " please read the following and pass it on." Bitterly, the email adds, "This helps to solve the mystery as to why they can afford to put a Walgreen's on every corner."

The email also refers to Steve Wilson, an investigative reporter for Channel 7 News in Detroit, who did a story on generic drug price "gouging" by pharmacies; some of these generic drugs were marked up as much as 3,000% or more. The email complains that drug companies are often (rightfully) blamed for the high cost of drugs, but points to pharmacies. The example: "If you had to buy a prescription drug, and bought the name brand, you might pay $100 for 100 pills. The pharmacist might tell you that if you get the generic equivalent, they would only cost $80, making you think you are "saving" $20. What the pharmacist is not telling you is that those 100 generic pills may have only cost him $10!

At the end of the report, one of the anchors asked Mr. Wilson whether or not there were any pharmacies that did not adhere to this practice, and he said that Costco consistently charged little over their cost for the generic drugs.

To further amplify the original emailer's complaint, Compazine, which helps prevent nausea in chemo patients, was comparison-shopped. The generic equivalent cost $54.99 for 60 pills at CVS. At Costco, 100 pills were $19.89. The poster goes on to point out that, although Costco is a "membership" type store, you do NOT have to be a member to buy prescriptions there as it is a federally regulated substance. You just tell them at the door that you wish to use the pharmacy, and they will let you in.

I am asking each of you to please help me by copying this letter, and passing it into your own e-mail, and send it to everyone you know with an e-mail address.

Sharon L. Davis
Budget Analyst
U.S. Department of Commerce
Room 6839
Office Ph: 202-482-4458
Office Fax: 202-482-5480
E-mail Address: sdavis@doc.gov

Additional information:

Markups on Generic Prescription Drugs (WXYZ-TV)

Steve Wilson's report: Prescription Drugs (WXYZ-TV)

So let's think about this. The person complaining -- who probably votes Republican, I'll bet -- is complaining about the free market cost of drugs. Drugs, which have monopolies (patents, they're called) are pretty much not competitively priced, and the general marketing rule of thumb is -- charge what you can! This is not new, nor even evil, and, if you voted for the current administration, you shouldn't even complain about it. (See the post I reference above from the right-wing guy.)

These same people drive SUVs and complain about the price of gasoline.

As a liberal who also believes in the free market, I will point out that we can't have it both ways. If we're going to have a free market economy, then we can't inhibit free trade. But -- and this is what I believe -- since the ultimate result of a free market economy is monopoly (remember that from Econ 101?), then there's nothing wrong with tinkering with the economy, especially since there's no reason why individuals should suffer needlessly.

Whether or not Costco is your best choice for buying drugs, I can't say. I looked up my thyroid drug at the Costco site, and it's apparently not available. Right now I pay something like $15 for a three-month supply, but I'm also paying $366 a month for my health insurance, which covers my prescriptions.

I will say this: In a truly free market, where there are enough competitors, there will be downward price movement. However, for some pretty good reasons, we permit drug companies to have patents on the drugs they develop. The logic is that the enormous profits they make in the first years the drug is available only through the manufacturer will pay back the immense costs involved in developing the drug. (Not to mention the cost of lawsuits when the weight-loss drug being marketed turns out to kill a significant percentage of people who use it.)

The alternative is to make important substances, such as drugs, or petroleum, or electric power, quasi-governmental or totally governmental organizations, and, for some reason, we don't really want that, either. Although I would submit that one good practice might be to prevent ginormous (wow, I never thought I'd use that word) corporations in the same business from merging without requiring some equally ginormous public benefit. For instance: Sure, Exxon and Mobil can merge, but the merged company cannot lay off employees and must sell gasoline at the pump for no more than x% markup.

Drugs, gasoline, electricity, and other items like this are items not easily done away with. In Economics 101, this was called "price inelasticity." If suddenly we needed to pay for oxygen, we'd pay whatever we had, because you just can't live without oxygen.

Therefore, in my humble opinion, anything that is relatively price inelastic is something that should not be thrown willy-nilly into the free market. Free market bullies will hoard the item and then hurt people while gorging themselves on the profits.

That said, if you're out there in the real world, buying milk and bread and cars and gas and Claritin and cigarettes, then remember to shop accordingly.

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