This analysis of retail drug prices in Florida shows that independent pharmacies in the poorest ZIP codes charge the highest prices for four commonly prescribed drugs. This variation in prescription prices is of real importance to the uninsured poor who struggle to pay for their medications. The number of such patients is significant: there were 46.1 million nonelderly Americans lacking health insurance in 2005, and more than half of the uninsured come from low-income families (Kaiser Family Foundation 2006
; Dubay, Holahan, and Cook 2007
). In addition, there remain four million Medicare beneficiaries who lack creditable prescription coverage and may be paying retail prices (Kaiser Family Foundation 2007
). In Florida, one in four of the state's residents younger than 65 were uninsured in 2006 (Florida Health Insurance Advisory Board 2007
We are not aware of any other studies formally documenting this kind of variation in prescription prices and association with area income. In a 1997 letter to the editor in the British Medical Journal
, the authors reported on their small investigation of 62 chemist shops in Bath, U.K., in which they found that the price charged for a month's supply of donepezil (Aricept; Eisai Inc, Woodcliff Lake, NJ) ranged from £68 to £120, and in general they found lower prices quoted by chemists that were not part of a chain (Jones, Mann, and Saunders 1997
). More recently, Redelmeier et al. (2000)
surveyed 66 hospitals from every large city in the United States and Canada and documented variation in hospital charges to individuals paying out of pocket; the price to an uninsured patient for filling a prescription for fluoxetine varied fourfold among hospital pharmacies, ranging from $26 to $93.
Our findings on the differences in price between chain and independent pharmacies suggest a potential mechanism for geographic price variability in prescriptions that deserves further investigation. The preponderance of independent high-cost pharmacies in poorer areas explains much of the observed variation in price, much as the presence of small, higher-priced grocery stores explains in many cases the higher price of groceries in poorer neighborhoods (Fellowes 2006
). However, despite higher mean prices among independent pharmacies, the poorest areas also contain some independent pharmacies with prices similar to those charged by chain pharmacies. This finding suggests that even in the poorest ZIP codes, motivated consumers who shop around can find independent pharmacies that are as inexpensive as chain pharmacies. Because the ability of consumers to compare prices may be more limited in economically deprived settings, where finances, health literacy, and transportation are barriers, interventions to assist consumer choice could be warranted if large numbers of the uninsured purchased prescriptions at high prices.
It is possible that the higher prices at independent pharmacies could represent better value if, for example, these pharmacies offered home delivery or other specialized services that might improve adherence. Additionally, for those with insurance, independent pharmacies may improve access to medications because of their location and personal service, despite higher retail prices. The nationwide market share for independent pharmacies has declined (Congressional Budget Office 2007
) and while we would not suggest making policy decisions about market interventions based solely on our study, our analysis of the data does raise questions about high-priced independent pharmacies.
Our results must be interpreted in the context of the study design and data sources. First, while previous research has shown that ZIP code-level census income is strongly associated with individual socioeconomic status, our study measures prices charged by pharmacies in poorer ZIP codes and not the actual prices paid by poor individuals. We also do not model income heterogeneity within ZIP codes or other demographic characteristics. Individuals may purchase drugs at pharmacies outside of the ZIP codes in which they reside, or they may avoid purchasing drugs from high-priced pharmacies and may substitute lower-priced related drugs. We are not able to measure the volume of purchasing by the uninsured at these pharmacies, and thus we cannot comment on any truly causal link between pharmacy type and the price patients pay for their prescriptions; nonetheless, we believe the findings raise important questions about geographic variability in retail prescription prices that deserve further investigation.
Second, our data represent only those pharmacies that filled a prescription for one of the four study drugs for at least one Medicaid patient in November 2006. A number of pharmacies in the state (and mail-order pharmacies) are therefore not included in our analysis. These pharmacies either did not fill any prescriptions for the drug in question during the reporting period, in which case the price available is not a relevant issue for comparison, or they filled only prescriptions for non-Medicaid patients, which is unlikely to substantially alter our results as the main driver of our findings is high-priced independent pharmacies in poor ZIP codes. We were not able to provide any detail on pharmacies that were not included in our sample or any additional detail on the characteristics of independent pharmacies. Third, we analyzed price data for only four drugs. However, the relationship between price and area income was remarkably consistent across all four drugs, and we have no reason to suspect that a different relationship would exist for other drugs. Finally, we considered only one state and our results may not be generalizable, although this relationship could exist in other states and deserves study.