Wholesale vs retail prescription drugs: How a local doctor is bringing big savings to patients

Posted at 5:44 PM, Apr 12, 2021
and last updated 2021-04-14 11:01:40-04

(WXYZ) — The high cost of prescription drugs is a national problem, but it is also a Michigan problem. Prices for the most commonly prescribed drugs for older patients have increased at more than 10 times the rate of inflation within five years, and the average cost of prescription drugs increased nearly 60% between 2012 and 2017, according to Michigan's Prescription Drug Task Force report. Meanwhile, Michiganders' incomes have increased only 11%.

It's a bitter pill millions of Michiganders are forced to swallow.

"It can be really damaging to someone's budget," said Michelle DiMercurio, who has asthma and allergies.

DiMercurio was spending $128 a month for prescription drugs.

Over the past six years, the average price of drugs prescribed to treat diabetes, heart disease, asthma and other common conditions has more than doubled, according to a December report from Michigan's Prescription Drug Task Force.

Lantus, which is a type of insulin, rose from $1,792 a year to $4,703 a year.

And the inhaler Advair has nearly doubled from $2,2239 to $4,370.

But why does medication cost so much? There are a lot of layers. First, drug manufacturers set their own prices, then sell the meds to a wholesaler, which marks up the price then sells it to a retailer like your local pharmacy.

The pharmacy negotiates various sale prices with prescription benefit managers for those with insurance.

The end result?

When you buy medication at a retail pharmacy, there is a markup sometimes 20%, sometimes 50%, or sometimes 200% higher.

Dr. Paul Thomas started Plum Health Direct Primary Care four years ago in Detroit with a mission.

"We believe that medication should be affordable and accessible," Dr. Thomas said.

His membership-based business model eliminates the pharmacy and prescription benefit managers by getting medications directly from the wholesalers then selling it to his patients at cost.

"We'll buy like a bottle of 1,000 pills of Lisinopril for $10 so it would cost our patients 1 cent per pill or 30 cents for a month supply of medication," Dr. Thomas said.

He builds relationships with manufacturers too.

"For example, insulin pens can be $100 to $300, and we are able to get those for free for our patients," he said.

Free Insulin? That sounds absurd. Entrepreneur Shawn Lee had been paying hundreds of dollars a month for years.

"With direct primary care, I pay absolutely nothing," Lee said. "And I thought to myself this can not be real right?"

That's everyone's reaction at first.

"It does seem a little too good to be true but that's really how broken our health care system is," Michelle DiMercurio said

She joined Plum Health four years ago with monthly membership fees start at $50 for adults and includes doctor visits.

"I went to renew my prescription," she said. "I would have to go visit the doctor and with Plum Health, that cost is included in my membership."

Shawn Lee joined Plum Health three years ago.

"Dr. Paul is my doctor," he said. "Right, you get to see him when you need to anytime that you want – health checks, and screenings and physicals."

Now he now offers Plum Health services as a health benefit to members of his organization, the Multicultural Association of Professional Photographers.

"It doesn't replace health insurance but, people no longer have to have the fear of choosing one thing or their health," Lee said.

Now there is legislation in the works on the state and federal level attempting to lower costs.

"We have to demand transparency and that our hospitals and pharmacies demonstrate how much they bought the medications for," Dr. Thomas said. "And what they are selling it for."

Until that happens, more and more people are discovering the Direct Primary Care clinic model. There are 12 locations in Michigan.