Prescription drug costs and health care coverage (or lack thereof) have been high profile issues in the U.S. for several years now. As the November elections draw closer, it is almost impossible to go a day without hearing a sound byte on these topics. I'm lucky enough to have a comprehensive health plan through my employer. While this doesn't cost me much each month, I know it costs my employer an astronomical amount. I've often wondered what factors have pushed the cost of obtaining any health care related service so high. Perhaps I will research that in the future, but for now I'm reporting on another interesting phenomenon I took advantage of today: Paying the cash price for a prescription rather than using my insurance coverage saved me 66%!Wal Mart was the first company I saw offering a number of generic prescription drugs for $4 for a 30 day supply, or $10 for a 90 day supply. I thought that was pretty cool, but figured it wouldn't help me out because my health plan charges either the cost of the drug or a $15 copay for a 30 day supply of generics, whichever is cheaper. I avoid shopping at Wal Mart (it's an unsettling experience to be mixed in with the other shoppers) and there isn't a store nearby, so I had no reason to look into the program. Then I noticed stores like Target and Fred Meyer offering similar prices on over 300 generic drugs. Since these stores are somewhat close to my house, I decided to check and see if anything I buy was on the list. Sure enough, I found one.
I was a little suspicious at first, thinking maybe the $4 / $10 deal was after insurance picked up the rest of the bill, but it really is just the price. So I had my prescription transfered from the insurance company's own pharmacy (only place my insurance works) to the local Fred Meyer. I had been paying $30 for a 90 day supply of medication through the insurance company (they waive one $15 copay if you order a 90 day supply by mail). Now I can get the same thing for only $10 from Fred Meyer. While this requires that I go to the store to pick it up, I no longer need to remember to order a refill online a week in advance so it can get to me in the mail before it's too late, and I can pick up other things while I am there.
Here's the part that is most interesting to me: The medications mailed by the insurance company state both the amount I paid, as well as the full cost of the drug. A 90 day supply of this particular generic drug costs my insurance company $66. "Wow, that's a big difference!" I thought after discovering I really could just buy the stuff on my own for $10. How can these companies buy medications for less than 1/6th of what my insurance company gets them for, and then charge me less than a copay on a good insurance plan while still making a profit? Are these cheap generic programs a money loser for the stores? Is it some sort of public service they are providing? Do they hope you come in for other prescriptions that they can actually make money on? I asked the pharmacist, and she said that Kroger, Fred Meyer's parent company, has so many outlets across the U.S. they were able to contract directly with the manufactures of the 300 covered generic drugs, leading to extremely low prices. I'm impressed, saving $80 a year is nice for me, but imagine the difference that will make for low income families with kids who probably have to fill a lot more prescriptions than I do? Especially if they don't have medical coverage. They may have ended up paying the full $60+. It's excellent to see one part of the health care arena where costs have actually dropped recently!
Now the big question: Why can't my insurance company get similar prices on these drugs? True, Kroger, Wal Mart, and Target are nationwide, and probably have a much higher market share (proxy for market power) than my health insurance company. But, my insurance company is a major player in the Pacific Northwest, and covers enough people that I imagine they deal in substantial volumes of these common generic medications. Do they simply not care if their patients end up paying more, or not mind if their patients are siphoned off by commercial pharmacies to get the cheap drugs? Maybe they don't have the right people doing the negotiations, or maybe they are 6 months behind the other guys in securing contracts?
I'm really not sure what the explanation is. It just strikes me as very odd to know that I have good insurance coverage, something many people don't have and desperately need, but when it comes down to it, I can save myself a significant amount by bypassing my coverage all together and paying cash. Sure is a lot easier for me than trying to get claims paid properly, and deductibles satisfied!
I am hoping that this is a sign of things to come in the health care sphere. Eventually we may reach a point where it's reasonable for a person to cover the basics for themselves, and only insure against catastrophic health events. We certainly are not going to get there anytime soon when it costs upwards of $175 to see a doctor for 10 minutes! But, $4 and $10 generic prescriptions may be a glimmer of hope.
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2 comments:
From your description of your insurance company, and what I know about you, I'm going to assume you insurance company is basically an HMO, which is a very small player in the prescription drug player, and thus does not have the puchasing power of a Kroger or Costco, like you say. But the majority of insurance companies are Preferred Provider Organizations (PPOs) which have a much broader network of providers and pharmacies for their customers (basically everybody). Thus, the insurance companies do not control the actual purchasing of drugs for or by their members, and have to be as accomidating as possible when it comes to contracting discounts with pharmacies. PPOs do as much as they can to encourage members to use cheaper providers and pharmacies, but the price of drugs more depends on the pharmacy and the contract discount rate contracted between the pharmacy and insurance company. This is usually just the average wholesale price of the drug, set by the drug maker, plus a dispensing fee for the pharmacy.
True, my insurance company is essentially an HMO, but it isn't a PPO like many others. Services MUST be obtained from their own facilities or they simply will not be covered. This includes their own in house pharmacies which seem to pay $66 for drugs others can get for less than $10. The only exceptions are for hospital admissions, and even then, they give you an incentive to use their facility. Even if their share in the generics market is tiny, I continue to be surprised they can't get a better deal than 6x the price of the competition. Having in house pharmacy services doesn't make much financial sense, especially when you consider how plentiful full service retail pharmacies are and the apparent economies of scale at work in the drug market.
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