The Price of Happiness

One of the defining experiences of being twentysomething and broke in New York City is participating in a paid drug study. There is nothing like long periods of unemployment (or sporadic employment) to make a person willing to subject his body to all manner of manipulation, and sometimes (I gather) outright quackery, for half the price of a meal at Le Cirque.

I was not aware of how widespread the phoenomenon of paid drug studies was until I found myself out of work in the middle of 2006. Losing a job for the second time in less than two years caused me to slide into a deep depression--or, possibly, made me realize how far I had slid into a depression that was already well underway.

A good friend of mine, who shall remain nameless but who is no doubt reading this, recommended that I participate in a drug study. She had been through a few herself, in the process trying practically everything that might grace a modern medicine cabinet, without having found anything that actually seemed to work with her depression. I had recently stopped seeing my shrink (let me tell you--this is a BAD move when you're out of work--BAD, BAD, BAD, BAD, BAD) but clearly needed something to get me to get off of my futon and do something to turn my life around. I asked my friend to e-mail me any drug studies she could find. She said they usually advertised on Craigslist, and I should just look around, but at some point she e-mailed me four.

I chose a psychiatric study because my main goal was to find something for my depression--and because, of the four, it was the only one at which I succeeded at getting an actual person when I made an initial phone call. And so I put my mind at the disposal of psychiatric research, for a mere $40 per visit ($20 of which was to cover my "transportation expenses" to and from the clinic, though what these might be to a New Yorker accustomed to using monthly subway passes I cannot guess).

Whatever they put me on not only did nothing for my depression, but actually made it worse. But the study promised that, after the trial period, I would be evaluated for the proper antidepressant. The promise was kept, and a nice lady in a white coat put me on Paxil. That seemed to work, to my great relief.

The first time I filled my prescription for Paxil, I went to the Duane Reade pharmacy on 48th Street between 5th and 6th Avenues. For those of you who don't live in New York, Duane Reade is pretty much the default pharmacy for New Yorkers, the place you go when you have a splitting headache and are mostly concerned with how fast you can find a pharmacy, buy the necessary aspirin tablets, and get out. In Manhattan, there seems to be one about every three feet.

Initially, I was charged $75 for a 30-day supply of paroxetene, the generic of Paxil. The price seemed high, but I was new to buying prescription medication and had heard a lot about the high prices of psychiatric medicine, so I ponied up.

I didn't think much more aboout that price until my next meeting with the psychiatrist who had prescribed Paxil. She asked me a bit about what I had paid for it. Knowing that I was unemployed, she suggested I look into online Canadian pharmacies, as well as the pharmacy at Brooklyn's CostCo. She did not know the exact price for my medication, but she had heard CostCo had a very cheap pharmacy one could use even if one didn't have a CostCo membership.

As I needed my pills faster than I thought I could get them from Canada, I checked out the CostCo first. There, I was able to obtain a ninety days' supply of paroxetene for a mere $36--less than a sixth of the price I had paid at Duane Reade, where a 90-days' supply would have cost $225.

I thought that $36 price was pretty good until today, when I finally saw a doctor in Wichita who prescribed Paxil for me again. He told me to try out Dillon's, a local grocery chain with a pharmacy. Dillon's currently is offering some generic drugs for $4 per 30-days' supply--thus, $12 for a 90-day's supply. When I got home, I called a couple of pharmacies and got price quotes. One local pharmacy charged $37.40, roughly the same price as the Brooklyn CostCo had. But just as the doctor predicted, Dillon's was offering paroxetene for $4 per 30-days' supply--thus $12 for a 90-days' prescription.

Now, none of this makes much sense to me. I cannot fathom how the price of the same supply of this drug can possibly range from $12 to $225. And more to the point, I cannot see how Duane Reade manages to get away with charging $225 when so many cheaper alternatives exist. Nonetheless, just for laughts, here are a few theories:

1) "The $225 price reflects high New York prices and rents." Umm...nice try. But the cost at CostCo in Brooklyn was $36. Now, there are some (small) price differences between Brooklyn and Manhattan, but I know of no other product that is six times as expensive on the Island as in the Outer Boroughs.

This also fails to explain how the price at a local pharmacy in Kansas could actually be more than the cost in Brooklyn--$37.40 in Kansas versus $36.00 at the Brooklyn CostCo.

2) "The 225 price reflects lack of price discrimination on the part of people who work near the Duane Reade in Manhattan." "Price discrimination" is a fancy term economists use for, basically, how much consumers care about the price of a particular item. People often show much higher degrees of price discrimination for some items than for others. For instance, coffee shops in Grand Central can get away with charging $5 for a tiny cup of black coffee because morning commuters essentially don't care what they pay for a cup of joe. Used car dealers, on the other hand, have to be more careful, because people know they're making a big purchase and care much more about the price. This is why used-car dealers are never located in the centers of major cities--the consumer just won't bear the cost of Manhattan rents when they buy a used car the way they will when they're rushing to work and want their morning coffee NOW.

The 48th Street Duane Reade is located just across the street from Rockefeller Center. It could be argued that the customers there are mostly Yuppies who come to the pharmacy counter screaming into their Blackberrys--that their incomes are too high for them to worry about a $225 pharmacy bill, and that they aren't likely to hear the pharmacist give the price, anyhow.

The trouble is, these aren't the only people who work in the area. 48th Street in Manhattan in awash not just in Yuppies making $1,000,000 or more a year, but also secretaries and construction workers making $30,000. These people definitely do care what they pay for prescription drugs.

3) "CostCo and Dillon's are selling prescription drugs as a loss leader." A loss leader is a product a store sells at a loss, with the idea that the low price will get customers to come in and buy other products while they're there. For instance, a grocery store might sell sugar at below cost, with the idea that people who come in to buy cheap sugar will also buy bread, milk, and eggs.

It is likely that both CostCo and Dillon's are selling drugs as a loss leader. CostCo's strategy of doing this is well-known; the pharmacy is the only department in CostCo that can be used without a membership card. Clearly the idea is that people who come to fill a prescription will walk around the store while it's being filled, see things they want to buy, and sign up for a membership. Dillon's is almost certainly doing the same thing, although with less fanfare.

But this still does not explain the size of the price difference--$12 at Dillon's versus $225 at Duane Reade in Manhattan. This is a factor of almost 20. I could understand one store charging, say, $150 for a product it was selling as a loss leader that another store was selling for $225. I could accept some price differential between New York and Kansas. But a factor of twenty is inexplicable.

The only answer that makes any sense to me that may consumers are just ill-informed about the prices of prescription drugs; they're not as visible to us as the prices of homes, cars, and the myriad other goods we buy. And we should be angrier both that we aren't as well-informed as we should be, and that drug companies and pharmacies take advantage of that fact.