When a drug costs 30 times what it once did
Diane Shattuck filled a prescription in December for a generic antibiotic called doxycycline. With insurance, she paid $4.30 for 60 pills at a CVS store in Orange.
She returned at the end of February to refill her prescription. This time, she was told her cost for the drug would be about $165.
“It was bizarre,” Shattuck, 73, told me. “And no one at CVS could explain why the price was so high.”
Unfortunately, I won’t be able to offer a clear-cut answer, either. But my effort to untangle Shattuck’s situation cast a harsh light on the shadowy world of drug pricing.
It revealed that different manufacturers can charge wildly different prices for what is essentially the same generic medicine, and that drugstores can rake in unconscionable profits by passing along marked-up meds to customers without the slightest explanation.
“It’s a very murky world,” said Jeffrey McCombs, a professor of pharmaceutical economics and policy at USC. “All you can say for sure is that the price being charged has nothing to do with the actual cost of producing the generic.”
There’s been a lot of buzz lately about insane healthcare charges. Time magazine carried an extraordinary article by Steven Brill recently highlighting the arbitrariness of many hospital prices. My own columns on being hospitalized after a cat bite touched on some of the same issues.
But crazy hospital charges often can be negotiated lower by patients or patient advocates. Prescription drugs are offered by pharmacies to customers on a take-it-or-leave-it basis. And many people might not think to even question the price being charged.
Shattuck was prescribed doxycycline for a skin rash. The first batch of pills she received was manufactured by Watson Pharmaceuticals, which was acquired by Switzerland’s Actavis Group last year. Watson specializes in generic drugs.
According to the U.S. National Library of Medicine, “doxycycline is in a class of medications called tetracycline antibiotics.” It’s used to treat inflections, “including pneumonia and other respiratory tract infections; Lyme disease; acne; infections of skin, genital and urinary systems.”
When Shattuck tried to refill her prescription last month, she was informed that the only doxycycline available was manufactured by Mylan Pharmaceuticals, which, like Watson, specializes in generic drugs. Mylan’s doxycycline, however, came with a price tag absurdly higher than Watson’s.
Shattuck’s doctor said she could skip the refill and stop taking the med, so she never had to fork over the extra cash. But the experience left her wondering how the insured price of the drug could have gone from just a few bucks one month to $165 two months later.
Mike DeAngelis, a CVS spokesman, blamed the problem on “a supplier shortage” involving Watson’s doxycycline.
He also said that, “recognizing the significant price difference between the generic drug our patient was previously dispensed and one that was available from a different generic supplier,” Shattuck was offered “a bridge supply of her prescription until the original supplier’s product became available.”
CVS reordered the Watson-made doxycycline within a week’s time, DeAngelis said, and “refilled her prescription Feb. 22 and left her a message that her order was ready.”
First of all, Shattuck told me that CVS’ “bridge supply” consisted of just three pills, which weren’t enough to last until the new refill was ready. Moreover, she said, there was no message from the pharmacy that a refill was ready.
“That’s because they don’t have our phone number,” Shattuck explained. “We don’t want them calling all the time to say our prescriptions are ready.”
As for that supplier shortage, Charlie Mayr, a spokesman for Watson’s parent, Actavis, said that “we are shipping to all customers, including CVS. There is no shortage of inventory from the Actavis perspective that we are aware of.”
He declined to comment on the pricing of his company’s doxycycline, as did Nina Devlin, a spokeswoman for Mylan.
But Devlin said that Mylan’s doxycycline and Watson’s doxycycline are not perfectly identical, “and therefore cannot be compared by price.”
William Comanor, head of pharmaceutical economics and policy studies at UCLA, said this was a ridiculous distinction.
“Doxycycline is always going to be the same in terms of active ingredients,” he said. “The inert compounds may be different, but not the active ingredients. They have to be consistent.”
A CVS pharmacist in Los Angeles, who asked that his name by withheld because of fear of retaliation by the company, shared with me the average wholesale price of different makers’ doxycycline, as made available to pharmacists by the McKesson Connect online ordering system.
The system shows that the average wholesale price of 100 doxycycline pills made by Watson with a strength of 100 milligrams is $328.20. The same number of doxycycline pills at the same strength made by Mylan cost $1,314.83.
But the average wholesale price, or AWP, as it’s known in the industry, may have little, if any, correlation with what a drugstore charges customers.
“The AWP prices are as made up as the prices that come out of hospitals,” said USC’s McCombs. “It’s not the price that CVS or other drugstores pay.”
In other words, drugstores negotiate their own prices with manufacturers of generic drugs, as do the pharmacy benefit managers who often serve as intermediaries in wholesale drug transactions. They may be able to cut sweetheart deals based on the volume of medicine they can move to retail customers.
“Pharmacies make much more on generics than they do on name-brand drugs,” McCombs said. “They have a lot more wiggle room for pricing.”
Shattuck’s experience raises questions about the responsibility of pharmacies to ensure that customers are receiving if not the best possible price, then at least a fair price for their meds.
It appears to me that Mylan prices its generic doxycycline at an absurdly high level because it can get away with it. Why not, if drugstores willingly enable such blatant gouging?
At the very least, drugstores should routinely make clear whether a customer is receiving the lowest-priced generic available, and if not, why. Customers can then make informed decisions about where to take their business.
Shattuck said she returned to CVS this week and was finally informed about the refilled order of Watson-made doxycycline. Only now, it wouldn’t cost her $4.30. It would cost $35.
Apparently Watson and CVS had decided their respective profits on this drug just weren’t high enough.
David Lazarus’ column runs Tuesdays and Fridays. He can also be seen daily on KTLA-TV Channel 5 and followed on Twitter @Davidlaz. Send your tips or feedback to firstname.lastname@example.org.
Your guide to our new economic reality.
Get our free business newsletter for insights and tips for getting by.
You may occasionally receive promotional content from the Los Angeles Times.