Generics Aren't Always That Much Cheaper

Generics meds are supposed to be a cheaper alternative to name-brand drugs, but a recent Wall Street Journal found that there wasn’t as much difference as you might think. — BEN POPKEN

Why Generic Doesn’t Always Mean Cheap [WSJ via Freakonomics via BoingBoing]

UPDATE: Stephen Dubner writes to prod our eyes towards what’s really stunning, that the price difference between Walgreens and the Costco pharmacy can be up to 1000%. His post suggests this is because the standard Walgreens, Eckerd and CVS prescription shoppers (i.e. old people) are entrenched in their ways and not exercising consumer choice.

But another factor is that CVS, Walgreens and Eckerd don’t have plasma TVs to make up for the cheap drugs. At prices like $12 and $15, you could consider the pills considered loss leaders. What big ticket item are you going to pick up at Walgreens on a whim, a singing and dancing Santa Claus?

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  1. acambras says:

    Yeah, but where my wallet comes in is my insurance company co-pays. Under my policy, co-pays on generics are $10. Co-pays on most brand names are $20. And co-pays for “premium” drugs are $30 — I know Tamiflu is on that list, and I think drugs like Viagra and Cialis are too.

    So even if the cost for a bottle of generic whatever is only slightly cheaper than that for a bottle of name brand, it’s still a substantial difference in my co-pay.

  2. thrillhouse says:

    hrmm, so really, based on the chart, Drugstore.com seems to be a rip. Other than that, is saving $20-30+ not worth the WSJ’s time?

    Looks like CostCo and Sam’s clubs are the places to get your pills. Might begin to recoup those membership fees.

  3. MaliBoo Radley says:

    Believe it or not, they sell Zocor over the counter here in the UK .. dig it! It goes for £7.99 for 28 tablets .. I believe that’s about $15.

    http://www.boots.com/shop/product_details.jsp?productid=10

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  4. typetive says:

    Jeeze, if I were paying for my own prescriptions, it’d definitely be worth the Costco membership. Good to know. (I’m on a similar plan to acambras – $10 copay, or retail, whichever is lower, for generics.)

  5. jaysonjaz says:

    From Your Friendly Consumerist Pharmacist:

    The deal with these specific generics is that they all have recently become available as generic medications. Due to the way drug copyright law was written, once a drug first becomes generic, only one company is allowed to make that generic. Therefore, you generally have the brand, which is high, and a generic which is just a little bit cheaper. After six months, other manufacturers are allowed to enter in and start making the drugs, which therefore leads to dramatically lower prices.

    As an example, Zocor became generic last Summer. At that point the Brand sold for about $140 for 90 and the Generic was about $110 for 90. Just a month or two ago, that six month exclusivity period ended and the price went from $110 to around $20-30 for generics.

    Overall, generics are a great value.

  6. @thrillhouse: The reporters at WSJ just have it like that. $20 is just a mere pittance.

    My first reaction to the headline was, “This is news?” before remembering most people don’t have to see the real prices because of health insurance.

    Sam’s Club/Costco prices are like whoa.

  7. knn269 says:

    Zoloft generic prices – Sertraline 50mg for 30 tabs at both Costco and Sam’s are incorrect. Costco $53 and Sam’s will match that price if you ask them to.

  8. Mogbert says:

    I have to say, I go to costco, and the generics are:
    -$130
    -$76
    -$35
    -$32

    Now, I’m not pulling down Wall Street Journal reporter type money, and I’m obviously not getting any kickbacks for any writing I do, but I have to say those seem to me to be SUBSTANTIAL savings…

  9. karmaghost says:

    Summarizing these posts and the findings of WSJ:

    Generics are a good bet, even if you’re talking about more expensive generics.

    One of the meds with the smallest difference is Zithromax at a little over $10. If that’s monthly, like it usually is, that’s a savings of over $120 a year. Still not too shabby.

  10. Joe Hass says:

    There are two reasons Costco’s prices are so low (this was the explanation given by Costco in their Costco Connection magazine two years ago): they cap their margin on drugs to 14% (which they do on every item in their warehouse) and they roll all drug rebates from insurance and pharma companies back to the consumer.

