$4 prescription drugs - How do they do it??

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dm200
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$4 prescription drugs - How do they do it??

Post by dm200 » Mon Nov 29, 2010 3:10 pm

I am seeing advertisements by large chains for generic prescription drugs at $4 per month or $10 for 3 months.

Is there a "catch"? Is there any "trick", or is this truly a bargain?

How do these outfits do this and not lose money? That price is less than many/most insurance copays for generic prescriptions??

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Post by touchdowntodd » Mon Nov 29, 2010 3:23 pm

idk, id give ANYTHING for a deal on my entocort.. i cant afford it

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Post by wde » Mon Nov 29, 2010 3:27 pm

This response is completely unresearched and I am nowhere near an expert in this or any related field, but...

Pharmaceuticals, once researched, developed, tested, and approved are very, very cheap to manufacture.

The research, development, testing, trials, and federal approval process is the expensive part.

Also, as soon as insurance companies get involved, prices are inflated, generally speaking, in the majority of situations.
Last edited by wde on Mon Nov 29, 2010 3:31 pm, edited 1 time in total.
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Post by dm200 » Mon Nov 29, 2010 3:30 pm

wde wrote:This response is completely unresearched and I am nowhere near an expert in this or any related field, but...

Pharmaceuticals, once researched, developed, tested, and approved are very, very cheap to manufacture.


Very true (as best I understand). BUT - why do large insurance companies (presumably with a lit of power) not offer similar prices to their subscribers (who pay premiums)?

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Post by wde » Mon Nov 29, 2010 3:33 pm

dm200 wrote:
wde wrote:This response is completely unresearched and I am nowhere near an expert in this or any related field, but...

Pharmaceuticals, once researched, developed, tested, and approved are very, very cheap to manufacture.


Very true (as best I understand). BUT - why do large insurance companies (presumably with a lit of power) not offer similar prices to their subscribers (who pay premiums)?


(1) Many insurance plans have copays near this low level cost. But you're right, not $4, that I've heard of.

(2) If your prescriptions are not on the walmart list, which many of the non-generic (read: expensive) types are not, you are forced to pay full price or go through your insurer.
Last edited by wde on Mon Nov 29, 2010 3:35 pm, edited 1 time in total.
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Post by DTSC » Mon Nov 29, 2010 3:35 pm

The cost of medicines (I'm told) is mostly in research, development, advertising and profits, not in making the chemical compound itself. The costs have long been recovered by the time the drug goes generic. Furthermore, many of the generic meds are made in other countries; India a common source.

The low cost meds get you in the door at Walmart or Target. If you walk by the 42 inch LCD TV enough times, you might just be inclined to buy one eventually.

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Post by earlyout » Mon Nov 29, 2010 3:36 pm

dm200 wrote:
wde wrote:This response is completely unresearched and I am nowhere near an expert in this or any related field, but...

Pharmaceuticals, once researched, developed, tested, and approved are very, very cheap to manufacture.


Very true (as best I understand). BUT - why do large insurance companies (presumably with a lit of power) not offer similar prices to their subscribers (who pay premiums)?


The insurance companies assume most of their subscribers will not look elsewhere and will continue to get their prescriptions through the insurance companies. It all adds to the bottom line for the insurer. The insurance company may not have the same buying power as WalMart but they can't be paying very much more for these $4 medications.

EO

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Post by KyleAAA » Mon Nov 29, 2010 3:41 pm

By definition, generics only exist for drugs for which the patent has expired. That means the R&D has (hopefully) already been paid for many times over and the only remaining cost is manufacture and distribution, which is dirt cheap. The generic companies are probably making an adequate (but not large) profit even at $4. To them, distributing through Wal-Mart is an easy way to push massive volume. Remember, return on assets = net margin x asset turnover. You can increase your return EITHER by raising prices OR raising volume.

