Unbiased Analysis of Today's Healthcare Issues

Information on pharmaceutical prices

Written By: Jason Shafrin - Feb• 15•08

Economic theory says that for commodities, there should be one market price. For instance, there is one worldwide price for oil, metals also have a one worldwide price. While there is significant heterogeneity between different types of medical treatments, one would expect that the price of pharmaceuticals would be the same or very similar across different pharmacies. Of course, drugs from different companies, or brand name versus generic drugs would likely have different prices, but economic theory suggests that pharmacies selling drugs with the exact same chemical formulation from the exact same company should sell these drugs at approximately the same price.

This is not what a phone survey by change:healthcare found. According to VentureBeat, the survey examined six prescription drugs: “Copaxone, an injectable multiple-sclerosis drug; the antidepressant Zoloft; the fibromyalgia drug Lyrica; Lipitor, a statin that lowers cholesterol; the sleep aid Ambien; and the allergy/asthma drug Singulair. The survey turned up some surprisingly wide disparities among the pharmacy chains, such as the fact that a Lyrica prescription costs more than twice as much at Rite-Aid as it does at Walgreens. No single pharmacy was consistently the cheapest, and prices could vary considerably even at different branches of the same chain. Kroger, for instance, charged twice as much for Singulair in one Nashville neighborhood (Green Hills/Belle Meade) as it did in another (Franklin).

How large are these differences? The change:helathcare site states:

“A person buying at the highest priced chain in the survey would have paid about $485 (20%) more than the person buying at the lowest. In fact, the cost of a prescription can vary as much as 20 to 40 percent between major pharmacy chains within walking distance of one another, and as much as 50 percent from one part of a city to another.”

While VentureBeat wisely notes that change:healthcare has “a vested interest in building demand for services that will help individuals compare healthcare costs,” it is still interesting such large price discrepancies could exist.

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4 Comments

  1. christopher says:

    Jason – thank you for noticing the Rx case study! Even though both studies (Rx and also the “strep test” case study) were not done with a large sample size nor did we apply complete, third-party academic rigor to our methodology (though approp blinded, randomization was applied)… the point was not to perform a genuine scientific analysis. The point was to validate just how confusing, inequitable, and down-right silly product and services pricing in healthcare can be when someone wants to know, “how much will this cost me?” (be it someone uninsured or bearing more of the direct cost via higher deductible in a CDHP).

    Like in the movie Shrek, healthcare is “…like an onion! Layers, many layers.” The current system just isn’t geared for simplicity nor direct-to-consumer purchasing, which is why efforts that help to point that out may not be perfect, appear flawed or potentially one-sided YET are needed to poke people within the system to say, “This is screwed up. It’s too complex and there is a dire need of more transparency.”

    Just wanted to say thanks for noticing our trivial efforts.

    – christopher

  2. […] Economic theory says that for commodities, there should be one market price. For instance, there is one worldwide price for oil, metals also have a one worldwide price. While there is significant heterogeneity between different types of medical treatments, one would expect that the price of pharmaceuticals would be the same or very […] Read more […]

  3. […] Economic theory says that for commodities, there should be one market price. For instance, there is one worldwide price for oil, metals also have a one worldwide price. While there is significant heterogeneity between different types of medical treatments, one would expect that the price of pharmaceuticals would be the same or very […] Read more… […]

  4. […] Information on pharmaceutical prices Economic theory says that for commodities, there should be one market price. For instance, there is one worldwide price for oil, metals also have a one worldwide price. While there is significant heterogeneity between different types of medical treatments, one would expect that the price of pharmaceuticals would be the same or very […] […]