The High Cost of U.S. Prescription Drugs

     Prescription drug prices in the United States are significantly higher as compared to other developed countries around the world. This is a huge problem exacerbating the cost of healthcare in the U.S. currently and is worsening healthcare in many other ways such as decreased medication adherence. According to a KFF Health tracking poll conducted last year, roughly 3 of 10 Americans reported not taking their prescription medications as prescribed due to cost. Poor medication adherence as you know, often lead to negative health outcomes for patients, which we want to avoid. 

    The U.S. also spends more per capita on prescription medications in a year compared to our other wealthy first-world country counterparts. Based on data from the Organization for Economic Cooperation and Development (OECD), which is comparing data from the U.S. and other comparable developed nations around the world, it was shown that in the year 2019 that U.S. spent $1,126 per capita on prescription medications whereas the average between the other comparable countries was significantly less at $552 per capita. That is more than double the average cost per capita of other comparable nations. The cost of prescription drugs, specifically brand-name drugs, in the U.S. also seems to be higher as compared to its developed counterparts. For instance, data from the Health Care Cost Institute and the International Federation of Health Plans shows that prescription medications Harvoni, Kalydeco, Enbrel, Humira Pen, Xeljanz, Victoza 3-Pak and Xarelto were all brand named drugs shown to cost more in the U.S. as compared to the comparable country average. The comparable country average being the average cost between Germany, Netherlands, Switzerland and the U.K. in this data. 

    The reason as to why the U.S. prescription drug prices are so much higher is believed to be as a result of many factors, such as U.S. patent protections on new drugs, lack of direct regulation or negotiation of drug prices from U.S. government that allow pharmaceutical companies to set high market prices, unavailability of biosimilars & generics, and the negative influence of Pharmacy benefit managers (PBM). There is also the pro pharmaceutical company argument that prices of new drugs are often high due to the cost that went into research, development and clinical trials of multiple potential drugs that failed in addition to the drug that succeeded in getting approval. Thus, drug manufacturers argue they must set high prices to recoup losses, fund the drug development process of future drugs, fund marketing of a drug and of course make a profit. 

    As to possible solutions to reduce U.S. prescription drug prices, many have been proposed over the last few years. Some of these ideas include loosening of U.S. patent protections for new drugs, prohibiting drug manufacturers from paying rebates to PBMs instead replacing with discounts to beneficiaries at point of sale, setting tax punishments for drug price increases, importation of drugs from countries they are cheaper in, setting price controls on drugs, allowing the U.S. Health and Human Services to negotiate prices with drug manufactures similar to other developed nations, and etc. Given the new passage of Inflation Reduction Act of 2022 that just recently passed last August, it looks like U.S. government is going to try allowing HHS to negotiate the price of select few number of drugs covered by Medicare Part D & B each year gradually negotiating the prices of more and more drugs in coming years with the newly negotiated prices not taking effect until 2026. The new law also allow for the government (Medicare) to charge a rebate to drug manufacturers that increase the price of a drug covered by Part D & B above the general inflation rate. Lastly, it altered Medicare Part D allowing for price a general price cap of $2,000 per year for out-of-pocket prescription costs, capped Part D premium increases to 6% max every year until 2029, made Medicare covered vaccines free, capped Medicare covered insulin at $35 max, and lowered the qualification threshold for subsidies that help pay for Part D out-of-pocket costs by making people 150% above the federal poverty line now eligible (previously 135%).  As to how effective this new law will be at reducing U.S. prescription prices remains to be seen as it has just barely taken effect, with many provisions in the law not taking effect for many years down the line. 

Sources:

1. https://www.healthsystemtracker.org/chart-collection/how-do-prescription-drug-costs-in-the-united-states-compare-to-other-countries/#Per%20capita%20spending%20on%20prescribed%20medicines%20in%20dollars,%20by%20financing%20scheme,%202019%20or%20latest%20year 

2. https://healthcostinstitute.org/in-the-news/international-comparisons-of-health-care-prices-2017-ifhp-survey 

3. https://www.bloomberg.com/news/articles/2022-07-19/why-prescription-drug-prices-in-the-us-are-so-high-quicktake#xj4y7vzkg 

4. https://www.aarp.org/politics-society/advocacy/info-2022/medicare-budget-proposal.html

5. https://www.kff.org/medicare/issue-brief/explaining-the-prescription-drug-provisions-in-the-inflation-reduction-act/#bullet01

6. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7023937/

7. https://www.pewtrusts.org/en/research-and-analysis/fact-sheets/2018/07/a-tax-on-drug-price-increases-can-offset-costs

8. https://www.kff.org/health-costs/poll-finding/public-opinion-on-prescription-drugs-and-their-prices/

9. https://umich.instructure.com/files/29257024/download?download_frd=1