A twist on the Drug cost debate

[sandorski]

Detroit News station investigative report

I wonder how widespread this pricing policy is?

 

[BaliBabyDoc]

What do you mean "how widespread?" Welcome to America, anything and everything is for sale to the highest bidder.

 

[charrison]

Originally posted by: sandorski
Detroit News station investigative report

I wonder how widespread this pricing policy is?

I am not surprised. People have their insurance, they pay their copay, and dont shop around.

THere was a report that costco has the cheapest meds, with some stuff cheaper than the copay..

 

[Hayabusa Rider]

I hate "investigative" reporters sometimes.

Pharmacies charge a higher markup (sometimes very high) on generics.

Now for the facts in context.

About 90 percent of prescriptions are covered by insurance. So the pharmacy gets paid outrageous amounts from the insurance company? Well, no. The pharmacy takes whatever the insurance offers. Usually, that is very very little over the cost of the drug.

Worse, often the reimbursment is below cost with brand name drugs. A pharmacy may pay a thousand dollars for an injectable, but be paid only 900 for it. Typically its a hope to break even scenario.

Now the other 10 percent pay cash.

With expensive brand name drugs (and brand name means expensive) competition is such that they fare little better than with the insurance companies. Thats about half of the 10 percent.

That leaves about 5 percent of the sales volume to account for the profit made by the pharmacy. Since that is the only place where money can be made, that's why the markup is so high.

 

[Hayabusa Rider]

Originally posted by: WinstonSmith
I hate "investigative" reporters sometimes.

Pharmacies charge a higher markup (sometimes very high) on generics.

Now for the facts in context.

About 90 percent of prescriptions are covered by insurance. So the pharmacy gets paid outrageous amounts from the insurance company? Well, no. The pharmacy takes whatever the insurance offers. Usually, that is very very little over the cost of the drug.

Worse, often the reimbursment is below cost with brand name drugs. A pharmacy may pay a thousand dollars for an injectable, but be paid only 900 for it. Typically its a hope to break even scenario.

Now the other 10 percent pay cash.

With expensive brand name drugs (and brand name means expensive) competition is such that they fare little better than with the insurance companies. Thats about half of the 10 percent.

That leaves about 5 percent of the sales volume to account for the profit made by the pharmacy. Since that is the only place where money can be made, that's why the markup is so high.

Edit: The gross margin estimate of 1 to 2 percent is accurate. Costco and Walmart use their pharmacies as loss-leaders. They are designed to NOT make a profit, but to act as a draw for other departments.

 

[Hayabusa Rider]

Oh well, hit the wrong button

 

[charrison]

Originally posted by: WinstonSmith

Originally posted by: WinstonSmith
I hate "investigative" reporters sometimes.

Pharmacies charge a higher markup (sometimes very high) on generics.

Now for the facts in context.

About 90 percent of prescriptions are covered by insurance. So the pharmacy gets paid outrageous amounts from the insurance company? Well, no. The pharmacy takes whatever the insurance offers. Usually, that is very very little over the cost of the drug.

Worse, often the reimbursment is below cost with brand name drugs. A pharmacy may pay a thousand dollars for an injectable, but be paid only 900 for it. Typically its a hope to break even scenario.

Now the other 10 percent pay cash.

With expensive brand name drugs (and brand name means expensive) competition is such that they fare little better than with the insurance companies. Thats about half of the 10 percent.

That leaves about 5 percent of the sales volume to account for the profit made by the pharmacy. Since that is the only place where money can be made, that's why the markup is so high.

Edit: The gross margin estimate of 1 to 2 percent is accurate. Costco and Walmart use their pharmacies as loss-leaders. They are designed to NOT make a profit, but to act as a draw for other departments.

I doubt that the entire department is a loss leader....

 

[Hayabusa Rider]

Originally posted by: charrison

Originally posted by: WinstonSmith

Originally posted by: WinstonSmith
I hate "investigative" reporters sometimes.

Pharmacies charge a higher markup (sometimes very high) on generics.

Now for the facts in context.

About 90 percent of prescriptions are covered by insurance. So the pharmacy gets paid outrageous amounts from the insurance company? Well, no. The pharmacy takes whatever the insurance offers. Usually, that is very very little over the cost of the drug.

Worse, often the reimbursment is below cost with brand name drugs. A pharmacy may pay a thousand dollars for an injectable, but be paid only 900 for it. Typically its a hope to break even scenario.

Now the other 10 percent pay cash.

With expensive brand name drugs (and brand name means expensive) competition is such that they fare little better than with the insurance companies. Thats about half of the 10 percent.

That leaves about 5 percent of the sales volume to account for the profit made by the pharmacy. Since that is the only place where money can be made, that's why the markup is so high.

