Your Pharmacy Is Probably Overcharging You

Here’s how to save money (and not get ripped off)

Photo: Shana Novak/DigitalVision/Getty Images

AAbout a month and a half ago, Jane*, a woman in her twenties, entered a Manhattan drugstore whose brand would be familiar to most Americans. She went to the pharmacy to pick up two prescriptions her doctor had sent in. One was for a new form of birth control, and while Jane was shocked to hear it would cost her $50, she nevertheless paid for it. For the other prescription, she was initially quoted a price of $80 — but it was her lucky day, the pharmacy staffer told her: A coupon he found behind the counter would reduce that price to $18. (*Jane is a pseudonym for privacy reasons, Elemental has confirmed the story.)

When Jane called her doctor to ask for a more wallet-friendly birth control going forward, she learned the pharmacy had not filled the prescription her doctor sent; it had instead substituted a different brand-name medication with the same active ingredients. She could have gotten that medication for $13 instead of $50 if she’d known to use a GoodRx pharmacy discount card. And if the pharmacy had simply filled the prescription the doctor had written, her birth control would have been free.

Fuming, she returned to the pharmacy to request an explanation and a refund. The explanation she got only made her feel worse: Everything the pharmacy did was legal, said the pharmacist. And there would be no refund.

Picking up a prescription from a retail pharmacy is supposed to be straightforward — you drop off your prescription, or your doctor calls it in. If you’re lucky enough to be insured, you fork over your insurance information. After a few minutes, you collect your little paper bag, pay your money, and go.

What you might not realize is that the way your prescription is priced is far from straightforward — and can vary enormously based on factors beyond your control. Meaning, you might be paying more than you need to for your prescriptions. Here’s what you should know.

Understand the system

If your doctor prescribes a brand-name medication, it’s not unlikely that the pharmacist will substitute a generic form of the medication rather than the brand (the profit margin for the pharmacy on a generic will usually be higher than it is on the brand). Generic medications are required to contain the same active ingredients as their brand-name equivalents within a certain (very small) margin. Although the inactive ingredients of generic medications may be different than those of brand medications, those differences only really matter to the small minority of people who have allergies or sensitivities to some of those inactive ingredients.

An added advantage of generic medications is that they are cheaper for pharmaceutical manufacturers to produce — and when manufacturers’ savings get passed on to consumers, that’s a good thing for consumers’ bottom line.

The problem is that those savings don’t always get passed on. Different insurance companies often charge different amounts for the same drug based on the prices they have negotiated with a middleman (otherwise known as a pharmacy benefit manager, or PBM). So while a generic medication might be a preferred drug with a $10 copay under one insurance plan, that same medication might be a third-tier drug under a different insurance plan, incurring a $30 or $50 copay.

Of course, you also have the option of buying a drug without using your insurance at all. You might assume insurance plans make most drugs cheaper, but it isn’t necessarily so: Cash prices — that is, noninsurance-plan prices — for generic drugs at pharmacies are sometimes lower than insurance company copays for them. And drug discount cards like GoodRx (which is also available as an app) or stores’ proprietary discount cards (like Walgreen’s) can reduce those prices even further.

While generic drugs are often thought of as cheaper, pharmaceutical companies — whose brand-name drugs are usually much more expensive than their generic versions — occasionally offer patient assistance programs or coupons that make brand-name versions of a drug inexpensive or even free.

Ultimately, no one is exempt from the vagaries of the labyrinth that is retail pharmacy pricing.

What this all means is that at any given pharmacy, there are at least six variations on any given drug’s price tag, with three different potential prices each for the generic and brand-name versions: the noninsurance cash price, the insurance copay or coinsurance price, and the price with a drug discount card (in the case of a generic) or coupon (in the case of a brand).

Believe it or not, until recently, pharmacists could be legally prevented from telling you when it was cheaper for you to buy a drug without using your insurance. Thanks to a 2018 bill outlawing retail pharmacy “gag rules,” that’s no longer the case — but that doesn’t mean pharmacists are compelled to tell you how to get the best deal. And they often don’t, says Geoffrey Joyce, director of health policy at the University of Southern California’s Schaeffer Center for Health Policy and Economics. In a 2017 study of retail pharmacy prices Joyce co-authored, study staff called more than 500 Los Angeles County retail pharmacies and asked for the cash price of two medications on behalf of a hypothetical uninsured patient. They also asked whether any discounts were available.

How often did pharmacies offer up information about discounts? That varied, says Joyce, “depending on the pharmacy, the time of day, whether they spoke English, things of that nature.” About 35% to 40% of the time, the pharmacist would work with the caller to try and find a lower-cost alternative. Joyce’s findings suggest that many people likely pay more than they have to simply because their pharmacist doesn’t have time to help them find the lower price — within their own pharmacy.

Joyce’s study also found enormous variations in cash prices among pharmacies, with average price differences within zip codes ranging from $11 to $52 and the highest prices offered — surprise! — by chain drug stores.

A separate 2018 survey of 250 retail pharmacies in 11 states by the U.S. Public Interest Research Group (PIRG) — a public interest advocacy organization — found even more dramatic price differences: across a range of 12 generic and brand-name medications, the median price varied an average of 892% from the cheapest available price. As in Joyce’s study, large pharmacy chains surveyed had higher median prices than small-chain or independent pharmacies.

“It’s counterintuitive because you would think the large pharmacy should be cheaper because they get a deal on buying significant amounts of a drug for all of their customers,” says Adam Garber, a consumer watchdog at the U.S. PIRG. “But actually, it allows them to further game the system because people need the medication to survive,” and large pharmacy chains are often the most accessible option for patients living in lower-density areas or with limited transportation access.

How to pay less

In such an opaque retail environment, what’s a consumer to do? For starters, shop small businesses. “Try to find pharmacies that are smaller,” says Garber, “because they are often cheaper.” (Among the bigger chains, Joyce notes Costco and Walmart also tend to have lower prices.) Ask your doctor about switching from a brand name to a generic drug — or switching from one generic drug to another in the same class if your insurance copay seems high; increasingly, says Joyce, doctors’ electronic health records include software that can help determine the cost of different drugs under individual insurance plans. And shop around—because different pharmacies price drugs differently.

Pharmacies sometimes make medication substitutions in response to financial incentives or rebates from the middlemen who negotiate the prices of the drugs they stock — and in some states, they are not required to tell you if they do so. Always ask if a substitution has been made, and ask about the price difference that results from any medication substitution. If you have doubts about whether the medication you’re receiving is equivalent to the one you were prescribed, call your doctor before buying the medication.

Many uninsured people find pharmacy discount cards easier on their bottom line, but these come with their own caveats. People with insurance should be aware that the money they spend on drugs using these cards does not count toward their insurance deductible. Furthermore, the discounts the cards offer comes with a trade-off: GoodRx shares its customers’ health data with Google, Facebook, and other internet and marketing companies.

Ultimately, no one is exempt from the vagaries of the labyrinth that is retail pharmacy pricing. Uninsured people have to be much smarter consumers to avoid paying a premium for prescription medications, says Joyce. “For an insured consumer, even they have to keep their head above water, and just don’t assume, ‘My copay is my copay.’”

Infectious disease doctor | Epidemiologist | Journalist | Health disparities, HIV/STDs, LGBTQ care, et al. |

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