Why the U.S. Is Being Gouged on Drug Prices Compared to Other Countries

Fiscal Times

By Eric Pianin
December 2, 2015

From a global perspective, the cost to consumers and government agencies of prescription drugs in the U.S. is off the charts.

For instance, the Medicare Part B program earlier this year paid $1,936 for a vial of Lucentis used for treating macular degeneration, while the Norwegian government paid just $894 for the same drug. The U.S. health system meanwhile paid $3,678 for a vial of Rituxan/MabThera, which treats rheumatoid arthritis, while England’s health service paid $1,364.

While the Medicare program had to shell out $685 for a vial of Avastin, a cancer drug, the Canadian government in Ontario was spending only $398.

According to a revealing report this week by The Wall Street Journal, the pharmaceutical industry is gouging the U.S. Medicare program and its millions of beneficiaries to maximize profits while providing drugs at bargain-basement prices to government agencies and consumers overseas.

In the case of Norway, The Journal found U.S. prices were much higher for 93 percent of top branded drugs available in both countries during the third quarter of 2015, with a similar pattern of price disparity in England and Canada’s Ontario province. Depending on the drug being purchased, those countries were paying only 28 percent to 60 percent of the cost incurred by the U.S.

“Throughout the developed world, branded prescription drugs are generally cheaper than in the U.S.,” The Journal concluded. Yet even with their huge discounts, not every European citizen gets the drugs they need or want. Rationing of drugs is common in Britain and other European countries.

Still, there’s a reason Medicare was stuck with the bill: It is not allowed to negotiate pricing by law.

[Because the Republicans insisted no a provision blocking Medicare from doing so.]

Soaring U.S. prices not only fund most of the big pharma’s profits, they also help develop new medicines, including the more expensive biologics. This class of drugs is responsible for the spike in costs for a number of reasons.

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Nevertheless, a good chunk of the money generated by the U.S. health care system to big pharma also funds massive marketing budgets, including consumer advertising on television, something that is not allowed in Europe and many other countries. According to The Journal, pharmaceutical and biotechnology companies in the S&P 1500 earn on average a net profit margin of 16 percent, compared with an average of about 7 percent for all companies in the index.

[And CEO pay is much higher here.]

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tags: price gouging