    The idea that Costco uses the pharmacy as a loss leader doesn’t hold water: anyone can use the Costco pharmacy (membership is not required); and Costco’s business model doesn’t support the idea of a temporary loss leader because their margins are lower on items. Best example: try buying a spindle of CD-Rs at Costco. You’ll consistently pay $30, even while the Best Buy down the street marks a similar brand down to $15. I’ve asked the manager of a Costco why they carry CD-Rs when they’re constantly out priced by other retailers. His answer was absurdly simple: enough people buy them.

    BTW: I saw this when it first hit the paper on Tuesday. The best quote is from the Rite Aid person who said the price quoted (which happened to be the highest price in the survey) was wrong, but refused to give the correct price because it was “proprietary information.”

  11. “Looks like CostCo and Sam’s clubs are the places to get your pills. Might begin to recoup those membership fees.”

    As noted just above — by law (at least in my state), warehouse clubs can’t require you to join to allow you to access the pharmacy. If they operate a pharmacy, they have to let anyone go to it whether they’re a member or not.

  12. TPK says:

    Does anyone know how BJ’s compares to the other two warehouse stores in this area?

  13. eross says:

    This is informative, but what about independent pharmacies? According to Consumer Reports, they often have better prices than the drug chains and beat them hands down for overall value.

    Article summarizing CR’s 2003 report here: http://reclaimdemocracy.org/independent_business/independe

    Pdf with full study here: http://reclaimdemocracy.org/independent_business/consumer_

  14. LintMan says:

    Loss leader? I doubt it. How many people do you think pop in to the Costco to buy a big screen TV along with their $15 prescription? Particularly when the people without insurance who need these prescriptions probably couldn’t afford to buy a big screen TV. (Given their lack of prescription coverage, that’s not an unreasonable bet.)

  15. chandler in hollywood says:

    What is not stated is the number of drugs that are eligible to be offered in their generic form where Big Pharma pays the generic producing company NOT TO PRODUCE a generic medicine.

    Thank you GW Bush.

  16. mad_oak says:

    @jaysonjaz: Nice post.

  17. jaysonjaz says:

    thanks mad_oak

    Also as a Pharmacist at an independent company, I wanted to confirm what eross said. I know that we have much much better prices than any of the chains. The Walgreens across from us has a minimum of $8 or $9 per prescription. That means if you walk in and ask for 1 hydrochlorthiazide tablet (which costs about 3 cents) they will charge you $9. The pharmacists there aren’t allowed by the company to alter any of their prices, so thats what it is. Since we’re not bound by idiotic corporate policy, we’re free to help out as much as we want.

    When I got out of school, I swore I wouldn’t work for any of those faceless corporations and I haven’t regretted it for a single moment.

  18. wesrubix says:

    Having been a pharm kid (HAW–my parents are pharmacists–I know can you feel the nerd vibes?), I can also say that generics are a good thing: they encourage market competition and also (consequently) cost less.

    Pharmaceutical patents exist to help cover the cost of R&D required to create the patented drug. That’s why the patents are short. Otherwise we might still be paying $[astronomical number] for Tylenol (apap).

    Of course these patents also give the pharmaceuticals an interesting economical tool…
    e.g. Clarinex came from Claritin (big surprise). When Claritin went generic, the manuf. no longer had that market edge of sole provider and price control. So they made Clarinex. It’s almost the same. Claritin turns into Clarinex… in your body… about 20 minutes after taking it. You get the idea. Funny detail, the generic name of Claritin is loratadine. Clarinex is desloratadine.

    It’s also very important to remember that if your doctor ever itemizes drug recommendations for you that include generics, make sure to ask what the differences are. For instance, a friend of mine was recently recommended to go on SSRI anti-depressants, namely Lexapro. Her doctor said she could prescribe a generic to save money, but the generics aren’t Lexapro, since the patent hasn’t expired. This isn’t an error on the doctor’s fault at all as she explained the differences–just a question you may want to ask if you aren’t sure.

  19. Major-General says:

    A little birdy dropped a hint that at a major West Coast pharmacy chain that mark-ups for prescriptions is around 16-18%. Intersting also that the price for the generic can be less than the minimum co-pay. I wonder how many people pay 10-20$ co-pays for generics that cost less than that.