For Wal-Mart, it's something to get you in the door. Just imagine, a product that would get a customers in the door every single month like clockwork. It's a dream come true for Wal-Mart because selling to somebody already in the store is easy. It's getting people in the store to begin with that's the difficult part. I doubt Wal-Mart makes much if anything off of these drugs, but the incremental sales it generates indirectly as a result make it very worthwhile.
Last edited by KyleAAA on Mon Nov 29, 2010 3:50 pm, edited 1 time in total.

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Post by mikep » Mon Nov 29, 2010 3:48 pm

By having the pharmacy counter at the back of the store, you pass by $20 of other items that you "need". Also, brand Rx ~10-20% price inflation more than makes up the difference, so much that our insurance requires us to order those Rx maintenance medication by mail order.

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Re: $4 prescription drugs - How do they do it??

Post by fsrph » Mon Nov 29, 2010 3:58 pm

dm200 wrote:I am seeing advertisements by large chains for generic prescription drugs at $4 per month or $10 for 3 months.

Is there a "catch"? Is there any "trick", or is this truly a bargain?

How do these outfits do this and not lose money? That price is less than many/most insurance copays for generic prescriptions??


Well, it's truly a bargain ..... maybe. I say that because, in the fineprint, I bet it says they can change the list at any time. So, one day it isn't going to be $4 anymore. Furthermore. a lot of the $4 generics are old drugs. They can be bought in large quantities very cheaply and even can turn a profit in charging $4. One thing I never understood is the larger Pharmacy Benefit Managers (Caremark, Medco, ExpressScripts) certainly can buy generic drugs as cheaply as the chain drug stores. Yet, since you want to use your employer Rx plan, you end up paying a lot more. It goes right to the PBM's profits. Don't assume your Rx insurance will give you the cheapest price. Often times you end up paying more by using your Rx plan.

Francis

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Post by Watty » Mon Nov 29, 2010 4:18 pm

No inside knowledge but;

It is not all generics, only selected generics. Not all generics are inexpensive to make.

Their competitor has this price so they feel they have to match the competitor's price.

Most people get all their prescription at one place so they will make up for it on some of the other prescriptions that are not $4.

They may get some tax advantages by being able to write off the loss on some $4 prescriptions as a promotional cost.

They likely get special deals from the manufactures of the generic drugs by bundling the purchasing with more profitable generic drugs from the same manufacturer. For example they might only buy the expensive generic "eye of newt" from a supplier if they also agree to sell them the inexpensive generic "dried toads" at cost.

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Post by Chuck T » Mon Nov 29, 2010 4:22 pm

KyleAAA wrote:By definition, generics only exist for drugs for which the patent has expired. That means the R&D has (hopefully) already been paid for many times over and the only remaining cost is manufacture and distribution, which is dirt cheap. The generic companies are probably making an adequate (but not large) profit even at $4. To them, distributing through Wal-Mart is an easy way to push massive volume. Remember, return on assets = net margin x asset turnover. You can increase your return EITHER by raising prices OR raising volume.

For Wal-Mart, it's something to get you in the door. Just imagine, a product that would get a customers in the door every single month like clockwork. It's a dream come true for Wal-Mart because selling to somebody already in the store is easy. It's getting people in the store to begin with that's the difficult part. I doubt Wal-Mart makes much if anything off of these drugs, but the incremental sales it generates indirectly as a result make it very worthwhile.


I think this explains it.
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Post by Sam I Am » Mon Nov 29, 2010 4:41 pm

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Post by supertreat » Mon Nov 29, 2010 4:47 pm

1) These are cheap drugs that the retail store may change at any time so their losses are minimized (though there are still losses due to pharmacy costs)
2) These pharmacies generally have longer waiting times and they are counting on customers waiting for prescriptions and doing a little impulse shopping/buying to fatten their profit margins.
3) They would've stopped doing it if it is a net loss for them.
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Post by jcompton » Mon Nov 29, 2010 5:28 pm

wde wrote:(1) Many insurance plans have copays near this low level cost. But you're right, not $4, that I've heard of.


