Basic Personal Finance: Shop Around for the Lowest Price
Published on - March 19th, 2007 (by J.D. Roth) Tony forwarded an eye-opening post from Stephen J. Dubner at the Freakonomics blog.
Most shoppers assume that prices on a given product will be roughly the same from store to store. This is not always the case. Dubner cites research from Cyril Wolf, a Houston doctor who is upset that many generic medications are too expensive for his elderly patients to afford.
Wolf began snooping around and found that two chains, Costco and Sam’s Club, sold generics at prices far, far below the other chains. Even once you factor in the cost of buying a membership at Costco and Sam’s Club, the price differences were astounding. Here are the prices he found at Houston stores for 90 tablets of generic Prozac:
- Walgreens: $117
- Eckerd: $115
- CVS: $115
- Sam’s Club: $15
- Costco: $12
Those aren’t typos. Walgreens charges $117 for a bottle of the same pills for which Costco charges $12.
If you’ve always filled your prescriptions at Walgreens, and you’ve never bothered to shop around, how are you to know that you’re overpaying by $100? And even if you did shop around, would it occur to you that warehouse clubs might have the lowest prices? The Freakonomics post includes links to related stories and price comparisons.
The ability to shop around is a fundamental personal finance skill. It’s not difficult, but it requires patience and a little organization. The more expensive the item you’re intending to purchase, the more important it is to shop around. Your potential savings magnify with the cost of the item. (Someday I’ll tell you how I once got bids from 20 roofing contractors, ranging in price from $1200 to $5000.)
[Freakonomics: If crack dealers took lessons from Walgreens, they really would be rich]
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Excellent info. One point that may help people decide – Drugs are regulated which means, that you do not need to pay for membership at Sam’s or Costco to obtain a prescription. Just tell the door guard, you are going to the pharmacy.
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“(Someday I’ll tell you how I once got bids from 20 roofing contractors, ranging in price from $1200 to $5000.)”
Can you make that day tomorrow? I have to get bids on a fence and want to find a difference in price like that.
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Another shopping-around tip: when you get the price you like (Wal-Mart/Sam’s is generally my benchmark for prescription drugs), call back the guy whose business you want to support – the locally owned shop, or the company with the socially sustainable business practices, or whatever is important to you. Nine times out of ten, that business will match their competitor’s price. And you get the double-whammy warm-fuzzy of having gotten a good price and having given your money to someone you respect.
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I hate Walgreens and CVS. They are the biggest rip-off stores. Prescriptions are way too expensive, general health goods are too expensive, photo developing is way too expensive. Their profit margins are through the roof on practically everything in the store. That’s why they’re on practically every street corner nowadays.
Back when I was growing up, my hometown had a few drug stores. Now there is literally one at almost every major intersection. Sometimes you can find a CVS and a Walgreens caddy-corner from each other. It’s even worse because their buildings always look so similar. So bland, with the beige exterior, weird pseudo-window/pseudo-foyer thing in front, and the big red lighted logo.
The only time I visit those stores is the day after Valentine’s, Easter, etc. to get candy at 75% off.
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That pricing is absurd! It makes me want to never shop there again. Seriously.
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Getting co-insurance with a Prescription Benefit Manager can save you a lot of money on both generics and on brand-name medications. And while their big business is managing employee prescription insurance plans for businesses, many of them sell very good plans for retirees and employees of companies that don’t offer such plans.
(Disclaimer: I work for a PBM. But not on commission.
)
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I recently saved $600 on a Zofran prescription (I got it for $10) by using a pharmacy that compounds their own capsules (legally). I actually shared my story a few days ago (click on my name).
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I’m a pharmacist and the best way to make the most of your dollar is to price match. Currently Walmart is promoting $4.00 (#30 generic prozac 20 mg is on the list). K-Mart, Sam’s club, Kroger, and sometimes CVS will price match these for patients. Another great choice is Meijer, which has a number of antibiotics that you can get for free. Become friends with your local pharmacist, most will do their best help you get the medication you need. Walgreens is always the most expensive when paying cash, you’re paying for the “convenience”.
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Gaming: CVS and Walgreen’s are no longer drugstores; they’re convenience stores, and the pricing of non-drug goods reflects it.
That said, I love my local CVS because the pharmacists there are excellent, and the pharmacists and pharmacy techs there know my family and always ask about my son, who has some unusual medical issues. They’ve gone out of their way to make sure that we get what we need as quickly as possible. I wouldn’t switch for any reason. Of course, I also have exceptionally good medical insurance and have never had to pay more than a $15 co-pay, even on some REALLY expensive drugs like Lovenox. If we had to pay out of pocket we would have to look more closely at the pricing.
