By Harwood D. Schaffer and Daryll E. Ray
Over the last decade or so we have seen a growing concern over rising drug prices for the general public with prices of many drugs set at what the market will bear or priced on value to the consumer rather than cost of production. The result has been increasing medication costs for many families, including those who live on the farm.
We too have had concerns about our own pharmaceutical costs. In retirement we have transitioned from employer-paid insurance that included prescription coverage to individual Medicare Part D prescription insurance.
About a year ago we ran across a popular prescription pricing website that provided available pricing for various pharmacies with discount coupons for most drugs. In the process of looking up drug costs to compare with what we were paying with our Part D insurance we ran across a prescription savings club offered by a national grocery chain with stores in our area.
So, we went to the store’s website to compared prices with the prescription pricing website and our Medicare Part D co-payments for us and our spouses. We were shocked with what we found:
- The grocery store prescription savings club prices were significantly lower than our Part D copay;
- For one of us the savings was 80%, dropping from $6,100 a year in copayments to $1,200 a year;
- Most drug copayments were lower even than our copayments when we had employer-paid health and prescription drug coverage; and
- The club has an annual membership fee of around $75 for family up to 6 people.
It has occurred to us that this website in combination with a retail store pharmacy’s saving program could be a life saver for farmers, retirees, or singles who may have put off filling prescriptions because of cost.
What we found also left us with some questions for which we have not been able to find clear answers:
- When we have a $0 copay at the major grocery chain’s pharmacy as a part of their savings club — not insurance — who pays for the 90 day supply of medicine? Who pays for the pharmacist to take the time to fill the prescription? Certainly, they do not do it out of the goodness of their heart.
- How is it that one of us can now pay $1,200 a year for his family’s medicines with the savings club and the occasional use of the medication website’s coupons instead of $6,100 a year in copays with Medicare Part D? And how can that be less than what we were paying under our employer-paid health insurance when we worked at the university?
- How can a relatively expensive generic medication go from $250 for a 90 day supply when purchased from a Canadian pharmacy that has it direct shipped from a manufacturer in India to less than $15 with a coupon?
- How can the website offer a coupon for generic epi-pens at $126 for a two pack at a local retail pharmacy instead of a list of $377? How can they offer a coupon at $609 for the brand name Epi-Pen that lists for upwards of $730?
We suspect that Pharmacy Benefit Managers play a role in all this and maybe they use the $0 co-pay as loss-leaders. But we admit that as economists we are confused about the mechanisms of the system.
Our confusion about the economics of the system should not stop farmers, students, seniors, and others from purchasing needed prescriptions at a significant savings depending on the drug. As a note, we do keep our Part D medical insurance as a hedge against an unanticipated illness that may require a very expensive medicine (the real purpose of insurance is to cover such unanticipated random risks) and occasionally a given medication is less expensive on our Part D insurance.
Dr. Harwood D. Schaffer: Adjunct Research Assistant Professor, Sociology Department, University of Tennessee and Director, Agricultural Policy Analysis Center. Dr. Daryll E. Ray: Emeritus Professor, Institute of Agriculture, University of Tennessee and Retired Director, Agricultural Policy Analysis Center. Email: firstname.lastname@example.org and email@example.com; http://www.agpolicy.org