Tangentially related:

Before committing to use your pharmacy insurance benefit on a purchase, ask what the cash price is. Costco does (or did) this automatically, as I found out to my surprise when I was rung up for $3.80 on a prescription that I expected to be a copay of $5. I asked about it and they said they automatically calculate the cash price and charge that if it's cheaper. (yes, many tried and true decades-old drugs really cost next to nothing to make these days.)

Other pharmacies may not automatically make this comparison, and many have a minimum dispensing fee that's far more than $5, but if you buy a lot of generics which may not show up on a $4 list but you suspect are cheaper than your copay, it may be worth shopping around.

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Post by Grasshopper » Mon Nov 29, 2010 6:30 pm

My copay with BCBS is more than my $10/90day Wal-Mart drug.

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Post by norookie » Mon Nov 29, 2010 7:08 pm

DTSC wrote:The cost of medicines (I'm told) is mostly in research, development, advertising and profits, not in making the chemical compound itself. The costs have long been recovered by the time the drug goes generic. Furthermore, many of the generic meds are made in other countries; India a common source.

The low cost meds get you in the door at Walmart or Target. If you walk by the 42 inch LCD TV enough times, you might just be inclined to buy one eventually.
FWIW: TEVA and MYLAN two Israeli companies supply the USA many generics. They might outsource the "work' to maximize profits but the brain/potilitical/ FDAs friends, germanic, Israeli, whatever, out source the work. Might in fact be to India.
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Post by petunias » Tue Nov 30, 2010 12:26 am

supertreat wrote:2) These pharmacies generally have longer waiting times and they are counting on customers waiting for prescriptions and doing a little impulse shopping/buying to fatten their profit margins.


KyleAAA wrote:For Wal-Mart, it's something to get you in the door.


mikep wrote:By having the pharmacy counter at the back of the store, you pass by $20 of other items that you "need".


DTSC wrote:If you walk by the 42 inch LCD TV enough times, you might just be inclined to buy one eventually.



I think all of these hit on the main reason. In my area, cheap generics are offered by Publix, Kroger (grocery chains), Target, and Walmart.

I'll bet anything that the Walmart number crunchers know the ideal length of time to make you wait for a prescription to be filled to maximize other sales. If the pharmacist tells you it'll be ready in 15-20 minutes, you'll wander around the store and buy things. If it'll be 45-60 minutes, you might leave and come back later.

I think this is the reason that true drugstores like CVS, Walgreens and RiteAid do not participate. Maybe they know that you're going to leave the store and come back later, or maybe they don't have enough high-margin items to make up for the loss.

-petunias

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Post by gunn_show » Tue Nov 30, 2010 1:19 am

KyleAAA wrote:By definition, generics only exist for drugs for which the patent has expired. That means the R&D has (hopefully) already been paid for many times over and the only remaining cost is manufacture and distribution, which is dirt cheap. The generic companies are probably making an adequate (but not large) profit even at $4. To them, distributing through Wal-Mart is an easy way to push massive volume. Remember, return on assets = net margin x asset turnover. You can increase your return EITHER by raising prices OR raising volume.

For Wal-Mart, it's something to get you in the door. Just imagine, a product that would get a customers in the door every single month like clockwork. It's a dream come true for Wal-Mart because selling to somebody already in the store is easy. It's getting people in the store to begin with that's the difficult part. I doubt Wal-Mart makes much if anything off of these drugs, but the incremental sales it generates indirectly as a result make it very worthwhile.


It's for generics, which cost pennies to produce, no different than Target brand Ibuprofen. I've been getting my hypothyroid med for $10 for 90days for a couple years now, very happy about it.
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Post by FrugalInvestor » Tue Nov 30, 2010 1:24 am

dm200 wrote:
wde wrote:This response is completely unresearched and I am nowhere near an expert in this or any related field, but...

Pharmaceuticals, once researched, developed, tested, and approved are very, very cheap to manufacture.


Very true (as best I understand). BUT - why do large insurance companies (presumably with a lit of power) not offer similar prices to their subscribers (who pay premiums)?


