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Monday, June 30, 2008

What's it made of...

gold? Well, unless we're talking about a certain compound given for arthritis (aurothiomalate, or Myocrisin for short), then, no, not made of gold.

Oil, maybe. Heh, heh. (Actually, LCD, or coal tar, is a petroleum product but it is quite cheap--go figure.)

So, what to say to these people with such inquiring minds?

How about, "Here's the 1-800 number to Blanketyblankety Labs; why not ask them? And call me back and let me know what they say; I'm kind of curious, myself."

Drugs cost whatever the company that makes them determines they cost. Pretty simple, eh? What goes into the price? Well, research and development, certainly. That's the ol' R & D in the P & L. What else? Marketing. Marketing is actually a bigger slice of the pie than R & D. Why? Well, if you're the CEO of Company XYZ then you probably make a lot of "me-too" drugs, which is the way we pharmacy types designate drugs that really have no great advantage over all the others in that drug's class. Think of Motrin and Aleve (along with Orudis and aspirin). No great shakes either way you toss them. So what to do? You round up your creative, left-brain types and spin some ads. Along with them you round up the sales force posse and have them give some lunches and dinners to the docs. (By the way, I don't go along with the people who spell it doc's: 's is for possessives and some other rare instances for plurals. Ahem.) And then they like to show off at meetings and rent stadiums and such, which must cost a pretty penny.

Then there are the stockholders, those denizens of the financial deep (you and me, probably), demanding their piece of the brass ring.

And then there's the CEO and his minions.

The plants that house these minions, too, must be financial hogs. The equipment, as they say, ain't cheap.

Don't forget the lobbyists, those representatives of industry that serve to grease the wheels of justice and, er, ... let's call it what it is: self-serving, fat-as-hogs, re-election PACs of our heroic congressmen (and women).

So you see, this question is more complicated than it first appears. I have the feeling that many people think that the cost of the drug has a lot more to do with the ingredients (drug + lactose + talc + little bitty things) and the pharmacist's salary. Not so. Rite Aid once commissioned a study on the cost of filling a prescription minus the drug itself. That is, the cost of dispensing an empty vial. This was done in the late '90s. Even back then they found the cost about $6. Now it's probably more like $10. That's the salaries, the electricity, the computer stuff. The whole enchilada, as it were. So when you see some drug costing 128 smackeroos, it's not the pharmacy getting all greedy-like. Most drugs are sold as loss leaders, meaning the pharmacy loses money on them. The more expensive the drug, the less profit they make (it costs a lot to keep up a big pharmacy inventory). Most prescriptions are now filled with some third-party paying at least some portion of the drug cost. That puts a limit on the profit a pharmacy makes. We might fill a prescription for Drug X costing $103 and we might get $3 as a fee, but then they discount our bill by maybe 12 percent. (There are other areas that a pharmacy can make a profit, at the warehouse end, for instance.)

That's the reason why a lot of independent pharmacies are going out of business. They simply cannot make a profit. The big box stores can't either, but they can sell a lot of toothpaste to make up for it. A small independent cannot. As a matter of fact, if it tries to compete in that way, selling some of the same stuff that say, Walmart sells, or CVS, or Rite Aid then woe betide that Silly Sally. The only way to compete against the big boys is to do something they don't.

So what's the drug made of that causes it to be so expensive? Next time I'm asked that I think I'll just say, "Cat's whiskers and Billy Goat tails, sir." They'll like that just about as much as the truth.

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