Research conducted by USC Price MPP students found huge variation in prescription drug prices when shopping around at pharmacies in the LA area. Based on their experience, they recommend four strategies consumers should use to get the lowest price.
There is growing concern about health care prices in the United States. Though there is an increasing trend towards encouraging patients to shop around for health care, it is difficult in part because of a lack of transparency in terms of both prices and quality.
This tension with health care prices pushes into prescriptions as well. However, unlike other health care costs, prescription drugs have the same standard of quality no matter where they are purchased. According to a 2016 poll released by the Kaiser Family Foundation, one in four people in the United States taking prescription drugs report difficulty affording them. These individuals, both insured and uninsured, may save significant amounts of money by shopping around for prescription drugs.
My colleagues and I conducted a research study to analyze whether there are returns to price shopping for pharmaceutical drugs and strategies consumers could employ to maximize their savings. Jessica Du, Leigh Ann Haley, and Noah Miller and I are masters students at the Price School of Public Policy and worked in partnership with the USC Schaeffer Center as part of our MPP Practicum project.
Our team made a total of 419 visits to 112 pharmacies (different researchers went to the same pharmacy to check the accuracy of the data) in the Los Angeles area. Using prescriptions for four common drugs, we asked the pharmacist or pharmacy tech what the price would be without insurance. The drugs included a birth control tablet, an ointment of a topical steroid, a common high cholesterol medication, and a topical cream for seborrheic dermatitis.*
Across the greater Los Angeles area, consumers could save a minimum of $150 by price shopping for a bundle of four drugs.
For generic Lomedia, the birth control tablet, we saw average returns to price shopping of $10-$25 in Santa Monica, Beverly-wood, and Mid-City, while parts of South Central and Hollywood had average savings of up to $50.
When pricing generic Lipitor, a common high cholesterol medication, we observed the stark reality of pharmacy-to-consumer prescription drug price variability. We found every consumer could expect to save a minimum of $175 by price shopping in their neighborhood. Furthermore, this actually understates the observed price differences: every region we shopped in had independent pharmacies with most prices in the $20-30 range, and chain pharmacies with most prices in the $350-450 range. The highest price of $527 listed in our infographic may be an outlier, but approximately 20 percent of prescriptions did cost greater than $400.
Based on our findings, we recommend consumers use four strategies to maximize their savings for pharmaceutical drugs:
- Inquire about a Lower Price: We suggest that consumers probe for the lowest price. Based on the study, 62 percent of the time discounts were not automatically volunteered by pharmacists or pharmacy technicians, but were given when asked.
- Use Internet Resources: We also suggest consumers use internet resources like GoodRx for pricing and coupons. We found that for each drug, at least two chains or independent pharmacies had a GoodRx price that was less than the lowest in-person price. Consumers could save as much as $172 by using the website and mobile service to identify pharmacies and apply coupons. Virtually all chains, and about 36% of independents accepted GoodRx, making it an easy and reliable service to use.
- Shop at Independent Pharmacies: We recommend consumers shop at independent pharmacies in addition to using GoodRx. Independent pharmacy prices often beat the listed GoodRx independent coupon prices. Furthermore, independent pharmacies were potentially more willing to work with consumers (researchers assume this is because independent pharmacies can more easily adjust their profit margins compared to chain stores). Furthermore, researchers observed independent pharmacies emphasized establishing a relationship with the consumer and focused on serving immediate communities around them.
- Buy Generic Drugs: Generic versions of brand drugs are FDA certified to be exactly the same as their respective brand drug, but at a much lower cost. The average cost of buying brand name Lipitor was $1055 across neighborhoods, compared to the average price of generic Atorvastatin at $183 – that is 83 percent in savings.
These recommendations may save consumers significant amounts of money in the long-run and lead to increased medication adherence for low-income patients. Racial and ethnic minorities and individuals of low socioeconomic status disproportionately face chronic health conditions. High prescription drug costs for these individuals— who have a propensity to be uninsured or under-insured— may present a significant barrier to medication adherence and appropriate disease management, therefore exacerbating existing health disparities and increasing long run health care costs. By raising awareness of price variation among these consumers, not only will patients see better health, but may also save the state significant amounts of money in long-term chronic health care costs.
*Drugs included: Generic Lomedia Birth control tablet 20 mg, Brand Elocon Topical Steroid Ointment 45 g, Mometasone Topical Steroid Ointment (Generic of Elocon) 45 g, Brand Promiseb Topical Cream for Seborrheic Dermatitis 30 g, Brand Lipitor High cholesterol medication 90 day supply, 20 g, (Generic of Lipitor) Atorvastatin High cholesterol medication 90 day supply, 20 g
Editor’s Note: This research was conducted by USC Price School of Public Policy Masters of Public Policy students as part of their final Practicum project. Schaeffer Center faculty members Neeraj Sood and Geoffrey Joyce were mentors on the project.
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