Ours does through their drug discount plan that is part of our policy...at least for the generic statin my wife currently takes.
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Rx cost driven

Post by TT » Tue Nov 30, 2010 5:59 am

Advertising costs significantly higher than R&D

http://www.sciencedaily.com/releases/20 ... 140107.htm

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Post by White Coat Investor » Tue Nov 30, 2010 3:59 pm

There are lots of bargains in medicine, but it takes some real know-how to exploit them.

1) $4 drug lists
2) Emergency departments if you don't feel a moral obligation to pay your bills
3) Medicare
4) Medicaid (I saw a patient the other day with a $7 co-pay for the ED visit and no co-pay for an admission-guess what, she wanted to be admitted-but had no reason to be. Her life is literally cheaper when she is in the hospital.)
5) Community health centers (sliding scale fees)
6) Discounts for paying cash (sometimes 50-75% off)
7) Eliminating/delaying tests that will probably come back negative or having a work-up done serially rather than "shot-gun style"
8) Being treated as an outpatient when possible-lots of things that used to be admitted to the hospital can be treated safely at home, if the patient and family are willing
9) Having a family member care for you rather than home health care, assisted living, hospitalization, long-term care etc
10) Hospice
11) Going to foreign countries for care-often cheaper even with airfare/hotels added in
12) A good primary care doctor that doesn't feel the need to refer to lots of specialists
13) A good patient who doesn't feel a need to be seen by lots of specialists
14) Dialysis-Despite being amazingly costly, I don't think anyone who is on it actually pays for it.
15) Homeless clinics (live with a friend? Guess what, you're homeless.)
16) Eating healthy and exercising
17) Making sure you're on the least expensive drugs adequate to treat a condition
18) Being admitted to the medical floor rather than the ICU
19) Home births/mid-wives (Women delivered for thousands of years without obstetricians.) If you're on your 2nd or 3rd vaginal delivery, had no issues with the first delivery or the current pregnancy, don't want an epidural, and live close to a hospital, you can probably deliver your baby quite safely at home and save thousands. You can probably even bring the baby down to the pediatrician's office later that day or the next to be checked out.
20) Employer paid insurance
21) Insurance company negotiated discounts-even if you have to pay the whole bill because you haven't met the deductible, you can still get a serious discount off the asking price because you have insurance.
22) High deductible insurance plans-thousands cheaper than a standard plan
23) Health savings accounts-The stealth IRA
24) Get a $15 book that tells you when you need to go see a doctor immediately and when you can give it a few days at home.
25) Discuss the cost of your care with your doctor, and if she isn't cost-aware (and unwilling to put in the effort to learn,) get a new doctor.
26) Consume less health care. Learn the concept of "number needed to treat." If you knew that drug you were taking was only going to help one out of twenty people who take it, would you still shell out the cash for it every month for years?
27) CHIP-kid's care is very cheap in many states
28) WIC-no one wants a kid to get hurt because his parents are poor
29) This phrase: "If you didn't have to worry about me suing you for missing something, are there any tests or treatments we could skip today?"
30) This phrase: "Could we put this test or treatment off for a week or two and see if I still need it then?"
31) Be happy with the body you were born with.
Last edited by White Coat Investor on Tue Nov 30, 2010 4:19 pm, edited 1 time in total.
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Post by dm200 » Tue Nov 30, 2010 4:16 pm

EmergDoc wrote:There are lots of bargains in medicine, but it takes some real know-how to exploit them.