BTW, I would also love to read the roofing quote story. Our first quote for a tear-off and replacement was $21K, which scared us so much we’ve had a hard time getting motivated to call more companies for quotes.
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Related to this topic, I came across an interesting fallacy that most people make when shopping around for price. (This is from “Stumbling on Happiness”, a recommended read.) If one store had a stereo system for $300 cheaper, most people would drive across the city to go to the cheaper store. However, those same people likely wouldn’t take the same effort to find a dealership selling the exact same car for $300 less. Sometimes our brains play tricks on us. $300 is $300, whether it’s saved on a stereo or on a car.
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You know, I’m not surprised.
At our house, we go to Costco once a month, at the beginning of every month. We have strict rules that we only buy food there, and we don’t buy anything we aren’t totally positive we’ll be able to eat (it’s difficult to consume six heads of lettuce before they go bad, for example, if only one of you likes salad).
Anyway, I was feeling dubious that Costco was actually saving us money. Being a working mom of two, I didn’t have time to do exact price comparisons for things like diapers and yogurt, so we ran a simpler experiment.
For one month, we didn’t shop at Costco. We decided to do all of our shopping at our regular supermarket. Paper towels, diapers, food, everything we bought at Safeway or King Sooper’s. We held ourselves to the same rules: no extra buying of magazines or stuffed animals or crockpots, try to avoid waste.
My hypothesis was that we would actually spend less on groceries. I figured we would buy only what we needed at the supermarket, and that there might be less waste. I also (wrongly) suspected that there wasn’t that much of a price break at Costco.
So, did we save money that month?
Nope. In fact, we spent $300 MORE on groceries. Diapers, formula, food, paper goods, cat food–all more expensive at the regular stores.
So, I don’t have the hard data to compare product by product. But the bottom line is clear. Last month, we went back to our Costco trip and stayed within budget. This month is on track to do the same.
Interesting, huh?
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Thanks for posting this. I have no health insurance so I’ve been paying $70/mo for generic Prozac at CVS. I will be moving my prescription somewhere else this afternoon, possibly Target or Costco.
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It isn’t just generics behind the counter. I’ve started taking Claritin daily. I shopped around and the only price I can remember was CVS with 120 pills for $29.99. Went home and checked eBay where someone was selling Kirkland (Costco brand) generic Claritin, 300 tablets for a little under $15 shipped. He had good feedback so I thought I would take a chance, the bottle arrived sealed with an expiration date 1 1/2 years away. It’s a special bonus since I don’t have a Costco near me. Also, I checked the actual pill manufacturer’s website and they provide that generic to all the big names in the drugstore business including CVS.
Also, I don’t go to the Dr much but have had some prescriptions filled in the last couple of years. EVERYTIME!!! there was at least one prescription with a rebate offer if you went to the official website. I never would have thought of that but I was curious what exactly the expensive ($32 after using insurance) drug did. I found a rebate offer covering up to $30 of my co-pay. With that the most expensive prescription that day turned in the cheapest.
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Andy, don’t go to Target, if you are paying out of pocket, Costco is going to be the lowest. Their current price is $10 for #100 20mg caps of fluoxetine.
Even with Wal-Marts vaunted $4 program you need to compare apples to apples. Most if not all Wal-Marts meds are based on #30 pills/caps/tabs. So if you get #90, that is now $12. Which is now more than the $10 Costco price for #100.
Not only that but for Wal-Mart to make money they have to charge more for their other meds to make up the difference. For example I went to get a generic version of Zithromax, thinking $4, but no it was $42, called Costco and it was $22.
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[...] you to subscribe to my RSS feed. Thanks for visiting!On Monday I mentioned that it pays to shop around for the lowest price. This skill is specially important when making large money decisions. You should always shop around [...]
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[...] I encourage you to subscribe to my RSS feed. Thanks for visiting!In Monday’s post about shopping around for the best price on generic drugs, Tyler added an excellent tip: I don’t go to the doctor much, but have had some prescriptions [...]
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[...] It seems drug companies aren’t the only ones being sleazy with drug prices — pharmacies (at least in the states) are also inflating drug prices. (via Get Rich Slowly) [...]
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i have pain medication that is so expensive i have to get oxycontin and it is so expensive its almost 600 dollars to get 60 of them and i also have other perscription to get filled i have to take xanax and oxycodone 30mg for chronic pain i have no insueance and it is really hard to get them filled so if anyone has any tips or any place that may be cheaper please help me i really need to save money and i also have a 70 dollar savings card on the oxycontin
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