Bob Toomajian worked for 16 years as Kaiser Permanente's drug purchasing manager for Southern California, giving him an insider's knowledge of how medications are priced before reaching consumers.
When it comes to patented name-brand drugs, he told me, pharmaceutical companies try to get away with the highest prices possible. On the other hand, they're typically recovering millions of dollars in research and development costs, so those sky-high prices are perhaps understandable.
It's a different story for generic drugs, Toomajian said. In that case, the manufacturer isn't saddled with R&D expenses. It isn't attempting to create a market for a new medicine. Basically, everything it earns beyond production costs is pure gravy.
"A lot of the prices for generics can't be justified," Toomajian said. "Manufacturers are basically starting with the exorbitant prices that the branded guys charged and then setting their own prices at whatever level they think the market will bear."
The murky world of generic drug prices has been much on my mind after hearing from readers about costs for various medicines experiencing crazy fluctuations. I wrote the other day about a Target customer who saw the price for a generic antibiotic climb from $6 to $133 within just a few weeks.
More on this story here.
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