1) $4 drug lists
2) Emergency departments if you don't feel a moral obligation to pay your bills
3) Medicare
4) Medicaid (I saw a patient the other day with a $7 co-pay for the ED visit and no co-pay for an admission.)
5) Community health centers (sliding scale fees)
6) Discounts for paying cash (sometimes 50-75% off)
7) Eliminating/delaying tests that will probably come back negative or having a work-up done serially rather than "shot-gun style"
8) Being treated as an outpatient when possible-lots of things that used to be admitted to the hospital can be treated safely at home, if the patient and family are willing
9) Having a family member care for you rather than home health care, assisted living, hospitalization, long-term care etc
10) Hospice
11) Going to foreign countries for care-often cheaper even with airfare/hotels added in
12) A good primary care doctor that doesn't feel the need to refer to lots of specialists
13) A good patient who doesn't feel a need to be seen by lots of specialists
14) Dialysis
15) Homeless clinics (live with a friend? Guess what, you're homeless.)
16) Eating healthy and exercising
17) Making sure you're on the least expensive drugs adequate to treat a condition
18) Being admitted to the medical floor rather than the ICU
19) Home births/mid-wives (Women delivered for thousands of years without obstetricians.) If you're on your 2nd or 3rd vaginal delivery, had no issues with the first delivery or the current pregnancy, don't want an epidural, and live close to a hospital, you can probably deliver your baby quite safely at home and save thousands. You can probably even bring the baby down to the pediatrician's office later that day or the next to be checked out.
20) Employer paid insurance
21) Insurance company negotiated discounts-even if you have to pay the whole bill because you haven't met the deductible, you can still get a serious discount off the asking price because you have insurance.
22) High deductible insurance plans-thousands cheaper than a standard plan
23) Health savings accounts-The stealth IRA
24) Get a $15 book that tells you when you need to go see a doctor immediately and when you can give it a few days at home.
25) Discuss the cost of your care with your doctor, and if she isn't cost-aware (and unwilling to put in the effort to learn, get a new doctor.)
26) Consume less health care. Learn the concept of "number needed to treat." If you knew that drug you were taking was only going to help one out of twenty people who take it, would you still shell out the cash for it every month for years?
27) CHIP
28) WIC


Interesting list.

I have only been to an emergency room twice in my life. Once with my then teenage son (fell ice sakting) and once for myself (funny feeling in chest). Both were long and miserable experiences. No bargain, even if they paid ME. PURE TORTURE!!!!

While I agree that there is often too much specialization in medicine today, there are times and medical conditions where seeing (or being referrred to) a specialist takes care of the issue quickly, and with less total cost than messing around for a long time with a non-specialist.

I think I read soewhere that something like 50% of visits to the doctor are unnecessary. If we could only "know" whick 50%.

Let me add that one of the real bargains is a nurse telephone advice line that some HMOs provide. It was wonderful when we had a small child. Also, when we had some condition that there was some question whether we needed to be seen. I believe (for us anyway) that these advice lines, staffed by qualified nurses, both save money for everyine and increase the overall quality of medical care.

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Post by White Coat Investor » Tue Nov 30, 2010 4:23 pm

dm200 wrote:
Let me add that one of the real bargains is a nurse telephone advice line that some HMOs provide. It was wonderful when we had a small child. Also, when we had some condition that there was some question whether we needed to be seen. I believe (for us anyway) that these advice lines, staffed by qualified nurses, both save money for everyine and increase the overall quality of medical care.


That would make a good addition. We get calls in the ED all the time for advice. Due to liability, the standard answer is, "I'm sorry we don't give out advice over the phone. If you feel you need to be seen by a physician please come on in." Lately, as we try to drum up more business, I think we should start giving out advice. But it is always going to be, "Boy, that could be pretty serious. You better come right in. In fact, why don't you call 911 so the ambulance company can get their cut too." :)
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Post by FrugalInvestor » Tue Nov 30, 2010 4:23 pm

Excellent list EmergDoc!
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Post by dm200 » Tue Nov 30, 2010 4:44 pm

EmergDoc wrote:
dm200 wrote:
Let me add that one of the real bargains is a nurse telephone advice line that some HMOs provide. It was wonderful when we had a small child. Also, when we had some condition that there was some question whether we needed to be seen. I believe (for us anyway) that these advice lines, staffed by qualified nurses, both save money for everyine and increase the overall quality of medical care.


