Welcome to the murky world of drug pricing.


Have you ever wondered what a gallon of gasoline costs?  Likely not, because the answer is on nearly every corner.  But then there is the question about why it costs what it costs.  That’s a bit more work to find out, but the information is still readily available.  Turns out that an entire marketplace of buyers and sellers set the price of gasoline each day based on their assessment of the plethora of factors that drive supply and demand.  Pretty efficient system!

How about a gallon of milk?  Again, easy to find out from a quick trip to your local supermarket.  The pricing also makes sense… Visit a large discount store and choose regular old milk and it's cheap.  If you only drink organic milk and choose to shop at a boutique health food store, you won’t be shocked if it’s considerably more expensive.  Again though, no matter where you buy it, the price is ultimately driven by supply and demand.  This is why you can be certain that that gallon of milk you purchased for $4.00 doesn’t really cost 40 cents.

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Now how about that prescription that you picked up the other week?  What does that cost?  If you opted to pay cash for your prescription, you'll get a number, but we'd bet that if you went to 10 different pharmacies you will get 10 different numbers.  If you instead paid with insurance (but haven't met your deductible), we'd double down that you'll have to pay a completely different price altogether for your prescription, and that price would change if you changed insurers.  

With the way our prescription supply chain is designed, it's really difficult to trust that we are paying a fair price for the medications we need.  What's missing here (that we have with gasoline and milk) is a transparent and efficient marketplace setting the price of the underlying product.  Instead, the price you pay is being set by a few large companies whose best interest is to keep all the nitty gritty details of how they set the prices proprietary.  They may be choosing to set the price close to the cost, or they may not.  They have created a system that is so mind-numbingly complicated that it's hard to ever know whether or not you're getting a fair deal.

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If you dig deep enough (and pay enough money), you can get access to cost benchmarks for the medications you take.  But which one to use?  There is Average Wholesale Price (AWP).  Wholesale Acquisition Cost (WAC).  Average Manufacturer Price (AMP).  Turns out those are all different from each other.  Then there is the king of all non-transparent price benchmarks: Maximum Allowable Cost or "MAC."  Good luck ever obtaining that benchmark as your pharmacy benefit manager (PBM) certainly has it classified it as proprietary.

Let’s say you pony up the money for one of the pricing measures you can get, such as WAC.  Then you learn that the PBMs are negotiating rebates with the drug manufacturers off of that list price, none of which are publicly available.  The rebate could be 20%, 50%... maybe 75% of the list price!  All of that is hidden from you. 

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And that’s when you realize the depth of the sickness of our system.  You, being well below your deductible, just paid some arbitrary inflated amount of money for your prescription and you have no idea where the rest of the money went.  Your pharmacist is likely just as frustrated.  Take her out for a beer and she’ll tell you that she has no idea how to predict what you'll be charged, what goes on in the middle of your transaction, and what sort of profit she will make from day to day on the drugs she dispenses to you.

So what are we to do about this?  It’s simple – we need to be armed with better information.  Some of it we can get, and 46brooklyn will work to provide it to you in an easily digestible format.  Some of it, sadly, is completely hidden.  But with the scrutiny on drug pricing rising, we have hope that we are close to waking up from this nightmare of a system.  Until then, we’ll keep pushing out visualizations and research to better arm you for battle.