Crixivan« Price: Behind the Reduction

Our last issue (AIDS TREATMENT NEWS #245) noted that patients who are paying out of pocket for the Merck protease inhibitor indinavir (Crixivan), which they can only purchase from Stadtlanders Pharmacy, can save $97 per month just by obtaining a discount card from a competing mail-order pharmacy, Community Prescription Service (phone 800/842-0502). The cost of the discount card is $18. Because this price reduction was announced just before our previous issue went to press, we did not have time to explain how it occurred.

For big organizations like insurance companies, HMOs, and government agencies, pharmaceutical prices are like hotel-room prices; almost nobody pays the officially stated price. Instead, each company negotiates a lower price which it pays for the clients it covers. But in pharmaceuticals, unlike hotels, individuals are usually excluded from these price reductions. Therefore, persons who have to buy their drugs out of pocket pay the highest price; organizations pay substantially less. (Some individual pharmacies have sold some drugs at or near cost, as a community service; this does not affect the wholesale price, however.)

In the case of Crixivan, an unusually high markup, plus charging individuals paying out of pocket the highest price while insurance companies and HMOs paid less, led to widespread protest against Stadtlanders. Merck had established an unexpectedly LOW price which it charged wholesalers for this drug, $12 per day. But Stadtlanders, a company well known for service and for supporting the AIDS community, temporarily became both the only wholesaler and the only retailer that individuals could use to buy Crixivan. It charged out-of-pocket customers $16.50 per day -- a wholesale and retail markup together of 37.5%, or over $1600 per year for filling 12 prescription bottles. The high markup plus the highest price for cash customers led to the protests.

In practice, almost all Crixivan sales were at lower prices through insurance plans, as few individuals can pay for their own protease inhibitors. Therefore, the extra profit from the high price to individuals would not make much financial difference to Stadtlanders. But according to Stadtlanders, for legal reasons a pharmacy cannot establish multiple levels of retail pricing (such as a cash discount to individuals). [Comment: If this is true, then Congress needs to be told that its laws are creating an injustice, by allowing discount pricing to every insurance company and HMO, while forbidding similar discounts to unorganized individuals, who have to pay more than any organization when buying drugs out of pocket.]

Stadtlanders found a way out of this situation by agreeing to recognize the discount card of CPS, which was already honored by about 60% of pharmacies in the U.S. This way individuals could get contract prices like those negotiated with insurance companies, HMOs, and government agencies. The official price (for individuals who do not get the card) is still $16.50 -- but no one needs to pay that price any more, and fewer people will pay it. With the card, the cash price is reduced to $13.27, saving patients $97 per month. (Stadtlanders will not accept the CPS card in conjunction with any other drug card or insurance coverage, meaning that individuals with other coverage must pay cash up front if they use the CPS card, and be reimbursed later.)

This reduction would never have happened except for the protests, which were led primarily by several organizations: ACT UP/Golden Gate, ACT UP/New York, ACT UP/Philadelphia, the PWA Coalition of New York, and the PWA Health Group (the largest buyers' club in New York). The protests included substantial publicity, as well as several persons arrested for posting signs on Stadtlanders' New York City outlet. Apparently the fear of a public-relations reversal pressured Stadtlanders into finding a solution, when the hardship to individuals who had to pay the unrealistic official price did not do so. It is widely believed that some other AIDS organizations may not have supported the protest because they had been funded by Stadtlanders, but there is no way to know for sure.

In the long run, what is happening is that individuals are increasingly being pressured to organize into groups, to avoid being at a serious disadvantage because they do not have the negotiating clout that large organizations do. The Stadtlanders events have spurred activists to look into other AIDS-drug pricing issues, and already they are finding remarkably large variations from pharmacy to pharmacy in what individuals have to pay. Often it is quite unexpected who is charging much more, and who much less, for the same drug. Price is not everything, as some companies give better service (which can make the difference between whether or not someone gets a prescription they need), and some pharmacies support community organizations while others do not. But if those patients who must be concerned about price are not advised how big the variations are, and where to find the lowest prices, we have a problem. Activists are now likely to work harder on immediate price issues, publicizing large variations and getting comparison information to patients who need it.

The Crixivan price reduction was a remarkable victory which shows how beneficial activism can be. But there is still concern that the high nominal price could set a precedent for higher distribution costs in the future.