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Follow Senior Citizens to Lower Drug Prices, Study
Says
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Adrienne Ohler |
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May 21, 2005 If you want lower drug prices, just
follow the senior citizens to the pharmacy they use. That is the
suggestion of award winning research by Adrienne Ohler, graduate student
in economics at Montana State University.
If you want consistent prescription drug prices,
maybe you should invite more senior citizens to move to town, writes
Carol Flaherty of the Montana State University News Service about the
Ohlers study.
When pharmacies have many senior citizens as
customers, they appear to price prescription drugs more competitively,
says Ohler.
Ohler studied prescription drug pricing in 13
Montana communities for her masters thesis. She found reduced price
variation in Montana communities with a higher percentage of senior
citizens. In those communities, different pharmacies were much more
likely to charge similar prices for prescription drugs, and higher
prices were less likely to occur.
Ohler says that economic analysis suggests that
average prices in these communities may therefore be lower.
Ohler worked with her principal adviser Vince Smith
to investigate the factors that influence prescription drug prices in
Montana. In discussing the findings that higher percentages of seniors
narrow the range of prices charged, Ohler speculates that seniors have
more time to do price-comparison shopping, more experience with multiple
prescriptions, and are more financially motivated to find the best
deals. So when pharmacies have many senior citizens as customers, they
appear to price prescription drugs more competitively.
For similar reasons, in communities with a larger
percentage of low income households, pharmacies tend to charge more
competitive prices.
Ohler spent two months driving through Montana
during the summer of 2004 to survey pharmacies in 13 communities,
including Belgrade, Billings, Bozeman, Butte, Glasgow, Great Falls,
Havre, Helena, Kalispell, Livingston, Missoula, Plentywood and Shelby.
While going door-to-door asking pharmacists to give
her prices on 75 common prescription drugs was not always easy -- there
were perks to the job.
"I got to see Glacier. That was really nice,"
Ohler, who is from the relatively flat-lands of Mt. Pulaski, Ill., says.
Ohler says she knew that she was asking for a
considerable amount of the pharmacists' time, and in some cases
corporate policies prevented them from providing the information. In
all, Ohler had five towns from which she got five or six pharmacies to
respond.
Other variables that tended to lower prices were
whether a hospital was located within a mile of the pharmacy, whether
the pharmacy was a part of a department store, and whether it was open
Sundays. However, these variables were only significant in combinations
or all together, Ohler found.
Ohler wrote that although Canadian drugs cannot be
legally imported, Canadian prices are sometimes lower there for the same
drug. She wanted to examine whether distance to Canada influenced
Montana drug prices. Five of the surveyed communities were within 100
miles of the Canadian border, three were with about 40 miles of the
border.
Ohler's data did not show any relationship between
distance to Canada and prescription drug prices in Montana.
"Adrienne's original data allowed her to look at
price variation across spatially separated markets and the
characteristics of the buyers in those markets," Smith says. "Adding
this special variability of the markets is a new and important
contribution to the research literature on the subject."
Ohler's work did not compare the prices between the
Montana communities surveyed, and the pharmacies surveyed are anonymous
in her thesis.
Ohler, from Mount Pulaski, Ill., received the 2005
Montana State University Foundation Masters Graduate Achievement Award
for her research.
Here advisor descirbed her study as "a genuine
contribution to economic research on the topic." Ohler received grant
funding through her adviser, Vincent Smith of the MSU Department of
Agricultural Economics and Economics. Smith said Ohler's work
"constructively addresses an important policy issue."
To complete her research, Ohler traveled throughout
Montana for two months, surveying the prices of 75 drugs in 40
pharmacies in six Montana communities. She then analyzed price variation
and the factors that contributed to that variation. She will graduate
with a 3.86 grade point average. "Her work is of such importance that we
have obtained some additional funding to enable her to develop a series
of professional papers over the next three months," Smith said.
Most of this story was by Carol Flaherty MSU
News Services
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