Cost of Generics in US Varies Based on Residency

An analysis by consumer website GoodRx concluded that the price people pay for generic drugs at the pharmacy varies greatly based on where they live. The study looked at 500 commonly used drugs in 30 of the most populated American cities over the last 12 months, ending April 2018. Researchers examined the average cash price of the drug at a pharmacy. Although many people have insurance coverage for prescriptions or discounts and don’t pay cash, more people are paying larger shares for prescriptions out of pocket. The results are based on a representative sample of US prescription fills (not fills using GoodRx) and comes from several sources including pharmacies and insurers.

The most expensive cities in the country for drugs were New York City (20% more than the national average) and Los Angeles and San Francisco (12.6% and 9.8% higher, respectively). Notably, prices in similar cities in the same state varied widely; in Columbus, Ohio, for example, prices were nearly 22% below the national average. Conversely, Cleveland’s prices were 2.5% above the national average and the 2 cities are only 150 miles apart. The cities with the least expensive drugs are Columbus, Ohio; Atlanta, Georgia (18.6% below); and Houston, Texas (17.4% below).

“This data highlights the nonsensical and variable nature of drug pricing,” the report notes. Cost-of-living differences don’t explain the full story because, for instance, drug prices in Washington, DC, where the cost of living is relatively high, are 9.0% lower than the national average. Raleigh, North Carolina, which has a lower cost of living, has higher prescription drug costs (4.3% higher than the national average).

What GoodRx calls the “Big Box Effect” may play a part in drug price variability because many larger big box stores offer popular brand and generic drugs at a cheaper rate, often $4 for a 30-day supply and $9 for a 90-day supply. Some states have more big box stores, giving residents more opportunities to save on medications.

Retail markup also plays a role in generic drug price disparities because some pharmacies claim a higher margin to support their business and these pharmacies are distributed unevenly throughout a state.

An example of the price differences for the same generic drug across the country are reflected in the comparison of prices for metformin, which treats type 2 diabetes, and the flu medication Tamiflu:

Metformin

Birmingham: $43.00

Boston: $28.57

Columbus: $11.16

New York: $66.23

San Francisco: $49.36

Tamiflu

Birmingham: $197.48

Boston: $185.46

Columbus: $189.61

New York: $155.46

San Francisco: $201.61

While many factors contribute to the differences in generic drug prices, much can still be “chalked up to the ‘drug prices make no sense’ theory,” said Thomas Goetz, GoodRx’s chief of research. Leigh Purvis, AARP's public policy institute director, noted that price variations are not just from city to city, even pharmacies on the same block can sell drugs at very different prices.