Currently Viewing:
The American Journal of Managed Care July 2017
Currently Reading
The Price May Not Be Right: The Value of Comparison Shopping for Prescription Drugs
Sanjay Arora, MD; Neeraj Sood, PhD; Sophie Terp, MD; and Geoffrey Joyce, PhD
Cost-Effectiveness of a Patient Navigation Program to Improve Cervical Cancer Screening
Yan Li, PhD; Erin Carlson, DrPH; Roberto Villarreal, MD; Leah Meraz, MA; and José A. Pagán, PhD
The Association Between Insurance Type and Cost-Related Delay in Care: A Survey
Sora Al Rowas, MD, MSc; Michael B. Rothberg, MD, MPH; Benjamin Johnson, MD; Joel Miller, MD, MPH; Mohanad AlMahmoud, MD; Jennifer Friderici, MS; Sarah L. Goff, MD; and Tara Lagu, MD, MPH
Availability and Variation of Publicly Reported Prescription Drug Prices
Jeffrey T. Kullgren, MD, MS, MPH; Joel E. Segel, PhD; Timothy A. Peterson, MD, MBA; A. Mark Fendrick, MD; and Simone Singh, PhD
Twitter Accounts Followed by Congressional Health Staff
David Grande, MD, MPA; Zachary F. Meisel, MD, MS; Raina M. Merchant, MD, MS; Jane Seymour, MPH; and Sarah E. Gollust, PhD
Predicting High-Cost Privately Insured Patients Based on Self-Reported Health and Utilization Data
Peter J. Cunningham, PhD
Adaptation of an Asthma Management Program to a Small Clinic
Kenny Yat-Choi Kwong, MD; Nasser Redjal, MD; Lyne Scott, MD; Marilyn Li, MD; Salima Thobani, MD; and Brian Yang, MS
Medication Adherence and Improved Outcomes Among Patients With Type 2 Diabetes
Sarah E. Curtis, MPH; Kristina S. Boye, PhD; Maureen J. Lage, PhD; and Luis-Emilio Garcia-Perez, MD, PhD
Leveraging EHRs for Patient Engagement: Perspectives on Tailored Program Outreach
Susan D. Brown, PhD; Christina S. Grijalva, MA; and Assiamira Ferrara, MD, PhD

The Price May Not Be Right: The Value of Comparison Shopping for Prescription Drugs

