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No Bargain…Pharmacies Mark-up Top Generic Drugs In addition to attention generated by rapidly rising prices from leading drug manufacturers, generic drug pricing practices are coming under greater scrutiny as well. While generics are still priced significantly lower than their brand name counterparts, drugstores are marking up the price of some by more than 1,000%. A prescription of Cimetidine, the generic version of the ulcer drug Tagamet costs retail pharmacies less than $3, but they sell it for about $37. The big mark-ups survive because the brand-name retail price is higher still. The retail cost of a prescription of Tagamet is more than $90. Pharmacies argue that generic drugs' high profit margins don't tell the whole story. Regardless of whether a prescription is filled with a generic or brand name drug, the drug store must cover overhead costs including the pharmacist's professional services. Those basic costs average about $6 a prescription according to the National Association of Chain Drug Stores. The federal government's Medicaid program that accounts for about 10% of all prescriptions filled, is trying to squeeze some of the profit out of their generic drug bills by negotiating lower prices. Medicaid reimburses pharmacies 10 cents a pill for the generic version of Capoten, which is still a 233% markup for the three cent cost paid by a pharmacy for the generic. It pays an additional dispensing fee of $4 to $5 to help cover a pharmacy's overhead and other costs. The total bill of $13 is much less than the $41.80 that customers must pay. Source: "Steep Markups on Generics Top Branded Drugs," Elyse Tanouye, The Wall Street Journal, December 31, 1998. This article first appeared in Volume 4, Issue 10 of "The Social Security and Medicare Advisor" newsletter (October/1999). To receive future editions of "The Advisor" in its special, free e-mail version, please click here. | ||||||||
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