Paying the Price

CALPIRG Education Fund

Exectutive Summary

Millions of uninsured and under-insured Americans struggle to afford the medicines they need, even forgoing medically necessary drugs when prices are out of reach. When discussing the high cost of prescription drugs, politicians often focus on the financial burden carried by senior citizens. Unfortunately, as this report shows, high prescription drug prices are a problem for Americans of all ages, particularly for the uninsured.

Today, nearly 46 million Americans under the age of 65 lack health insurance, and millions more with insurance lack prescription drug coverage. Young adults from 19 to 34 years old are the fastest growing group of uninsured, accounting for 40 percent of the total.

At the same time, prescription drug prices are skyrocketing in the United States, rising much faster than the rate of inflation. In 2005, Americans spent $252 billion on prescription drugs.

The federal government uses its buying power to negotiate lower prices for the drugs it purchases for its beneficiaries, such as veterans, government employees and retirees. Uninsured consumers, with no one to negotiate on their behalf, pay full price for their medications—if they are able to afford them at all.

During the spring of 2006, researchers from the state Public Interest Research Groups (PIRGs) posed as uninsured customers and surveyed by phone hundreds of pharmacies in 35 cities across the country to determine how much uninsured consumers are paying for 10 prescription drugs commonly used by adults under age 65. We then compared these prices with the prices the pharmaceutical companies charge the federal government; with prices at a Canadian pharmacy; and with the results of a similar survey we completed in 2004. Key findings include:

LOS ANGELES FINDINGS
• Uninsured residents of Los Angeles pay 65 percent more than what the federal government pays for the same drugs, ranking the city 6th out of the 35 cities we surveyed.

• An uninsured Los Angeles resident taking Zithromax for an infection has to pay 66 percent more for his or her prescription than what the federal government pays for the same medication. This is more than any other city we surveyed.

• The uninsured in Los Angeles pay more than twice as much for their medication at local drug stores as they would pay at a Canadian pharmacy.

SACRAMENTO FINDINGS
• Uninsured residents of Sacramento pay almost 69 percent more than what the federal government pays for the same drugs, ranking the city 2nd out of the 35 cities we surveyed.

• An uninsured Sacramento resident taking Synthroid for a chronic thyroid condition pays three times what the federal government pays for the same drug. The average price of Synthroid, as well as the sleeping aid Ambien, was higher in Sacramento than in any other city we surveyed.

• The uninsured in Sacramento pay more than twice as much for their medication at local drug stores as they would pay at a Canadian pharmacy.

SAN DIEGO FINDINGS
• Uninsured residents of San Diego pay 60 percent more than what the federal government pays for the same drugs, ranking the city 19th out of the 35 cities we surveyed.

• An uninsured San Diego resident taking Singulair for asthma or allergies pays 94 percent more for his or her medication than what the federal government pays for the same drug—almost twice the price. The average price of Singulair in San Diego was the 2nd highest among the cities we surveyed.

• The uninsured in San Diego pay almost twice as much for their medication at local drug stores as they would pay at a Canadian pharmacy.

SAN FRANCISCO FINDINGS
• Uninsured residents of San Francisco pay 68 percent more than what the federal government pays for the same drugs, ranking the city 3rd out of the 35 cities we surveyed.

• Three drugs—the anxiety drug Lexapro, the cholesterol drug Lipitor, and the blood pressure drug Norvasc—cost more in San Francisco than in almost every other city we surveyed. The uninsured in San Francisco pay the third highest prices for these drugs.

• An uninsured San Francisco resident taking Synthroid for a chronic thyroid condition has to pay 186 percent more for his or her prescription than what the federal government pays for the same medication—almost three times the price.

• The uninsured in San Francisco pay more than twice as much for their medication at local drug stores as they would pay at a Canadian pharmacy.

NATIONAL FINDINGS
• Uninsured Americans pay 60 percent more on average than what the federal government pays for the prescription drugs we surveyed.

• Regionally, uninsured consumers in the Northeast pay the highest prices for the 10 drugs we surveyed, followed by the West, South, and Midwest. Among the cities we surveyed, the uninsured in Boston, Sacramento, San Francisco, and Hartford (CT) pay the highest prices. Des Moines has the lowest prices among the cities we surveyed, but uninsured Des Moines residents still pay 46 percent more than the federal government for the same drugs.

• Uninsured Americans pay twice as much for drugs purchased at local pharmacies as they would pay if they purchased the same drugs from a Canadian pharmacy.

• Compared with our 2004 survey, the cost of the nine prescription drugs we surveyed increased by 11 percent, 81 percent faster than the general rate of inflation between 2004 and 2006.

RECOMMENDATIONS
The state PIRGs support the following common sense solutions to the problem of overpriced prescription drugs.

Increase the Availability of Generic Drugs.

Lower-cost generic drugs could save Medicare, Medicaid and consumers billions of dollars. The state PIRGs support increasing the Food and Drug Administration’s budget devoted to approving generic drug applications in order to ease the substantial backlog. We also support closing loopholes that allow drug makers to hold on to their patents and slow the introduction of generic drugs to the market.

Establish Prescription Drug-Buying Pools.

The state PIRGs support creating prescription drug-buying pools at the state and multi-state level to allow individuals, businesses and the government to use their combined buying power to negotiate lower drug prices.

Limit Drug Makers’ Marketing Tactics.

Drug makers’ marketing tactics encourage doctors and consumers to request the newest and more expensive medication, regardless of proof about its superiority to the older, less expensive drug. The state PIRGs support limiting direct-to-consumer advertising, restricting marketing to doctors, and placing strict limits or outright bans on gifts from drug makers to doctors.

End Secret Deals with Drug Makers.

The state PIRGs support efforts to increase transparency and accountability for Pharmacy Benefit Managers (PBMs), which negotiate deals with drug makers on behalf of insurers, state health programs, and large businesses. These deals are shrouded in secrecy and have led to lawsuits alleging that PBMs fail to act in their clients’ best fiduciary interest.

Legalize Prescription Drug Importation.

The state PIRGs support legalizing prescription drug importation as an interim solution for the millions of uninsured consumers who cannot afford to purchase their medications in the United States.