Sanjay Arora, MD; Neeraj Sood, PhD; Sophie Terp, MD; and Geoffrey Joyce, PhD
Price shopping for medications within a small geographic area can yield considerable cost savings for uninsured and insured consumers in high-deductible health plans.
In our study sample of 528 pharmacies, prices found at independent pharmacies and by using online discount coupons were markedly lower, on average, than at grocery, big-box, or chain drug stores for 2 widely prescribed antibiotics. Drug prices varied dramatically within a zip code and typically were less expensive when purchased in lower-income areas. The average price difference within a zip code was $52 for levofloxacin and $17 for azithromycin, which suggests that price shopping within a small geographic area can yield considerable cost savings, particularly for uninsured and insured consumers in high-deductible health plans with high negotiated prices. A possible explanation for the greater price variation with levofloxacin is that it recently became available as a generic, so there has been less time to establish a fair market value.
There is a common perception that chain drug stores have lower prices than independent pharmacies due to economies of scale and the fact that the chains derive a smaller fraction of their revenue from the sale of prescription drugs. However, chain drug stores typically compete less on price and more on convenience, brand name, and nondrug items.8 By contrast, independent pharmacies compete largely on price and service to induce consumers to bypass chain drug stores.9 Our results suggest that cash-paying consumers often face a premium for going to chain drug stores and could save substantially by using online coupons or purchasing their medications at independent pharmacies in the same or neighboring zip codes.
Although poor adherence is endemic, it is particularly problematic for individuals of lower SES.10 An estimated 20% to 35% of patients are primary nonadherent by failing to fill an initial prescription, and an additional 20% discontinue therapy after filling the first prescription.11-13 In 2012, 22% of uninsured adults aged 18 to 64 years reported not getting needed prescription drugs due to cost compared with 5% of adults who were insured for the whole year.14 Noncompliance with antibiotics for respiratory infections can result in treatment failure, worsening severity of disease, sepsis, antibiotic resistance, and increased risk of hospitalization.
A critical question is the extent to which consumers would use price information in purchasing medical services. The highly touted movement toward “consumer-directed healthcare” relies on patients having easy access to information concerning drug prices and quality. A recent survey indicates that a majority of Americans have tried to find out how much they would have to pay out of pocket—not including a co-pay—before getting care. However, the survey also reveals that most Americans are not aware that prices can vary across healthcare providers.15
Our results differ from those of a Florida study by Gellad et al that obtained drug prices for 3 chronic medications (esomeprazole, fluticasone, and clopidogrel) and a generic antibiotic (azithromycin).7 They found that mean drug prices were 9% higher in the poorest  zip codes and that independent pharmacies in the poorest areas charged the highest mean prices. We, however, found the opposite: lower prices at independent and online pharmacies and pharmacies located in low-income areas. A possible explanation for the differences across studies is that the Florida study obtained drug prices from a website whereas we collected prices by calling individual pharmacies. We also asked for any available discounts and verified concordance with in-store prices in a pilot study. The Florida study also restricted the sample to pharmacies that filled 1 of the 4 drugs to a Medicaid beneficiary in a single month (November 2006). This may have resulted in a nonrepresentative sample of pharmacies across income areas. By contrast, we collected price data over the phone from all available pharmacies. We focused on price variation for antibiotics under the assumption that consumers would have limited experience purchasing them (and thus would be less aware of price) and the consequences of not filling the prescription due to cost would have a more immediate impact on health.
There are several limitations to our study, the most prominent of which is that we only measured prices of 2 medications for an acute condition in a single county in California (LA County). We do not know if the findings will hold in other regions or states. However, LA is an economically and culturally diverse county with a broad array of income levels and population densities. The magnitude of price variation across outlets and the savings associated with online coupons at nationwide chains suggest that we could expect similar results in other areas of the country. The extent of price variation may be lower for chronic medications, but these by their nature (length of time taken) may impose a larger financial burden on patients. Future research should focus on comparing prices across a broader spectrum of pharmaceuticals, including medications for chronic diseases.
Another limitation of our study is that we obtained drug prices via telephone rather than in person, and pharmacies may offer discounts in the store that they are unable or unwilling to provide over the phone. Also, the calls to the pharmacy were made from a doctor’s office on behalf of a hypothetical uninsured patient, and the callers asked each pharmacy for any potential discounts after an original price was provided. Over 98% of pharmacies in our sample provided prices over the phone. Patients calling on their own behalf may not receive the same discounts we received. Additionally, we only called pharmacies in the highest and lowest quartiles of median income. It is possible that we might have a better understanding of price variation if we had contacted all pharmacies regardless of income level.
Finally, we used a single website to represent discounts available online. Nonetheless, GoodRx is the largest price aggregator and coupon tool used by thousands of doctors and millions of patients every month. Further, 100% of GoodRx coupons were honored when physically presented at the pharmacy during this study.
Slowing the growth of healthcare costs underscores nearly every health policy initiative in the United States and is the motivation for public and private efforts to increase price transparency in healthcare markets. Price transparency initiatives face considerable obstacles, however; most prominently, how to reliably measure and convey information about quality and price for thousands of complex medical services produced by a wide array of providers and organizations. The task is less daunting for prescription drugs because quality is fixed.
The extent of price variation found in this study suggests that consumers could readily benefit from greater price transparency. If this information were widely available to consumers, large variations in drug prices across pharmacies would likely be reduced. 

The authors would like to thank Kaleigh Barnes, Brian Raffetto, Melissa Luttio, Janice Rivelle, and Erin Higginbotham for helping to collect and analyze the data.

Author Affiliations: Keck School of Medicine, (SA, ST); Sol Price School of Public Policy (NS); and School of Pharmacy (GJ), Leonard D. Schaeffer Center for Health Policy and Economics, University of Southern California, Los Angeles, CA.

