Wednesday, June 03, 2015

Do you understand drug pricing?

Prescription version and OTC version
Notwithstanding several years in the health care field, I still have trouble understanding retail drug prescribing and pricing.  Here's the latest example.

I use Nasacort (a nasal corticosteroid, triamcinolone acetonide) for hay fever symptoms, and it works very well. Each year, I send in a prescription request to my PCP, and then I go to Walgreen's or CVS to pick it up. This year, the price was well over $100, since my insurance plan no longer covered it. When I expressed surpise, the phramacist said, "Why don't you buy the OTC version?  It's much less, and it's the same thing."

Sure enough, a comparable quantity was about 25% the cost of the prescription version.

I now have learned that the OTC version was authorized by the FDA on October 11, 2013.

My questions are basic. Why does my primary care practice still issue prescriptions for this medication instead of just sending people to the OTC version?  Why does a prescription version still exist, and why is priced so far above the OTC version?


Anonymous said...

And why does this generic drug, which has been on the market over 2 decades, cost over $10?

nonlocal MD said...

I could cite about 10 drugs that are common and familiar and now an astronomical price. While one could talk about lack of profit margin and manufacturing costs, the bottom line is 'because they can.' The pharma industry may finally be the one that pushes our country's tolerance of outrageous health care costs over the edge.

Aditya Pathak said...

Its nothing but plain and simple "revenue maximization" on part of the drug companies, and is a perfect example of how the health "insurance" market convolutions prevent market forces from leveling out prices to their most competitive levels.

I have a similar example of my own - Epi-Pen costs $40 when it is covered by your plan, $100 in some other plans, and if you are not covered, then it costs $400+. And BTW, there is a coupon available on their website that can give you a rebated of $100 if your pharmacist was good enough to tell you.

Another case just from yesterday - CVS will not tell me the price of a vaccine over the phone, even if I am ready to tell my insurance details to them over phone. I need to present myself in their facility with the insurance card, then they will tell me the price, and then they will order the vaccine to be delivered to their store. So I will have to come back again to actually get the vaccine. And the pharmacy guys don't see anything wrong with this whole run-around.

Not a Doc said...

I agree with nonlocal MD's comment - "because they can". Most pharma companies are profit maximizers, and want a large margin - mostly to fund future products. In the US, we have supported that model by delevoping a level of Moral Hazzard in our common consumer that buffers them from the true cost of a product. I for example, can get the same generic product through my insurance plan for $4 - considering that is nearly $20 less than the OTC, I will elect to go this generic route - which ultimately only fuels the price inflation.

Until we create a system which reduces moral hazzard, creates traditional market pressures, and builds an informed consumer - we will continue to see disperities like this.

Keith said...

Because formulary insuance coverage varies greatly from plan to plan,it is next to impossible for your doctor to know what your insurance will pay for the medication and what your out of pocket cost will be (that is dtermined at the pharmacy when you present your prescription). You may be able to get another similar version of this medication that is the "preferred medication" for your particular insurance for a very low co-pay that would save you even more.

It is all part of the same game that is played in health care where pricing is next to impossible to determine for the consumer and even more difficult to find les costly options.

Check the on line formulary for your prescription plan and see if there is a preferred option (usually tier 1). Then ask the pharmacist what your out of pocket cost would be for this option and see if it is less expensive than the OTC medication. It often is!

EB said...

PCPs prescribe drugs that have OTC versions because many insurers still cover the Rx version – and if they do cover it, the consumer generally has a rather small copay (why insurers cover it is a mystery to me). Manufacturers tend to price the OTC version at a level that is competitive with the copayment/coinsurance of the Rx version. Flexible spending accounts covered OTC drugs between 2003 and 2010, but since January 2011 FSAs don’t allow you to include OTC drugs. So manufacturers have tended to lower prices of OTC branded drugs in the last few years. More OTC competition has emerged recently from store brands (“private labels”), such as Costco’s Kirkland store brand. My conjecture is that if you compare price of the store brand, the OTC brand, and the Rx branded version of the same med you’ll find prices roughly as follows: SB = .8OTC brand = 25% Rx brand. If there is a generic version of the Rx brand, it’ll be about half the price of the Rx brand.

David said...

Hmmmm? Maybe because the PCP gets paid for writing the Rx? Happens all the time.

The other thing that happens is that the patient's cost for a covered Rx can actually be lower than the OTC version. That was probably the case with Nasacort until coverage stopped. Your co-pay was probably $15 at most and the OTC was $25. The insurance company paid $85 and your premium was higher as a result.

Geraldine said...

