Why pay $976 for a $200 prescription? Variation in Drug Prices

Rich Parker, MD explores variation in drug prices, finds that a three-month supply of potassium citrate can range from $200 to $976 - and starts looking into barriers to pricing transparency for consumers.

Potassium citrate

In a recent blog post, many of you enjoyed my description of the arcana of an EOB (Explanation of Benefits) for a $71,000 hip replacement.  Today I want to share a personal story with you about variation in drug prices that I think again highlights the irrationality of pricing in the U.S healthcare system.

At the risk of sharing too much PHI, I have experienced kidney stones.  Turns out there is (for me) a medication which is a particular formulation of potassium that helps prevent the formation of new kidney stones.  This drug is called potassium citrate, and also goes by the name of Uro-cit.

For several years, I have blithely payed $400 every three months out of my health savings account (HSA) for the drug.  It just seemed to irk me that something as basic as potassium should cost that much.  So last week I went on-line and found out that in Eastern Massachusetts, where I live, the cost for the same amount of the same potassium citrate ranges from a low of $200 for a 3-month supply to a high of $976!!

I called the pharmacy with the lowest price and they would not verify the cost for me until they had an actual prescription in their hands.  Being a doctor often comes in handy, and in this case, I simply wrote a prescription for myself and faxed it over.  The pharmacist then confirmed that the price would indeed be $200 for a 3-month supply.

Because the pharmacy is about 30 miles from my home, I inquired about mail away.  The pharmacy website explained that some insurers could not or would not cooperate with the mail away option.  Their pharmacist suggested that I call my insurer to check on that.

So when I called my insurer, they referred me to the PBM (pharmacy benefit manager) to find out if home delivery was an option.  I was amazed when the individual I spoke with told me the $400 price for me was irrelevant, because it was helping drive down my family deductible!  I explained that I had no intention of paying anyone $400 for a drug when I was told I could pay $200.  Begrudgingly, she accepted my logic and told me I could switch out of their PBM for that drug if I insisted.  I insisted!

This very minor tale of variation in drug prices for a simple drug exemplifies a basic problem in the U.S. healthcare system, namely – huge unjustified variation in price.  Many patients, also called consumers by some, will not understand that such variation exists, or necessarily know how to look for and take advantage of that variation.  Free market theory suggests that the consumer will figure out the best price, but that is often not true in healthcare where prices are obscured and covered by confusing layers of insurance coverage, co-pays and deductibles.  Perhaps part of a solution moving forward is to move towards some kind of “forced transparency” that allows patients to more easily understand the variation in their drug prices.

Curious about the graphic at the top of this page?  Explore five years of changes in prescription cost and frequency in our data visualization Prescription Drug Movements.

Rich Parker, MD

Dr. Richard Parker

Dr. Parker serves as chief medical officer for Arcadia with overall responsibility for the design and implementation of clinical strategies, input into the roadmap and development of Arcadia’s technology and service programs, thought leadership in support of providers transitioning to value-based care, and strategic advisory work for physician leaders at Arcadia’s clients.

Previously, Dr. Parker was an internist with a 30-year history at Beth Israel Deaconess Medical Center. From 2001 until 2015, Dr. Parker served as the medical director and chief medical officer for the 2,200 doctor Beth Israel Deaconess Care Organization. He oversaw the physician network evolve from a fee-for-service payment system to a nationally recognized global payment pioneer Accountable Care Organization. Dr. Parker’s other areas of expertise include end of life care, medical malpractice, care of the mentally ill, electronic medical records, and population health management. Dr. Parker served as assistant professor of medicine at Harvard Medical School. Dr. Parker graduated from Harvard College in 1978, and the Dartmouth-Brown Program in Medicine in 1985.

Dr. Parker is an in-demand speaker to associations, companies, and academic institutions on the topics of population health management, electronic health records, value-based care, and evolutionary, medical and business impacts of stress.

February 7, 2017

Ask Dr. Parker

Our chief medical officer Rich Parker, MD frequently travels across the country to meet with our customers.  He is constantly asked for advice on running a value based care organization – from how to incentivize physicians during the transition from fee-for-service to fee-for-value to how a small practice can make effective use of a nurse care manager.

Over time, we’ve noticed that a lot of our customers have similar challenges and opportunities as they tackle value based care.  So, we’ll be sharing some of these questions – and Dr. Parker’s responses – with everyone on a regular basis in 2017.  We’ll even pull in some guest experts to provide specialized insight and different perspectives.

Do you have a question for Dr. Parker?

Ask Dr. Parker