That would make a good addition. We get calls in the ED all the time for advice. Due to liability, the standard answer is, "I'm sorry we don't give out advice over the phone. If you feel you need to be seen by a physician please come on in." Lately, as we try to drum up more business, I think we should start giving out advice. But it is always going to be, "Boy, that could be pretty serious. You better come right in. In fact, why don't you call 911 so the ambulance company can get their cut too." :)


Actually, in January 2011, I will be going back to that same HMO that has the nurse advice line. Today, I suppose, they have also added an internet connection, as well. :)

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Post by Sidney » Tue Nov 30, 2010 4:56 pm

Many times when I go into my PCP, I end up seeing the physician's assistant. Most issues are not complex and may only need basic diagnosis and treatment. The PA has even given me prescriptions (I think they may be limited in what they can write). I've never looked to see if this is a savings for me or the doc but either way, I have been satisfied with the treatment and normally get in and out faster.
I always wanted to be a procrastinator.

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Post by neverknow » Tue Nov 30, 2010 8:04 pm

..
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Post by penumbra » Wed Dec 01, 2010 12:54 am

Neverknow:

I know you keep singing this song, but I think you're off base here. What are the commonest ailments people get? High blood pressure (especially if you're overweight), hyperlipidemia (especially if you're overweight), adult onset diabetes (especially if you're overweight). Some get thyroid issues. Are you saying people should just not take anything for these? Mostly, people don't have symptoms with these. Even when not taking drugs, many might say they've never felt better! They are just building up to an early, bad ending. How you think you feel is a very poor guideline in these and other cases.

I of course don't know what medications you've been advised to take that you're foregoing, but for most people, these are some of the commonest.

Really, you should rethink your approach. You give such good advice in other areas, you're at risk for doing people (and perhaps yourself) a great disservice.

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Post by thesofine » Wed Dec 01, 2010 1:07 am

EmergDoc wrote:There are lots of bargains in medicine, but it takes some real know-how to exploit them:

23) Health savings accounts-The stealth IRA


So, is this still true under the new health care legislation?

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Post by penumbra » Wed Dec 01, 2010 2:15 am

Still true. Unless you get sick and need the money.

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Post by frank10 » Wed Dec 01, 2010 8:30 am

I have to take two medications and I have medicare part d. the insurance covers neither drug I take and neither do none of the other insurers. they are both generic. you can get these drugs for 4 dollars without insurance, and what is really strange is that if you had insurance the co-pay would be higher than if you bought the drugs outright.

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Post by cubedbee » Wed Dec 01, 2010 9:58 am

frank10 wrote:I have to take two medications and I have medicare part d. the insurance covers neither drug I take and neither do none of the other insurers. they are both generic. you can get these drugs for 4 dollars without insurance, and what is really strange is that if you had insurance the co-pay would be higher than if you bought the drugs outright.


The insurance company I work for would not make you pay a copay (assuming the drug was covered). If the allowed amount (amount our drug vendor has negotiated as payment in full, below retail price) is less than a member's copay, then the member only pays the allowed amount.

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Post by Abciximab » Wed Dec 01, 2010 10:42 am

A majority of generic medications cost the pharmacy very little. The medications on the $4 list are all still technically sold for more than the cost of the drugs, but when you factor in other costs (salaries, materials, etc.) a lot of the prescriptions are a loss for the pharmacy. This is why you see Wal-Mart, Target, and Safeway offering $4 prescriptions whereas Walgreen's and CVS do not. Big retail stores have always looked at their pharmacies as convenience for customers and a way to get them in the door.

The profit margin on generic medications is pretty good, and this is typically where the pharmacy does best in terms of gross profit per presctiption. Insurance companies know how much medications cost at wholesale and reimburse accordingly. What a customer pays out-of-pocket is much higher than what an insurance company would pay.

Brand name medications, on the other hand, have a very narrow margin despite their high cost. Usually 90% or more of what the customer pays on brand medications is going to the cost of the product.

Trust me, I'm a pharmacist. :D
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Post by neverknow » Wed Dec 01, 2010 11:18 am

..
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Post by AlwaysaQ » Wed Dec 01, 2010 1:05 pm

I was surprised when Target added the 90 days for $10 because it means you don't need to go to the store as often.

I mostly use Kmart which is not as cheap as Target but the traffic and parking lot are so, so much easier to navigate.

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