Leslie Ramirez, an internal medicine physician, observes that the price of some prescription drugs don’t drop much when they become first available in generic form – and considers why this is so:

“Patients are used to paying a high price for branded medications, and pharmacies know this. So when a new generic becomes available, many pharmacies discount the medication, but only by a small fraction as little as 10- 15%, However, the patient buying the prescription sees the new generic medication is somewhat cheaper and appreciates paying a little less for it. Over the course of a year or two, the price at the pharmacy retailer falls little by little. Eventually the generic medication stabilizes at a much lower price – as low as a tenth of the original, non-generic price. Meanwhile, the patient never realizes that they have been paying a very steep mark-up that constitutes as much as 15 times the wholesale price.”

Ramirex, who also runs a regional health care cost comparison website, notes the value of comparison shopping for new generics:

“A few months after going generic in August 2010, the branded version of [generic breast-cancer drug] anastrozole, was selling for more than $400 for a month’s supply. The generic form was sold for $361 at CVS, $360 at Walgreens and about $340 at Walmart and Target. Sounds like a bargain, right?

“Actually it was not. You might be interested to know that Costco has a well-publicized pricing strategy of charging the wholesale price plus a standardized 14% mark-up on everything it sells, including prescriptions. So how much was Costco charging at the time for this life-saving cancer drug? $27 per month. So we can deduce that the wholesale price at that time would have been around $24, which means that the major retail pharmacies were charging quite a hefty mark-up.”

Read more at KevinMD.com.