Prescription medications cost more in the US than anywhere else in the world and costs have been skyrocketing each year for the past several years. To a growing extent, the burden of the high cost falls directly on consumers, either because their health plan has a tiered system for medications (charging ever larger co-pays for some drugs), because their health plan pays only a percentage of the charge for various drugs (and if the consumer has to pay 20 percent and it’s 20 percent of a very large number, that’s a major outlay), or because they have a high-deductible health plan and the insurer doesn’t pay anything until they have spent $3000—or $5000 or $10,000—on health care.
By and large, pharmaceutical companies have been blamed for the high cost of medicines, with insurers shouldering some of the blame, thanks to complicated and ungenerous policies. Pharma has tried to justify its sometimes astronomical charges as necessary to support its research efforts, with the most recent industry-endorsed estimate for the cost of developing a new drug and bringing it to market now topping $2.6 billion. Other analyses attack the methodology used in this report to measure costs, arguing that it fails to take into account, for example, that NIH funds much of the research that goes into discovering a new drug, not the pharmaceutical industry. The result is a dramatic over-estimate of the cost borne by industry. Concerns about the role of drug companies and to some extent health insurers are entirely legitimate. But there has been little attention paid to the role of drug stores in contributing to the high cost of medicines.
I did a little bit of investigating today. I looked at what two commonly used medications would cost a family like mine who had exceeded the $4000 deductible for their health plan, what they cost today (given that it’s only early March and most people haven’t had the opportunity to spend $4000 on medical care this year), and what they would cost if they were obtained from a Canadian mail-order pharmacy. Here’s what I found for one of the medicines, the widely used nonsteroidal anti-inflammatory drug, Celecoxib.
Celecoxib is used as a treatment for arthritis in people with certain gastrointestinal conditions because it's a little less prone to exacerbate these problems than other anti-inflammatory drugs. It is available generically. The non-profit insurance company Harvard Pilgrim Health Care classifies generic Celecoxib as a “tier 1” drug. That means that the cost of a 3-month mail order supply of the medication (100 mg taken once a day) from Walgreen’s, the pharmacy with which Harvard Pilgrim has a contract, would be $10. But until the deductible is met, Harvard Pilgrim doesn’t pay for medications, so the cost would be a whopping $156.51 for 90 pills (which, incidentally, isn’t even quite a 3-month supply since last I looked, a year has 365 days, not 360 days). So I contacted a pharmacy in Canada, identifying one that is approved by CIPA, the Canadian association of licensed retailed pharmacies. I found a drug store that will supply 120 pills for $25.99 (plus a small shipping charge). That comes out to $1.74 per pill at Walgreen’s compared to 22¢ at the Canadian competitor. Walgreen’s costs eight times as much as the Canadian pharmacy. And the medication isn’t manufactured in some shady country with questionable oversight. It’s made in the UK.
How can this be? Is Celecoxib a fluke? So I looked at another commonly prescribed medication, this time a drug classified as tier 3. I chose Vagifem, an estrogen suppository, used to treat post-menopausal atrophic vaginitis. The cost of a 3-month supply through the health plan—after using the entire $4000 deductible? $80. The mail order cost from Walgreen’s today, assuming the deductible hasn't been spent? $360. The cost from the Canadian pharmacy? $55. Made in the UK. Walgreen’s is 7 times more expensive.
What’s going on here? I’ll leave that to the policy wonks, but maybe they should look at the behavior of pharmacies as well as drug companies and health insurers. After all, this isn't just a case of generic drugs costing almost as much as their brand name equivalents, which is still another problem for consumers. Meanwhile, importing drugs from Canada is a valuable option. It's not legal to re-import medication for sale or to import restricted drugs such as opioids, but the law on medicines for personal use is a bit fuzzy, or at least its enforcement is. With consumers shouldering an ever increasing proportion of health care costs, and no prospect for relief in sight, there's a strong incentive to look north.