Source of Funding: None.

Author Disclosures: The authors report no relationship or financial interest with any entity that would pose a conflict of interest with the subject matter of this article.

Authorship Information: Concept and design (SA, GFJ, NS, ST); acquisition of data (NS, ST); analysis and interpretation of data (SA, NS, ST); drafting of the manuscript (SA, GFJ, SN, ST); critical revision of the manuscript for important intellectual content (SA, GFJ, NS, ST); statistical analysis (SN); administrative, technical, or logistic support (ST); and supervision (SA, ST).

Address Correspondence to: Geoffrey F. Joyce, PhD, Leonard D. Schaeffer Center for Health Policy and Economics and School of Pharmacy, University of Southern California, 635 Downey Way, Los Angeles, CA 90089-3333. E-mail: 

1. Costliest cities 2015: pricing for the same medical services is all over themap (literally). Castlight health website. Accessed September 27, 2015.

2. Garfield R, Majerol M, Damico A, Foutz J. The uninsured: a primer—key facts about the health insurance and the uninsured in the era of health reform. Kaiser Family Foundation website. Published November 2015. Accessed January 7, 2016.

3. 2015 Employer Health Benefits Survey. Kaiser Family Foundation website. Published September 22, 2015. Accessed September 27, 2015.

4. Kullgren, JT, Duey, KA, Werner, RM. A census of state health care price transparency websites. JAMA. 2013;309(23):2437-2438. doi: 10.1001/jama.2013.6557.

5. Whaley C, Schneider Chafen J, Pinkard S, et al. Availability of health service prices and payments for these services. JAMA. 2014;312(16):1670-1676. doi: 10.1001/jama.2014.13373.

6. Look KA. Patient characteristics associated with multiple pharmacy use in the U.S. population: findings from the Medical Expenditure Panel Survey. Res Social Adm Pharm. 2015;11(4):507-516. doi: 10.1016/j.sapharm.2014.10.004.

7. Gellad WF, Choudhry NK, Friedberg MW, Brookhart MA, Haas JS, Shrank WH. Variation in drug prices at pharmacies: are prices higher in poorer areas? Health Serv Res. 2009;44(2, pt 1):606-617. doi: 10.1111/j.1475-6773.2008.00917.x.

8. Four big trends shifting the business of retail pharmacy. McKesson website. Published March 14, 2016. Accessed June 2017.

9. Leger M. Three ways small drug stores can beat big-box competitors. The Globe and Mail website. Published June 14, 2013. Accessed June 2017.

10. Goldman DP, Smith JP. Can patient self-management help explain the SES health gradient? Proc Natl Acad Sci USA. 2002;99(16):10929-10934.

11. Liberman JN, Hutchins DS, Popiel RG, Patel MH, Jan SA, Berger JE. Determinants of primary nonadherence in asthma-controller and dyslipidemia pharmacotherapy. Am J Pharm Benefits. 2010;2(2):111-118.

12. Shin J, McCombs JS, Sanchez RJ, Udall M, Deminski MC, Cheetham TC. Primary non-adherence to medications in an integrated healthcare setting. Am J Manag Care. 2012;18(8):426-434.

13. Evans CD, Eurich DT, Remillard AJ, Shevchuk YM, Blackburn D. First fill medication discontinuations and nonadherence to antihypertensive therapy: an observational study. Am J Hypertens. 2012;25(2):195-203. doi: 10.1038/ajh.2011.198.

14. Health, United States, 2013: with special feature on prescription drugs. National Center for Health Statistics website. Published May 2014. Accessed June 2017.

15. Schleifer D, Hagelskamp, C, Rinehart, C. How much will it cost? how Americans use prices in health care. Public Agenda website. Published March 9, 2015. Accessed June 2017. 
Copyright AJMC 2006-2020 Clinical Care Targeted Communications Group, LLC. All Rights Reserved.
Welcome the the new and improved, the premier managed market network. Tell us about yourself so that we can serve you better.
Sign Up