Anticompetitive business practices result in sky high drug prices

Americans spend more on prescription drugs than anyone else in the world. It’s true that they take a lot of pills. But what really has set the US apart is how much drugs cost. Unlike in most other countries, their prices are set without direct government intervention. A new law aims to change that for certain drugs for elderly and disabled patients who rely on the government’s Medicare health program. The pharmaceutical industry opposes the change, and the law faces a raft of lawsuits seeking to stop it from taking effect.

How US Prices Compare Internationally

Prices for drugs in the US in 2022 were nearly three times as high as the average in 33 other countries where incomes are high or relatively high, according to an analysis by the research group Rand Health Care. It’s a gap that has widened in recent years. In 2022, the annual cost of prescription medications was about $1,400 per person. Prescription drug spending in the US was about $634 billion in 2022, according to a study in the American Journal of Health-System Pharmacy, and expected to grow as much as 8% in 2023. That includes drug coverage by insurers and government health programs like Medicare, as well as a significant contribution from out-of-pocket spending by consumers.

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What That Gap Means for Patients

In one survey, one in five adults in the US said they failed to complete a prescribed course of medicine because of cost. The figure was one in 10 in Germany, Canada and Australia. The difference stems not just from the higher prices. Patients in the US directly pay about 14% of the cost of prescription drugs out of their own pockets. And high drug costs are ultimately passed to members of the public through the insurance premiums they pay and the taxes that support government insurance programs like Medicare for the elderly or Medicaid, which serves low-income and disabled Americans.

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Congressional hearings have focused on the gap between what it costs to make long-established, life-saving drugs such as insulin or Epipen allergy injections and what consumers are charged. In March, a study published in the journal JAMA Network Open concluded that Danish drugmaker Novo Nordisk A/S could profitably produce a month’s supply of its diabetes treatment Ozempic for less than $5. In the US, it charges almost $1,000 for that amount. In Europe and other wealthy nations, list prices for the same drugs are typically 85% to 90% lower, a recent analysis found.

This Is How Drug Prices Are Set Elsewhere

The cost of drugs is regulated almost everywhere. In Europe, the second-largest pharmaceutical market after the US, governments negotiate directly with drugmakers to limit what their state-funded health systems pay. In addition to setting prices, many governments decide which drugs are eligible for coverage. The UK’s National Health Service, for instance, has refused to pay for some cancer drugs widely used in the US on the grounds that they don’t offer sufficient value to justify their cost.

This Is How Drug Prices Are Set in the US

In the US, drug companies have more or less been able to set whatever price the market will bear. When prescription-drug benefits were added to Medicare under a 2003 law, the pharmaceutical industry successfully lobbied to prohibit the federal government from using its huge purchasing power to negotiate drug prices. A congressional committee concluded at the end of 2021 that drug companies had raised prices “with abandon,” using anticompetitive strategies and manipulating the patent system and marketing exclusivities granted by regulators.