When consumers need to get a drug prescription filled, they tend to turn to the neighborhood drugstore. Understandably so. But if drugstores were honest, some prescriptions would come with a special warning label: You May Be Getting Ripped Off.
Consumers who have health insurance—and whose insurance cover their prescriptions—probably don’t notice or care about the full list prices for their prescriptions. But for those who are uninsured, or who are underinsured to the point that they pay out of pocket for prescription medications, the choice of where they pick up meds can make a huge difference.
According to a new study by Consumer Reports, the prices charged for generic drugs are all over the map at the nation’s drugstores, supermarkets, and big-box stores. CR’s shoppers contacted more than 200 pharmacies around the country and asked for the prices of five prescriptions that are used to treat common maladies such as diabetes and high cholesterol, and that are now available in generic form.
What shoppers found is that pricing disparities can be extreme, with the nation’s best-known drugstores sometimes charging 10 times the prices available through other retailers. A generic version of Lipitor, for instance, cost $15 at FamilyMeds.com and $17 at Costco. CVS, meanwhile, offered the same product, in the same exact quantity, for $150.
Overall, Costco was the cheapest option, charging an average total of $167 for the five generic drugs. (While membership is required to buy most goods at Costco, anyone can use the store’s pharmacies.) Two drugstore chains (CVS and Rite Aid) were at the other end of the spectrum, with CVS taking the dubious high-price crown, charging $916 for those same five prescriptions. The pharmacies inside Target stores and assorted supermarkets also charged a pretty penny for these prescriptions—rates that were three or four times more than Costco.
As one expert quoted in the story explains, the difference in prices says as much about the business model of Costco as it does about CVS and other drugstore chains:
“Big-box stores such as Costco and Walmart use the pharmacy as a traffic builder for their stores, whereas traditional chain stores, such as CVS, Rite Aid, and Walgreens, make the majority of their revenue and profits from the pharmacy,” says Stephen W. Schondelmeyer, Ph.D., Pharm.D., a professor of pharmacy economics at the University of Minnesota.
Prescription drugs aren’t the only goods that Costco keeps cheap in order to drawn in customers. Prices for staples like milk and eggs are generally cheaper at Costco than a standard supermarket. And Costco’s famous hot dog special—quarter-pound dog and a 20-oz. soda for just $1.50—is arguably America’s best fast-food lunch deal. Costco accepts that it makes little to nothing (or perhaps loses money) on these purchases because they serve as magnets that draw in customers on a regular basis. The strategic hope, then, is that while a Costco member swings by for milk or a quick bite, he or she also impulsively buys some other merchandise (big screen TVs, winter coats, filet mignon) that temptingly lines store aisles.
Drugstore chains, on the other hand, attract customers mainly because they’re convenient, often with 24-hour pharmacies drive-thru windows and locations seemingly on every other block in big cities. Shoppers get their prescriptions filled in such chains because it’s easy, not because of better prices. For many drugstore customers, price isn’t top of mind—and they’re charged accordingly.
Food is another category that cost-conscious shoppers probably want to avoid at drugstore chains. While some consumers know how to work the drugstore coupon and loyalty program game like pros, scoring free or heavily discounted merchandise regularly, one price-comparison study showed that you’ll easily pay 25% more doing routine grocery shopping at a drugstore rather than a regular supermarket.
So if food and medications aren’t good values at drugstore chains, what should consumers be buying at these stores? Basically, only stuff that’s on sale—or that you can’t get anywhere else because it’s 2 in the morning.