walgreens employee

What Drug Dealers Can Learn From Walgreens Employee With Stephen J. Dubner

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For our first book Freakonomics, we wrote about the economics of a crack selling gang in Chicago, it was fun and interesting, because we have these assumptions, if you sell drugs, you become a millionaire and it turns out that the average criminal drug selling gang is set up a franchise, like a McDonald’s.

If you own ten McDonald’s, you make good money, if you’re a manager at one, but if you’re an employee at one, you make very little money and that’s the way a drug gang works that the vast majority of the profits are concentrated at the top.

So we made the argument that the average crack dealer isn’t very well off and the average crack dealer lives at home with mother and often has a second job at a place like McDonald’s, if crack dealers could take lessons from their legitimate drug selling counterparts, they could do a lot better.

So here’s what I mean by that generic drugs, we think most people seem to think like that, because they’re generic, their price is the same, that seems to be the way we think, it should work, because it turns out if you look at the pricing data on generic drugs across different companies retailers that sell it, there are instances where I could go to a Walgreens and buy a bottle of pills generic, a statin.

It would cost about a hundred and ten dollars and the same exact bottle of pills at a different place like a Sam’s Club or Costco would cost literally about ten or fifteen dollars, so a markup of a thousand percent for the same product that is sold by two companies that look similar and that are generic moreover.

So when you look at the data, it’s shocking, how can this possibly be, how can they get away with it? I mean anybody can charge anything they want, nobody has to buy it, but why would people buy it? It turns out that the reason is very simple that most people are in a given place especially a lot of older people who get you more drugs.

As you buy more drugs, as you get older, you’re more on plan, they make the assumption that a generic pill is going to be priced the same from one to the next, but it turns out that there’s massive disparity in that, so Walgreens is way better at dealing drugs.

If the goal is profit maximizing, I think that even though the people who are selling at the counter at Walgreens, I’m sure not making very much money, you know the shareholders of Walgreens appreciate that a firm like Walgreens is good at dealing drugs and profit maximizing.

So from an economic perspective, you have to applaud them from a fairness perspective, you have to decry them, on the other hand, that’s what capitalism is about, it’s about caveat emptor, you’re free to shop around.

If someone can take advantage of what’s called information asymmetry right, people on different sides of a transaction, I know a lot more about this price than you do, they can exploit it, what’s good about the digital revolution? It makes information asymmetry much harder to maintain.

So if such an app exists, a good one would be a very simple price comparison for generics for generic drugs and it would presumably off the bat save elderly Medicare patients billions of dollars within a month, it would cut into the the corporate profits of those shareholders, but that would work.

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