Edit: The gross margin estimate of 1 to 2 percent is accurate. Costco and Walmart use their pharmacies as loss-leaders. They are designed to NOT make a profit, but to act as a draw for other departments.

I doubt that the entire department is a loss leader....

Since I worked for Costco in Vermont as a pharmacist some years ago, I would be qualified to say it for a fact. Costco pharmacies put out more money than they take in.

 

[markjs]

I am not surprised at all.

I am a disabled person living in a small town off of welfare basically. I have legit disabilities and I get what's called medical coupons. I go to the Safeway pharmacy because they are the only game in town. So basically all your taxpayer dollars (and mine because I pay tax on anything I buy) are going to pay for these incredible markups! In an industry that screams out for regulation.

I am not a blind bleeding heart liberal but I am forced to vote for them because they are the only candidates that even begin to pretend they want to bring healthcare to the masses.

George Bush and many of his cronies want the status quo to continue. Continue putting big bucks into the hands of fat cats at the expense of the middle class and poor.

Think about it. if you lost your job and health insurance in today's world and then got sick where would you be? It just shouldn't be that way in an "enlightenend" technologically advanced society like ours.

 

[Hayabusa Rider]

Originally posted by: markjs
I am not surprised at all.

I am a disabled person living in a small town off of welfare basically. I have legit disabilities and I get what's called medical coupons. I go to the Safeway pharmacy because they are the only game in town. So basically all your taxpayer dollars (and mine because I pay tax on anything I buy) are going to pay for these incredible markups! In an industry that screams out for regulation.

I am not a blind bleeding heart liberal but I am forced to vote for them because they are the only candidates that even begin to pretend they want to bring healthcare to the masses.

George Bush and many of his cronies want the status quo to continue. Continue putting big bucks into the hands of fat cats at the expense of the middle class and poor.

Think about it. if you lost your job and health insurance in today's world and then got sick where would you be? It just shouldn't be that way in an "enlightenend" technologically advanced society like ours.

How much less than 1 percent total profit should a business make?

 

[markjs]

I don't think bussiness should have to make 1% profit, but the article talks about bussiness making like 2400% profit....Thats just wrong. 100% profit ought to be sufficient to stay in bussiness and prosper.

 

[markjs]

I didn't realize that insurance pays so little. Still there is no good excuse for 4600% percent markups

I don't think there is any law saying a pharmacy has to take what the insurance company is willing to pay if it doesn't make a profit. I am sure pharmacies are not in the red the way you see Walgreens popping up everywhere.....They wouldn't be expanding like they are if there wasn't big money to be made.

 

[Hayabusa Rider]

Originally posted by: markjs
I didn't realize that insurance pays so little. Still there is no good excuse for 4600% percent markups

I don't think there is any law saying a pharmacy has to take what the insurance company is willing to pay if it doesn't make a profit. I am sure pharmacies are not in the red the way you see Walgreens popping up everywhere.....They wouldn't be expanding like they are if there wasn't big money to be made.

You are right, that pharmacies do not have to take any insurance. They simply can exist to not fill any prescriptions, but that makes no sense.

You have to realize that pharmacies are really two beasts. One is the professional drug dispensing end, and the selling of aspirin, and stationary, and greeting cards etc. Thats where the money is for the corporations.

Real life example.

Near me there is a CVS that does about 12 million in sales a year. That is the total store.


Now, the pharmacy itself does 5 million in sales, and operates at an expense of about 6 million, for a 1 million loss. So how does it stay in business? Because of that Hallmark card, and the box of Trojans. and the Coke. The other six million in sales produces about 3 million in profit.

Subtract the million, and the store makes about 2 mil.

So, the whole store makes a profit in spite of the fact that the pharmacy loses.

Remember this too. Suppose I sell a thousand things, and I make money on one item. I mark that up 10000 percent. It doesnt make up for the actual loss incurred in operations. So, a company can indeed sell something for far more than it buys it for, but the losses more than wipe it out.

Notice the corner drug store? Not the chain, but the mom and pop? No? That's because they have no way to buy general merchandise for what the Eckerds and Walgreens do, but are stuck with the lousy reimbursments. Any survivors have a gimmick. Either medical supplies, or a nursing home contract.

What I would argue is that it is a shame such markups exist to prevent enormous losses instead of just serious ones.

The problem is that there is no competition for drugs. Medications (brand names here) are single source.

If you have to pay 300 bucks for a bottle of meds, obviously selling it for 10 isnt going to happen.

 

[ReiAyanami]

so that's how pharmacists make $75-100k starting salaries

it's like how all orthodontists make like $300k a year

 

[ReiAyanami]

just imagine how many millionaires rush limbaugh made!!

 

[sandorski]

Originally posted by: WinstonSmith
I hate "investigative" reporters sometimes.

Pharmacies charge a higher markup (sometimes very high) on generics.

Now for the facts in context.

