Small WS Independent Pharmacist Challenges Big-Store Goliaths

Buying generic drugs is one way many people save money on health care costs. But one independent pharmacist says people are still spending too much.

Larry “Dino” McGuire is a regular customer at Marley Drugs in Winston-Salem. Six months ago, he switched his mother's prescriptions to Marley. She's 59 and has Multiple Sclerosis.  According to McGuire she has no health insurance and won't qualify for Medicaid until 2013.  Her only income is a thousand dollars a month from Social Security. “We was able to get those six drugs up here for three months for $120.00. At the other stores we were going to between Rite Aid, Kmart and Wal-Mart to get the cheapest price, it would have cost me around $800.00,” says McGuire. "Now we got $300.00 a month (more) to buy food. She gets the same service and has money in her pocket.”

One of the drugs McGuire's mother takes is Gabapentin for nerve pain. It costs almost $300 dollars at most pharmacies. The generic is Neurontin. A 90 day supply for 300 mg at Marley Drugs is $20. At Wal-Mart, it's $44.78 while Costco and Walgreens charge around $15.00. In 2003, David Marley opened Marley Drugs. About seven years later, area Wal-Marts including the one up the street from him launched a $4 discount program for maintenance prescription drugs. To remain competitive, Marley and other companies created similar programs.

Today, with 13 employees, Marley offers more than 50 maintenance drugs. Customers pay $20.00 for a three-month supply, $37.00 for a six-month supply and $70.00 for a 12-month supply. Marley says he uses a simple formula to keep the price of discount drugs low. “If it's less than $12 for 90 pills, it goes on the list. If I can't buy it for less than $12, then it's my cost plus $30 for a 90-day supply,” says Marley. He's also urging other independent pharmacies to create a similar discount drug program so they too can better compete with larger chain stores. "I'm not trying to keep this a secret," says Marley. "I'll gladly share my templates with anyone."  

But in 2011, Marley discovered large price disparities of discount drugs depending on who's selling them. One evening, a breast cancer patient living in Greensboro called him. She was price shopping for Letrozole-- a generic version of the drug Femera used in some breast cancer treatments.  “She said she lost her insurance because of the breast cancer, lost her job. She walked away from the counter at Wal-Mart because they were going to charge her $436.00.” explains Marley.” At that point I set a flat fee $40 for 30 Letrozole. She came in and gave me a really big hug and it felt good.”

The Generic Pharmaceutical Association recently released a report noting the popularity of generic drugs in the United States. In 2011 consumers spent about $320 billion on generic drugs. That translated into a savings of $192.8 billion. Claire Sheahan is the Vice President of Communications. She says while her group represents the makers of generic drugs, it has no influence on pricing. “We are the very beginning of the supply chain,” says Sheahan. “By the time they get to the consumer, they've passed through a lot of other hands and pricing decisions are made along the way.” She also says it's too early to know how the Affordable Care Act will impact the pricing of generic drugs.

Currently, Marley Drugs out prices several area Winston-Salem pharmacies including Wal-Mart, Walgreens and CVS. However, Costco is competitive and offers lower prices on some generic drugs that are between $5 and $17 less.

Wal-Mart's corporate office declined an interview with WFDD for this story.  Walgreens and CVS did not return our calls. But Costco did speak with us. Victor Curtis is Senior Vice President for Pharmacy Wholesale for Costco. “We will not sell above a 15% margin on any item we sell at Costco including prescription drugs,” he says. According to Curtis, the sellers; such as Costco, Walgreens, Rite Aid, Wal-Mart and CVS, set their own prices for discount drugs. “95% of prescriptions are billed to insurance and they're going to maximize the payout from insurance companies. So their cash price is in effect high-enough that they never default to the lower price when billing an insurance company.”
Another variable influencing generic drug prices is pharmacy benefit managers (PBM's). These third party entities process and pay employee prescription drug claims and then bill the company. Costco also operates as a PBM for several companies nationwide. Curtis insists the company does business differently. “Basically any savings we get goes to the employer who we represent,” says Curtis. “We operate on a low member per month administration fee and no other revenue source, we don't keep a portion of the rebates that we get from pharma manufacturers and if we get a lower cost from network pharmacy in terms of claims, we pass that through as well.”

But Marley argues many PBM's practice spread pricing. “When I'm only being paid as a pharmacist $10.36 for a prescription but the employer gets a bill for the same prescription for $52.00 there's something wrong there,” says Marley. “Most employers assume the amount paid to the pharmacy is the amount they're going to be billed. But because of crafty lawyers and creative contracts those numbers are significantly different.” So to help even the field, Marley is offering his discount drug program to area employers as an alternative to using PBM's.   He says helping people save money while getting the drugs they need is his personal mission. “When we've got people getting life-saving medicine who were going to go without for no other reason than the greed of the company selling it, I feel pretty good,” says Marley. “I don't worry about the finances. It'll take care of itself. And if not, we'll figure something out.” 

Right now, only North Carolina residents can purchase from Marley Drugs. Daily, his staff mails out orders to customers across the state. Orders for a six-month supply or more are shipped free. A three-month supply carries a $5.00 shipping costs. So he's working to secure pharmacy permits in 18 states. This will enable him to fill and mail prescription orders to customers outside of North Carolina.