PSA: Crafty Ways to Outwit Drug Companies

Drug companies in the US are oligopolists. They do everything within their power to create monopoly markets for their products and gouge the public to rake in windfall profits.

What We Learned from Mylan

Last year, Congress held hearings on the skyrocketing price of EpiPens. At one time they were $300 ... then $400 ... then ... $650? An equivalent version of the device had been made available to the military for $30. Manufacturer Mylan could have set a more reasonable price if it had wanted to. It would have still made a profit. But we learned during that testimony that greed has no bounds. A patent currently gives Mylan the ability to charge whatever it wants, but the patent doesn't cover the drug itself. Rather, it covers the injection mechanism. That's right: Mylan was charging smartphone-level prices for what amounted to a hypodermic needle on a spring. New York Times, "Mylan’s Chief Is Chastised by Lawmakers Questioning EpiPen Pricing."

During its testimony, Mylan described a confusing scheme of middlemen that contributes to high prices. Although this attempted defense could hardly excuse Mylan's behavior, it did shed some light about how the pharmaceutical industry works.

Drug manufacturers will often pay a long series of middlemen through rebates. In exchange, the middlemen promote and market the drugs. To pay for all the rebates, the manufacturer will increase the price of their drugs. Later on down the chain, the manufacturer will secretly pay the money back to pharmacy benefit managers. Forbes, How Congress Can Make Drug Pricing More Rational.

It's a confusing scheme that bears little resemblance to free market economics. It thwarts the free flow of price information and constructs additional barriers to trade. It's a scheme in which everybody wins--except consumers. The drug companies make money from the higher prices and gain access to restrictive drug formularies. And pharmacy benefit managers make money from all of the hidden rebates.

Are Drug Companies Illegally Fixing Prices?

If you look back at the history of price hikes for related drugs, you'll see a disturbing pattern. Prices are marching upward at lockstep. When one company increases a drug price, a competitor offering a similar product will increase its price as well, often within a matter of days. For example, the price history for the insulin drugs Enbrel and Humira, made by competing manufacturers Amgen and AbbVie, respectively, are nearly identical. Washington Post, "The bizarre reason two competing drug prices rose in tandem."

Source: SSR Health, Truven Health Analytics

Avoiding the Price Traps

What can a consumer do? Medicines save lives. They are rarely a discretionary purchase. Yet, very large corporations are rigging the system against the consumer, abusing patents, restricting competition, fixing prices, and propping up secret cartels with so-called competitors. The current administration appears utterly impotent on the matter, failing to enforce antitrust laws. And the Congress would rather sling ideological tomatoes at each other rather than enact rational laws that promote competition and efficient markets.

What follows is a list of ideas to find medicines at reasonable prices. If I can help even one struggling college student, or single mom working two part-time jobs, or a senior citizen who has discovered the limits of Medicare, then I'll feel like I actually accomplished something worthwhile.

Keep in mind, even if you have a prescription drug plan, you may be hit by price hikes in the nears future. Health insurance companies are playing a new game now: dropping select drugs from their formularies.

So what are the alternatives?

• Manufacturer coupons: I'm hesitant to discuss this idea, because manufacturers play games here and throw up numerous restrictions. But you can try looking up a drug name on Google and hoping that coupons show up in the search results. You can also search the manufacturer's web site separately for coupons. But get ready for the restrictions and fine print. Most of these coupons will be void if you have insurance or receive government/military benefits. Most won't quote a specific discount, but will leave it up to the pharmacy to determine the final sales price. A number of coupons can only be used once per year. Also, there is nothing barring the manufacturer from selling your contact information (address, phone number, email address) to telemarketing companies. In retrospect, though, the discounts that manufacturers offer directly to consumers are rarely all that impressive.

• GoodRx: This company offers coupons for numerous drugs. Just browse to the site https://www.goodrx.com and enter the drug name. But be careful. The coupons that are displayed only work for a particular pharmacy. If you printed one up for Walmart, CVS won't honor it. Also, each coupon has a very limited shelf life. Try to use the coupon on the same day that you printed it from the web site, or the pharmacy may not honor it. Also, be very careful that the coupon is for the correct drug. Some drugs are marketed separately for pets, and GoodRx may display something that is actually for the animal, not for humans. If that happens, the pharmacy most likely not honor it. Also, when dealing with GoodRx, you're at the mercy of their ongoing negotiations with drug companies and pharmacies. If you find a really great deal on one occasion, don't expect it to be available next month. Or next week.

• Blink Health: This company has gotten some favorable press lately, so I tried them out. They can be found at https://www.blinkhealth.com. It's a neat concept. They quote you a firm price that you pay via credit card online. They will then display a receipt (they call it a health card) that you can turn in at a limited list of pharmacies. These include Walmart, RiteAid, Albertson's, and some others. Walgreens and CVS don't play this game, so don't even try. I was pleasantly surprised by how well this worked during my little experiment, because I was sure that there would be some fine print or exception somewhere that would complicate things. But no. It actually worked.

Every good experiment publishes its data to foster reproducible results, so I'll share mine.

Subject drug: Generic Cosopt (Dorzolamide/Timolol, 10 ml, used for glaucoma):

• Cash price without insurance: $105.95
• GoodRx coupons: $32.60 - $45.78 (depending on pharmacy)
• Blink Health: $24.10

Addendum

I spoke with someone at CVS pharmacy who confirmed that CVS has cancelled its contracts with Tricare, Blue Cross/Blue Shield, and Blink Health. When I expressed concern about how many people this will impact, the clerk responded, "I can't tell you how many customers we've lost over the past year." Ouch. And that came from one of their employees.