Almost everybody believes medical care should be available to all regardless of the ability to pay. So why don’t we have universal health care? Cost is a factor, maybe the leading one, though I suspect that people who lead a healthy lifestyle may resent having to subsidize unhealthy lifestyles.
Currently, most of the discussion about health care costs centers on prescription drug costs. Big Pharma is to blame, we’re told – the label, “Big Pharma,” is itself a pejorative. Hospitals, including non-profits and publicly owned hospitals, get a break here, as do all sorts of medical specialists. But they’re all part of the problem, as are unhealthy lifestyles.
I think it’s time to add non-prescription and over-the-counter (OTC) drugs to the suspect list. I was propelled toward this conclusion after looking online for Qunol, a brand of CoQ10 for “heart health.” I take this on recommendation of my doctor because I also take a generic prescription statin drug for high cholesterol. The online price at CVS for a 120 day supply of Qunol was $64.99 as of December 14. That seemed high and I wouldn’t pay that much unless I had one of CVS’s ubiquitous coupons, occasionally good for “40 percent off one item,” which would have brought my price down to $38.99.
I decided to check Target’s price, as I live close to both a Target store and a CVS (or two or three). Their online price for the same quantity was $29.99, no coupon needed.
I was on to something. I checked Walgreens next, which listed the same size for $64.99, the same as CVS but they were having a “buy one, get one free” promotion, so that would have made my price $32.50 for each bottle, but I might have had to buy two bottles. I was beginning to understand the high mark-up at retail at both CVS and Walgreens, of course.
Then I tried Walmart’s online price. Their price was $29.28 – they weren’t going to let themselves be beat by Target, though the price advantage was hardly enough to entice me to shop at a “Walmarts,” as it’s more colloquially known, at least in Indiana.
I could go on like this, but the pattern I saw was that drug store chains such as CVS or Walgreens almost always charge more for non-prescription drugs and over-the-counter health products than more broadly retail establishments do, and I think I know why. Chain pharmacies by far are the leading retailers of prescription drugs (48 percent) in America, followed by those discount department stores such as Walmart, Target and a few others (24 percent). As a category, “I don’t take any prescription drugs” came in third (at 16 percent), which was refreshing to see. Online pharmacies still trail all of the above. Full data can be found at civicscience.com.
I think this disparity in pricing is easy to unpack. If you’re already at a chain drug store for your prescription medicines, you might as well buy your aspirin and toothpaste and allergy pills and more at the same time. Plus, the sheer number of chain drugstores increases their marketing power. CVS alone had 9,962 outlets in 2020, though I’ve read elsewhere that they are closing down some of the their less profitable stores. (And, did you know that many CVS drug stores are franchises? I didn’t know that, either.) Walgreens had 9,021 stores as of August 2020. Really, these two chains in particular seem to be almost everywhere, including often on opposite street corners. It’s almost a duopoly between these two players in many markets.
By comparison, Walmart had 4,743 stores in the US as of this past January, and Target had 1,897 stores in the country as of 2020. That’s a lot of stores, too, but so many tend to be away from the inner cities of America, especially Walmart, whose initial expansion decades ago was predicated specifically on avoiding high big-city real estate taxes and providing huge parking lots for people with cars. It is often CVS and Walmart that fill the gaps in retail in poorer inner-city neighborhoods. It’s not just a convenience for many of their customers, but a necessity.
Plus – and this is significant – many of the chain drug store customers will be on Medicaid or have a Medicare Advantage plan. The majority of Medicaid plans in America provide a non-prescription drug benefit, as do some Medicare Advantage plans. That means people with either of these plans may be paying less than the advertised price to treat their minor ailments anyway so why should they comparison shop, and this in itself is a further disincentive for Walgreens and CVS to bother lowering their prices.
I’m still not paying $64.99 for a bottle of Qunol, or $7.49 for a standard size tube of toothpaste or well over $20 for a seasonal allergy OTC medication and so on, but I think a lot of people either can’t afford to be so choosy, or they have little incentive to shop elsewhere.
Great insight as always. I never thought of non-prescription drugs this way before. Very interesting.
These retail chains also invest in something called CLV (Customer Lifetime Value: https://www.inc.com/jonathan-steiman/whats-the-lifetime-value-of-your-customers.html). Basically, they want you to come back regularly and buy these drugs. Companies spend a lot of resources trying to figure out this value and create incentives.