Generic Pricing and the Independent Pharmacy

May 20, 2015 | Tim Gallagher

I’ve been in the pharmacy business for more than 30 years. Full disclosure time: I’m also president of Astrup Drug, and believe strongly in the approach that sister-company Smart-Fill takes with drug costs. After all, Smart-Fill tested the approach on all the Sterling drug stores before it was made available to the public--so I’ve seen it work.

The last thing any of us need, as pharmacists, is to be exposed to shenanigans. Which is why hearing about the Aetna fine or the predatory pricing practices exposed in the Catamaran lawsuit makes my hair stand on end. And it’s why, when I field calls from others in the business who are concerned about generic price increases, I can empathize.

It feeds a baseline distrust of drug wholesalers, regardless of which one you choose to use, that creates a grass-is-greener tendency to shop around. It’s something I don’t have a lot of time to do in my business—I’m too busy. But I also know that if I don’t get the best pricing, I won’t be in business very long.

We think all wholesalers adjust generic prices to varying degrees—they have to, to control their margins. Or THEY go out of business, just like I would if I didn’t have a rock-solid hold on my costs and revenues. It’s why Smart-Fill warehouses and shops certain items, and why we will continue to do so. But fair is fair: I know that, like me, you will want to satisfy yourself that you are getting the best deal. So here are a couple of things I would recommend thinking about when you’re making a buying decision:

Put price changes into context. Brand name drugs are surging in cost—as much as 14% or more recently, with virtually no inflation on other goods and services. Last year, generics went up by about 2.5%. That’s it, on balance. We all can think of drugs that went up six or seven thousand percent overnight, so one day you pay $10 for it, and the next day you pay $700 or more. Quite frankly, it’s shocking. But some generics have also gone down. And it’s been happening this way, on and off, for the past 10 years. That's the real story.

Play the averages. You’ll never find a single supplier who has the best price on everything. That’s why it’s important to do some price comparisons. BUT, your time is valuable. Find an expert who can stay on top of pricing for you. If you leave the shopping to the experts, you can spend more of your time with your patients.

Keep your eyes on the ball. The greatest threat we face is not increasing drug costs, but rather, lower reimbursement. We all need to work together to find a legislative fix to this issue. While you may be struggling to make the payroll, the PBMs are laughing all the way to the bank. In the end, it’s our patients who suffer. We have to continually remind ourselves why we got into this profession: to take care of patients. Need some inspiration to get involved? Remember your patients. Only when independents stay competitive are we able to do what we do better than any big box store: care for our customers and communities. Let’s keep that paramount in all our efforts and we can win this battle.

Drug CostsGenericsLawsuits

Tim Gallagher

Tim is a pharmacist and president of Sterling Specialty Pharmacy. He has practiced pharmacy for more than 30 years—much of it with the family-owned regional chain of pharmacies, Astrup/Sterling Drug—and has experience in community pharmacy, LTC pharmacy, and Specialty pharmacy. He is a graduate of South Dakota State University College of Pharmacy. In his spare time, Tim enjoys reading and spending time outdoors with his wife and their alpacas, angora goats, chickens, and honeybees.