Financial Savvy – ‘making Rx Affordable’

A friend of mine recently told me that she needed a particular prescription allergy medication but wasn’t taking it because she couldn’t afford the cost. Sound familiar?  In fact, many people forego prescription drugs or, worse, take them less frequently or in smaller doses than recommended in order to save on costs. Others buy drugs from foreign countries that do not have similar controls on quality and safety.

You may be surprised at Rx costs for some US households, particularly when the drugs they need are not available in generic form. For example, Celebrex, an arthritis drug, costs $1,776 per year and Lipitor, for cholesterol, costs $1,104 per year. Generic drugs have the same active ingredients as brand-name drugs and can be approved by the FDA after the originating company loses patent protection. The name-brand antidepressant Wellbutrin costs $2,388 per year, but a generic version is available for $744. Clearly, without insurance, these are not minor household expenditures. Incidentally, there is generally a higher profit margin on generics.

Although, as a CSU employee, our household is lucky to have a health insurance plan which includes prescription drugs. CSU at one time covered most prescriptions, but like many employers, it has had to incorporate some cost reduction elements-I now pay a separate deductible per year and a higher copay on name-brand drugs.  Fortunately, I can afford to pay the difference, but many cannot.

Spending on prescription drugs in the US today is about four times what it was in 1990. According to the Kaiser Family Foundation, this is a function of three factors:  more prescriptions being written, increasing prices, and a shift to new, higher-priced drugs. You can’t count on physicians to keep an eye on costs, since their focus is usually on how well the drugs work as opposed to how much they cost.

In the last ten years, the actual number of prescriptions purchased per year has risen about eight times faster than the population and now averages about 12 per person. Some believe that the change in demand has been driven by increased drug company spending on advertising directed at consumers rather than physicians. And this advertising is usually for the highest-priced drugs.

Prescription drug costs in the US have been increasing faster than overall inflation for many years. AARP Public Policy Institute survey results show that name-brand drug prices have increased since 2002 at a rate of more than 6 percent per year whereas inflation averaged less than 3 percent per year.  But there is good news to report. In September, Wal-Mart announced that its pharmacies will sell certain generic drugs for a flat price of $4 per month’s supply. For many people, this is a better deal than their usual "insured" copay. This program is gradually being rolled out across the nation and began on Tuesday November 28 in Fort Collins stores. Not all generics are included in the program, but there are choices in a range of therapeutic categories, including antibiotic, cholesterol, hormone therapy, diabetes, cardiac, thyroid, gastrointestinal, asthma, allergy, and others. This is great news for the uninsured, who can now gain access to needed medications at an affordable price.  It is also expected that additional drugs will be added in the future and that competing pharmacies will have to follow suit.

Don’t worry about Wal-Mart’s future profitability-they’ll still make money on most of the generics they sell, just not as much as before. And they’re counting on once-a-month refill customers who might just buy a few other items while they’re in the store.  

– 30 –

Vickie Bajtelsmit, Professor of Finance, Colorado State University College of Business,,

(970) 226-1473