"1,000%+ pharmacy mark up" on generics

US pharmacies are marking up prices for generic drugs, often by over1,000%, says the Wall Street Journal (US edition), citing documents obtained by Mylan Labs, PMSI Scott-Levin and internal research. Markups on branded drugs are usually 10%-30%.

Despite the current controversy over prescription drug prices, high profits for some generics have escaped scrutiny because of competing market forces and health policy, and because those without insurance coverage do not have managed-care firms negotiating with the pharmacies for cheaper generic prices. Pharmacies charge $18.08 on average for generic haloperidol, a markup of 2,800%, reports PMSI Scott-Levin.

Much of a generic's price discount evaporates as it goes through wholesale and retail channels, said Steven Gerber of CIBC Oppenheimer; generics have often been a profit boon to wholesalers and retailers. Manufacturers can make a profit of 90% or more on branded pills and about 40% on generics. Generics can be even more profitable at retail; pharmacies get most of the difference between the manufacturer's price and what the customer pays, and this offsets shrinking profits from branded drugs which are the focus of cost-cutting from managed care. Pharmacists know that health maintenance organizations want patients to use generics, but they also make more money dispensing generics. Without them, most pharmacies would be in deep trouble, which is why they push them aggressively, Hemant Shah of HKS & Co told the WSJ.