Making Sense of Drug Prices

The cost of fighting disease in the United States keeps going up and up.

If there is any single medication that insulin-dependent diabetics need to stay alive, it's insulin. There was a time that many pharmacies sold insulin at cost because it was simply a decent thing to do. As recently as the year 2000, the wholesale price, which was usually the retail price, of a vial the most advanced insulin of the time was $27. By 2010, that cost had risen to $225. In 2016, insulin is often dispensed in pens, which are simpler to measure but contain only 35 percent as much insulin. To obtain 1000 units of the latest long-acting insulins like Ryzodeg, Toujeo, and Tresiba, uninsured diabetics in the United States have to plunk down over $1400. And some of them will use as many as eight vials of insulin every month.

An even better known drug pricing scandal is the lifesaving EpiPen. Some people are especially allergic to insect stings or other allergens. Contact with an offending substance can cause swelling of the lips, swelling of the tongue, and swelling of the throat (along with hives, swollen eyes, nausea, vomiting, and other symptoms) that can result in quick death without immediate treatment. The treatment of choice for these kinds of reactions is epinephrine. Injected into a muscle, it can produce immediate relief and prevent death by anaphylaxis.

If you know how to draw epinephrine into a syringe and have the presence of mind to give yourself your own injection, it would be enough buy a vial of epinephrine, which retails for as little as $1.25, and a syringe, which you have to buy in packs of 10 for about $1.25 a pack. As little as $2.50 would buy lifesaving protection. However, because most people who have allergies, and parents of children who have allergies, are understandably excited when they are confronted by life-threatening allergic reactions, the delivery vehicle of choice is the EpiPen, which comes in a two-dose set. Sometimes a second dose of epinephrine is required for a particularly severe allergic reaction.

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When drug maker Mylan acquired the rights to sell EpiPens in 2007, the wholesale price of the device was $103.50. That's what the pharmacy paid. Maybe out of the goodness of their hearts the pharmacy made the pens available at cost to the poor, but most people, and certainly their insurance companies, would pay considerably more. By July 2013, the wholesale price of the pen was $264.50. In August 2015, it was $461.  By 2016, Mylan had raised the price of the pen to $608.61, and keep in mind, that's the price to the pharmacy, not the cost to the customer. Its costs of production had not increased, and it's not like epinephrine is going out of style. People who buy their products continue to need them for life and the number of people who need EpiPens and similar devices is only increasing. 

When confronted by consumer outcries, Mylan issued $100 coupons for lower-income customers. However, even with the $100 coupon, and health insurance, in many cases a two-pen pack still cost the user $400. And because the pens expire in a year, many families have to buy more about the same time they have to buy school supplies.

What Can You Do About the High Cost of Pharmaceuticals?

An even more outrageous example of pharmaceutical price hikes, however, is the out and out price gouging of Turing Pharmaceuticals after it was taken over by the famous hedge fund manager turned "Pharma Bro," Martin Shkreli. Turing bought the rights to sell the anti-parasitic medication Daraprim. It's most commonly used by AIDS patients, who are especially susceptible to these kinds of infections. When Shkreli took over the company, the cost a of a single pill of Daraprim was $13.50. Seeing a profit opportunity in a life-or-death situation, Shkreli raised the price of a single pill to $750. 

What isn't as widely publicized is that before Shkreli took over the company that makes Daraprim, he held the reins to a company that makes Thiola, a medication for people who have a rare disease called cysteinuria. Without Thiola, a slow and painful death, usually during childhood, is inevitable. Many users have to take 15 to 30 pills a day. Shkreli raised the price per pill from $1.50 to $30.

Of course, these prices are simply on par with medications for cancer, neurological conditions, and hepatitis C that cost as much as $300,000 per year.

How can this crazy system possibly work? What most people don't know about American pharmaceuticals is:

• Drugstores don't actually buy drugs. They usually are paid a fee for dispensing a drug before they even get it in stock. This is the reason that compassionate pricing at the retail level is no longer possible in most cases.
• Insurance companies don't pay the full retail prices for medications. They negotiate heavy discounts. The pharmacy also negotiates its fees with the insurance companies.
• What you pay at the cash register, however, represents the difference between what the pharmacy is required to pay for the drug and what your insurance company pays the pharmaceutical company. Only if you have no insurance at all do you pay the full price. If you are insured, but you have not met your deductible, you get the same discount that your insurance company does.

• Let your doctor known that you prefer generics. These no-brand drugs usually cost $10 or less. In many states, the pharmacy is legally required to give you the generic drug even if your doctor has written a prescription for a brand-name drug, unless the doctor also marks "no substitutions." 
• Make the most of coupons. If your insurance company requires a high co-pay, ask your pharmacy if there isn't a manufacturer's coupon to cover it. Usually the pharmacy will know about coupons for specific drugs. The coupon itself may be given to you at the doctor's office or at the pharmacy.
• Ask about patient assistance programs. Sometimes drug companies make medications available for free or at very low cost for people who meet income requirements. You may have to fill out an application and wait a week or two to get your drug, but the price may be greatly reduced.

And keep in mind that, as the American saying goes, what goes around comes around. Shortly after Shkreli announced his nearly-700 percent price increase, another manufacturer announced it would create a generic equivalent that sells for $1 a pill. Don't assume there's nothing you can do even if you have to pay one really high pharmacy bill. Where prices are outrageous, there will always be competition.