Paying The Price: A 19-State Survey of the High Cost of Prescription Drugs

7/15/2003

Executive Summary

While the pharmaceutical industry is the most profitable industry in the world, millions of uninsured and underinsured Americans struggle to afford the medicines they need, even forgoing medically necessary drugs when prices are out of reach. Meanwhile, the federal government uses its buying power to negotiate fairer prices for the drugs it purchases for its beneficiaries—such as veterans, government employees and retirees. Unfortunately, uninsured individuals have no one doing the same on their behalf. They thus remain at the whim of the pharmaceutical industry, one that has behaved in a manner considered by many to be monopolistic and unethical.

Frustrated by years of gridlock and inaction at the federal level, states across the nation are now considering filling that role for their citizens by establishing state-run buying pools and using their power to negotiate fairer drug prices, allowing uninsured or underinsured consumers of all ages to buy their prescription drugs at lower cost.

The time for state governments to act to lower drug prices has never been greater. The costs of the 50 most popular drugs rose three times higher than the rate of inflation in 2001. As drug prices have climbed, some employers have dropped or reduced the prescription drug coverage offered to their employees. The recent wave of corporate bankruptcies and layoffs has left many consumers without any health insurance at all. Medicare recipients—senior citizens most likely to take prescription medications—lack prescription drug coverage entirely. Moreover, the recent efforts by the Bush administration and U.S. Congress to reform Medicare have failed to address the root cause of the skyrocketing cost of prescription medication.

In the spring of 2003, the National Association of State Public Interest Research Groups (PIRGs) conducted a survey of more than 500 pharmacies in 18 states across the country and Washington, D.C. to determine how much uninsured consumers are paying for 10 common prescription drugs. We then compared these prices with the prices the pharmaceutical companies charge one of their “most favored” customers, the federal government.

In each of the surveyed locations, we found that uninsured citizens are paying much more than the federal government for these 10 common prescription medications. Among the key findings from this survey:

Nationally:

• Based on the results of our 19-state survey, uninsured Americans pay 72 percent more on average for these 10 common prescription medications than the federal government. The price differences ranged from 31 percent for Lanoxin to 110 percent for K-Dur 20.

• Many of the drugs featured in the PIRG survey treat chronic conditions—meaning that the percent difference between the retail and discounted prices quickly adds up. An uninsured person regularly taking Zocor for his high cholesterol, for example, would pay at least $1671 for a year’s supply of Zocor. The government, on the other hand, must pay only $814 for the same quantity of Zocor—a savings of $857.

• Prices varied sharply amongst the surveyed regions. Prescription drugs cost substantially more for uninsured consumers in urban areas in the Northeast and Middle Atlantic states; somewhat less in the Midwest and Mid-South; and substantially less in the Southeast and South/Southwest.

• Of the major metropolitan areas surveyed, the four most expensive cities in which to buy medication were Baltimore, Washington, D.C., Philadelphia and Boston. Prescription drugs were the least expensive, but still significantly above the federal supply price, in New Orleans, Denver, Grand Rapids, Houston and Tampa.