About 90 percent of prescriptions are covered by insurance. So the pharmacy gets paid outrageous amounts from the insurance company? Well, no. The pharmacy takes whatever the insurance offers. Usually, that is very very little over the cost of the drug.

Worse, often the reimbursment is below cost with brand name drugs. A pharmacy may pay a thousand dollars for an injectable, but be paid only 900 for it. Typically its a hope to break even scenario.

Now the other 10 percent pay cash.

With expensive brand name drugs (and brand name means expensive) competition is such that they fare little better than with the insurance companies. Thats about half of the 10 percent.

That leaves about 5 percent of the sales volume to account for the profit made by the pharmacy. Since that is the only place where money can be made, that's why the markup is so high.

Ok, that changes things then and makes sense. Sounds like fodder for another Investigative report! A Part 2

 

[Hayabusa Rider]

Originally posted by: ReiAyanami
so that's how pharmacists make $75-100k starting salaries

it's like how all orthodontists make like $300k a year

It's supply and demand. Pharmacist now have to have a 6 year education, and that is a LOT of money for most people. Add to that 12 hour stressful shifts. There was a pharmacist who passed out around here a few years ago. Impacted fecal material built up and overwhelmed his system. He had no time to go to the bathroom. Well, he could have, but would have gotten even further behind, and have had to listen to the chorus of complaining customers.

The only compensation in the retail side these days is money.

 

[Hayabusa Rider]

Originally posted by: sandorski

Originally posted by: WinstonSmith
I hate "investigative" reporters sometimes.

Pharmacies charge a higher markup (sometimes very high) on generics.

Now for the facts in context.

About 90 percent of prescriptions are covered by insurance. So the pharmacy gets paid outrageous amounts from the insurance company? Well, no. The pharmacy takes whatever the insurance offers. Usually, that is very very little over the cost of the drug.

Worse, often the reimbursment is below cost with brand name drugs. A pharmacy may pay a thousand dollars for an injectable, but be paid only 900 for it. Typically its a hope to break even scenario.

Now the other 10 percent pay cash.

With expensive brand name drugs (and brand name means expensive) competition is such that they fare little better than with the insurance companies. Thats about half of the 10 percent.

That leaves about 5 percent of the sales volume to account for the profit made by the pharmacy. Since that is the only place where money can be made, that's why the markup is so high.

Ok, that changes things then and makes sense. Sounds like fodder for another Investigative report! A Part 2

The problem with investigative reporting, especially at the local level is that it is largely shock entertainment packaged as news. It's not just pharmacies but anyone can become the bad guy when ratings drive unqualified people to present extremely biased reports on things they have no dealings with.

Recall a few years ago how "The earth was going to come to an end" when a big meteor/asteroid was going to strike the Earth? Well, it turned out that was an exaggeration, and the press blamed the scientists. What they didnt do was relate the scientific report in context. There was a SMALL CHANCE of a collision, not anything like a certainty. Naturally, none of these news hounds had much experience following science stories. Following politics? Sports? Sure, they do that day in and out. Get them away from their field of reporting, and they too often screw it up.

 

[sandorski]

Originally posted by: WinstonSmith

Originally posted by: sandorski

Originally posted by: WinstonSmith
I hate "investigative" reporters sometimes.

Pharmacies charge a higher markup (sometimes very high) on generics.

Now for the facts in context.

About 90 percent of prescriptions are covered by insurance. So the pharmacy gets paid outrageous amounts from the insurance company? Well, no. The pharmacy takes whatever the insurance offers. Usually, that is very very little over the cost of the drug.

Worse, often the reimbursment is below cost with brand name drugs. A pharmacy may pay a thousand dollars for an injectable, but be paid only 900 for it. Typically its a hope to break even scenario.

Now the other 10 percent pay cash.

With expensive brand name drugs (and brand name means expensive) competition is such that they fare little better than with the insurance companies. Thats about half of the 10 percent.

That leaves about 5 percent of the sales volume to account for the profit made by the pharmacy. Since that is the only place where money can be made, that's why the markup is so high.

Ok, that changes things then and makes sense. Sounds like fodder for another Investigative report! A Part 2

The problem with investigative reporting, especially at the local level is that it is largely shock entertainment packaged as news. It's not just pharmacies but anyone can become the bad guy when ratings drive unqualified people to present extremely biased reports on things they have no dealings with.

Recall a few years ago how "The earth was going to come to an end" when a big meteor/asteroid was going to strike the Earth? Well, it turned out that was an exaggeration, and the press blamed the scientists. What they didnt do was relate the scientific report in context. There was a SMALL CHANCE of a collision, not anything like a certainty. Naturally, none of these news hounds had much experience following science stories. Following politics? Sports? Sure, they do that day in and out. Get them away from their field of reporting, and they too often screw it up.

Hehe, I know, they'd probably not follow through on this new angle either.