Drug Prices

[Tom Bender]

About 15 years ago I started on a med that was not covered. It was over $600/month so I went shopping. Got it at an 80% discount thru what seemed to be a Canadian pharmacy on-line. Shipped direct from India and seemed to be the same. No problems. Then GoodRx came around and It was available at a discount of 75% from my local pharmacy. No problems and I felt more confident in the quality, though there was nothing discernible.

The discount varies from one pharmacy to the next and varies over time. The full price had risen slowly and the discount had improved to 95%. But just this week my usual pharmacy changed their 'GoodRx' discount to 55% while others in town raised theirs to 96%. I spoke to my usual pharmacist about cost and he said the store may have a better discount,,,'yes we can give you 94%' Sold.

So the lesson is that you should shop for better prices and understand that it's not all happening in Washington or at the manufacturer. Much of the problem and some solutions are real close to home.

[Doug Garson]

I've always been puzzled by GoodRx, getting an 80% discount just by saying the magic word GoodRx makes no sense to me.

[dennis thompson]

Tom
I couldn’t agree more. Just ask, this applies in so many cases. This summer we were getting three new central air conditioners installed. I wanted to use a local company but their bid was $42,000 while I had two other bids for about $30,000. I was about to go with one of the lower bids , when I called my local guy and said I’d like to go with you but I had two much lower bids. Five minutes later he called me back and matched the lower bids.

[Tom Bender]

Hi Doug
Good Rx is a wonder. They say they just asked every pharmacy for their best price on every drug and then report the best prices to customers. Pharmacies wanting the business are driven by competitive pressure to get on board, and pay Good Rx a commission. At least that's how I understand it. Hopefully that's how Medicare watches our tax dollars for us. Insurance companies, I don't know. There seen to be some laws that protect big pharma from this type of thing.

[Brian Elfert]

Insurance companies get huge discounts on most drugs. I bet GoodRX does similarly by having a huge base of customers who buy drugs in order to get discounts.

Most large trucking companies get substantial discounts on diesel from truck stop chains. I have an app on my phone that gives me similar discounts as the owner of the app negotiates discounts based on directing a lot of customers to them. I paid $4.12 at a truck stop on Tuesday while the retail price was $4.86. I would not have stopped there to pay retail as $4.86 is a bit above what others were charging at retail. I used about 600 gallons on my trip and only 50 to 60 gallons was purchased at retail pricing. The rest I used my app to get a discount. The app doesn't have many locations in Nevada and California.

[Keegan Shields]

The US healthcare system has so many perverse incentives and competing interests, it distorts normal market signals and from an outsiders view - seems to defy free market logic.

As I understand it, much of this comes from the insurance companies who extract value out of the system by sitting in the middle and making things complicated.

I heard about a cool company that manufactures and sells drugs only direct to consumer. They will not work through insurance companies because of the added cost and required price hikes - https://costplusdrugs.com/ (funded by Mark Cuban).

Might be an option for those who regularly take medication. Its pretty refreshing to see a company break down their costs between manufacturing/mark up/ and pharmacy labor.

[Curt Harms]

I'll be the devil's advocate for a bit. I knew a guy in the pharma R&D biz. He told me about a drug that was looking really good and the company was pouring lots of resources into it. Just about when they were to go for FDA approval a problem popped up that killed that product dead; may have killed a tester or two, not sure. That flushing sound was $850 million put into the development of that drug being flushed down the toilet. They need to make enough on the products that get approval to cover the products that end up expensive failures.

[Andrew More]

IIRC, GoodRx is basically burning investor money to get market share, same as Uber, and a few other startups. The current strong decline is likely killing this, hence the drop in the discount Tom experienced.

[Stan Calow]

I've made use of GoodRX a few times as well, and wondered how that works.

Clearly the nature of drug-pricing in the US is completely warped by the profit-driven insurance-pharma-provider cabal we have. Its a conspiracy to prevent the consumer from having any ability to make market-based decisions on their own care. I understand Curt's point completely, but what I don't think is right, is that it is American taxpayers, via insurance and artificially high prices, who subsidize all those development costs and failures, while other countries benefit from low prices. Follow the saga of insulin prices in the US, and wonder why they still make money marketing it cheaply in other countries.

[Kev Williams]

About 15 years ago I started on a med that was not covered. It was over $600/month so I went shopping. Got it at an 80% discount thru what seemed to be a Canadian pharmacy on-line. Shipped direct from India and seemed to be the same. No problems. Then GoodRx came around and It was available at a discount of 75% from my local pharmacy. No problems and I felt more confident in the quality, though there was nothing discernible.

The discount varies from one pharmacy to the next and varies over time. The full price had risen slowly and the discount had improved to 95%. But just this week my usual pharmacy changed their 'GoodRx' discount to 55% while others in town raised theirs to 96%. I spoke to my usual pharmacist about cost and he said the store may have a better discount,,,'yes we can give you 94%' Sold.

So the lesson is that you should shop for better prices and understand that it's not all happening in Washington or at the manufacturer. Much of the problem and some solutions are real close to home.