It's like going to the grocery store to buy food. People will still buy "Cherrios" or "Oreos" rather than the Winn-Dixie or Publix brand versions, because, well, they are "Cherrios" and "Oreos" and there is something about the inherent name brand that makes them think they are getting the best version of the product. My daughter swears they taste different, and companies know that consumers will pay for "that difference" :)

EB said...

Sort of wild that four versions of the same med (Rx brand, Rx generic, OTC brand, OTC private label) can sell at the same time with prices ranging five (Rx brand) to one (OTC private label). The really wild thing is that quite frequently it is the same manufacturer for all four products.

craig dolan ‏@craig_dolan said...

From Twitter:

1of 2 -easy – no one markets OTC drugs to physicians and when a drug becomes OTC the manufacturer doubles acq price

2 of 2 - The OTC mfr also can keep the price high until more OTC competition brings it back to the old rx cost. $$$$

Alexander Puschilov ‏@mrpusch said...

From Twitter:

in certain EU countries prescription systems automatically pick the cheapest drug - almost always generic.

Theresa Willett said...

The pricing differential is pure capitalism.

The reason I would still write a prescription is that it helps give the patient/family "credit" via HSA or high-deductible plans. In many cases, only an Rx med counts toward deductible, but with such a big price difference, obviously it still makes sense to get the OTC version. Since I am with Kaiser as a patient, if I pick up the Kaiser OTC, I am purchasing it through their pharmacy and it is still credited toward my deductible, but that is not true if I go to Costco or CVS without me submitting claims.

Like another poster said, as a prescriber I would have no way of knowing what the price would turn out to be based on the ridiculous complexity of the plans. Even with an EMR, there is rarely up-to-date formulary cost feedback. Sometimes you will see a "flag" (alert fatigue!) in the eRx window stating something is non-preferred, but the cost differential is not offered. Most of the time, I am prescribing blind and end up playing pharmacy phone tag to make a more insurance acceptable choice.
If there is an OTC, I will usually tell families: "I am writing this as an Rx in case that helps with your plan. If the cost is too high, please get the OTC."
10 more seconds out of my 15min visit, but to the family, cost information is valuable. I just wish I didn't have to know any of that!

Bob said...

A couple of answers.

It may have to do with insurance. If a drug is prescription, it can be covered by insurance; if it's OTC, it's completely out of pocket. That changes the whole equation. Our Medicaid patients often want prescriptions for Tylenol.

As for generic vs. brand, it is common for pharmacies to substitute generic for brand even if the MD writes for the brand. We have on our Rx forms a box that says "do not substitute," which we have to check if we really want that brand name.

You can answer your own question on the pricing issue....

Jim said...

For my insurance, prescription medications are covered – and any co-pays can be reimbursed from a Flex Spend account.

Because of changes in the law in around 2011, OTC medications cannot be submitted for FSA unless you have a script.

So, for the insured patient, the prescription medication may cost them less out of pocket.

Gail said...

Interesting question. My experience on this is that the insurance companies are moving drug costs onto their covered patients. The convenience of OTC is great; the out of pocket costs for us is much higher. I would rank our monthly premium costs average with a well-known company.

Our family has the opposite concern from what you describe. The cost of the prescription nasonex generic version is 25% of the cost for the same OTC drug because our health plan covers it. What you are asking for will quadruple our cost for this drug.

PPIs are similar. Some plans are not covering them at all, others cover selected company versions. I can’t find Prevacid or the generic on any of five plans I was offered this year. Yet it works better for me than the other PPIs. Who knows why this is true? In previous attempts to switch drugs because of formulary changes in healthplans, I have ended up with scope procedures or stress tests. So now I stick with one drug with excellent results.

The OTC costs are 3-4 times more costly than the prescribed version of the generic drug when my pharmacy plan covers it. So now I get a different PPI from the healthplan and supplement that with my OTC of choice when needed. And this is still less costly to me.

For those families living on the edge with Rx coverage, will their compliance in taking drugs change if the out of pocket costs increases when they are forced to OTCs?

nonlocal MD said...

If you just pause and read the length and complexity of all these comments, it is obvious what a completely screwed up system this is. Why are we tolerating it? This is a case of the Stockholm syndrome.

Paul Levy said...


G. B. Miller said...

My PCP writes for the generic version of one of my drugs (metaformin), since our insurance plan requires that generics are used when applicable first, brands if none generic 2nd, and jumping through serious hoops if you can't take a generic or if you prefer brand over generic. Mine is also required to write 90 days/3 refill minimum on my scripts.

Back in the day CVS used to print on the label what you would pay sans insurance, then switched to what the insurance company was paying on your script. Then they basically stopped.

However, if you have a chronic disease, say diabetes, then your co-pay is pretty much zero, whether it's generic or not.

But you guys pretty much know thst, eh?