It would appear as though CVS is in trouble once again for overcharging customers on their drug purchases. This time it is in California, not along ago it was in Massachusetts (in Massachusetts, they got off from the charges). In an article appearing in the Associated Press (July 31, 2015) entitled: “CVS accused of overcharging for generic drugs,” states:
“A lawsuit accuses CVS Health of deliberately overcharging some pharmacy customers for generic drugs by submitting claims to their insurance companies at inflated prices.
The suit filed Thursday in federal court in San Francisco says those inflated prices led to higher co-pays for customers that exceeded what they would have paid for the drugs if they had no insurance and participated in a CVS discount program.”
CVS customers are banding together to initiate a class action lawsuit. The lawsuit alleges that the drug store chain engaged in fraudulent behavior. However the company’s position is that co-pays are determined by insurance.
The moving target of drug costs
While we understand that insurance co-pays vary quite a bit from plan to plan, the discussion opens up a much larger, and far more important issue.
Generic drugs were created to serve as a lower cost alternative to branded pharmaceuticals. However, generic drugs are not necessarily cheap, nor are they generically priced. In a survey of more than 200 pharmacies conducted by writer Lisa Gill for Consumer Reports magazine in 2013, it was found that generic drugs vary by quite a wide margin. For example the generic version of Plavix, a blood thinner, ranged in price from $15 at Costco to 10 to 15 times as much at Target and CVS.
The “take-away” message from the survey was not so much that Costco was cheap and Target or CVS was expensive, but that buying generic drugs can be best compared to haggling for a used car.
Whether CVS was playing it fast and loose with the co-pays is one factor, but the margins built into generic drug prices can vary so widely, that even if CVS was caught overcharging those with insurance in comparison to those who paid cash with the CVS discount program. I have no doubt they would quickly admit the unequal pricing policies of its customers apology and pay what any fine might come along. Why? The pricing of generic drugs is such an elusive target that the margins can be manipulated in any way that is advantageous to the company.
The ethical burden
This is a free-market economy. If we both own pharmacies and you want to charge $100 for a knee brace but my pharmacy charges $85, that it our right. A knee brace is not a life or death item, and if worse comes to worse, you can always find a cheaper model – or even one that is used.
However ethically, I have a problem with an elderly woman on a fixed income who is a breast cancer survivor forced to pay $400 for a generic medication at one pharmacy while 50 miles away she could be paying $10 for the same thing.
This is not at all far-fetched and in fact, in an article appearing in the PBS online magazine (November 11, 2013) entitled: “Generic Drugs Don’t Necessarily Mean Low Prices,” the exact scenario above was found with the breast cancer generic for the Letrozole breast cancer chemotherapy drug.
Is there a point at which we go beyond the free market economy and graduate to price gouging at unethical and fraudulent business practices? Here is where the situation becomes even more confusing.
If an insurance company approves co-pays for the store charging $400 for one drug, but does not approve insurance acceptance at a store that only charges $10 for the same drug, in what kind of ethical pond do we find ourselves swimming?
Do insurance companies care how much the elderly breast cancer survivor pays for her generic medication? Apparently not. It would appear that generic drugs represent a true profit center for many pharmacies.
While I am certainly not the first person to point this out, there needs to be an examination of generic drug pricing practices. I would urge the major drug store chains to approach this from an ethical point of view.
The question is if they have the courage to do so.
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