This applies to much more than just medical. My personal pet peeve is the gasoline prices here in the SLC area:

National gas price averages, highest to lowest, above $4 per gallon:
1- $6.29 California
2- $5.42 Nevada
3- $5.36 Oregon
4- $5.23 Washington
5- $5.23 Hawaii
6- $5.21 Alaska
7- $4.43 Arizona
8- $4.43 Idaho
9- $4.17 Utah
10- $4.17 Michigan
11- $4.15 Illinois
12- $4.00 Indiana

--so we have the 9th highest gas prices in the country-- ok, but:

How many oil refineries are in Salt Lake City?
five oil refineries...
The state's five oil refineries, all located in the Salt Lake City area, can process
about 204,000 barrels of crude oil per calendar day.Apr 21, 2022

--These 5 refineries are less than 15 miles from where I'm sitting. The bulk of
the oil they refine comes from Utah (a top-10 oil producer in the US), Wyoming,
Colorado and Canada. So most oil comes by truck from less than 400 miles away...

Yet the cheapest gas I can find nearby right now is $4.16 a gallon... WHY?

back in '08 when gas prices went thru the roof, a local news station sent a crew to one of these refineries,
and asked them essentially 'what's the reason for charging so much for gasoline around here?'

Their answer was, essentially, 'because we can'...

aka: greed.

Methinks the medical supplies business ain't far behind the oil business in that respect...

[Doug Garson]

I wouldn't shed too many tears for big pharma. According to this study, they are doing just fine.

How do the profits of large pharmaceutical companies compare with those of other companies from the S&P 500 Index?
Findings

In this cross-sectional study that compared the profits of 35 large pharmaceutical companies with those of 357 large, nonpharmaceutical companies from 2000 to 2018, the median net income (earnings) expressed as a fraction of revenue was significantly greater for pharmaceutical companies compared with nonpharmaceutical companies (13.8% vs 7.7%).

Meaning

Large pharmaceutical companies were more profitable than other large companies, although the difference was smaller when controlling for differences in company size, research and development expense, and time trends.

https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7054843/

[Keegan Shields]

I'll be the devil's advocate for a bit. I knew a guy in the pharma R&D biz. He told me about a drug that was looking really good and the company was pouring lots of resources into it. Just about when they were to go for FDA approval a problem popped up that killed that product dead; may have killed a tester or two, not sure. That flushing sound was $850 million put into the development of that drug being flushed down the toilet. They need to make enough on the products that get approval to cover the products that end up expensive failures.

As I understand it, this is an often repeated talking point by the pharma industry, but I remain skeptical for several reasons:

1. Drug companies producing patented (novel) drug formulas continue to post record profits from those divisions. So do companies producing generic versions for that matter...

2. For-profit companies leave unprofitable market segments. Clearly, they are doing well enough to continue investing in new products.

3. Drug companies spend far more on marketing and advertising than on R&D.

4. Perhaps most importantly, most of the risk in drug development is in the early stage drug trials. These stages are most often funded, at least in part, by the National Institute of Health (tax payer dollars). Essentially, the American tax payer pays for the R&D of the vast majority of the worlds new drugs. Then on top of that, we pay the far higher prices in the US than in other countries. If the market was functioning correctly, we (American citizens) should get a discount given the public resources that were spent to assist in development and the size of our market.

Layered on top of this are the insurance companies who obscure the normal market signals with "discounting" and complex billing procedures. Ask one element of the healthcare system and they will blame another. All of this leads to the proverbial $500 aspirin at the hospital.

***This is based on what I have read but I'm not an expert and have no professional experience in the health care industry - so feel free to correct this if you see any errors. I'm always up to learn new things!

[dennis thompson]

I worked for the company that invested the $850 million on a failed drug.
It certainly isn’t necessary to feel sorry for the pharma companies, but I do find it interesting that we hear a lot of complaining about pharma companies but very little about tech companies. Microsofts pre tax margin was 42% while Mercks was 32%. No need to feel sorry for either of them!

[ChrisA Edwards]

Difference, I can choose to use a Microsoft product, may not have that option for prescriptions.

[Bill George]

This applies to much more than just medical. My personal pet peeve is the gasoline prices here in the SLC area:

National gas price averages, highest to lowest, above $4 per gallon:
1- $6.29 California
2- $5.42 Nevada
3- $5.36 Oregon
4- $5.23 Washington
5- $5.23 Hawaii
6- $5.21 Alaska
7- $4.43 Arizona
8- $4.43 Idaho
9- $4.17 Utah
10- $4.17 Michigan
11- $4.15 Illinois
12- $4.00 Indiana

--so we have the 9th highest gas prices in the country-- ok, but:


--These 5 refineries are less than 15 miles from where I'm sitting. The bulk of
the oil they refine comes from Utah (a top-10 oil producer in the US), Wyoming,
Colorado and Canada. So most oil comes by truck from less than 400 miles away...

Yet the cheapest gas I can find nearby right now is $4.16 a gallon... WHY?

back in '08 when gas prices went thru the roof, a local news station sent a crew to one of these refineries,
and asked them essentially 'what's the reason for charging so much for gasoline around here?'

Their answer was, essentially, 'because we can'...

aka: greed.

Methinks the medical supplies business ain't far behind the oil business in that respect...

FYI Gas prices where I live here in Iowa -Today $3.39/9 for 10% ethanol blend.