EATG » Analysis of why drug prices are so high in the USA

Analysis of why drug prices are so high in the USA

The study The High Cost of Prescription Drugs in the United States – Origins and Prospects for Reform by Aaron S. Kesselheim Jerry Avorn, and Ameet Sarpatwari discusses the reasons why medicine prices are often incomprehensibly high, and keep increasing, in the USA. The findings are relevant for other regions such as Europe as well. Against popular belief and the explanations of pharmaceutical companies, the primary reason is not always the high development cost of new health technologies.

The abstract reads: “The increasing cost of prescription drugs in the United States has become a source of growing concern for patients, prescribers, payers, and policy makers. After relatively modest growth after the expiration of patents on many widely used medications from 2010 to 2012, medication expenditures have begun to increase again, punctuated by several high-profile examples of very costly new agents and sharp increases in the prices of some older ones.1 Between 2013 and 2015, net spending on prescription drugs increased approximately 20% in the United States,2 outpacing a forecast 11% increase in aggregate health care expenditures.3 Prescription medications now comprise an estimated 17% of total health care costs,4 and prescription medication coverage constitutes 19% of employer-based insurance benefits.5 Since the advent of the Medicare drug benefit in 2006, government entities have paid for approximately 40% of the nation’s total retail prescription drug expenditure.6 Certain expensive drug products are important clinical breakthroughs and may even be relatively cost-effective; others are merely costly, with prices that are difficult to justify in relation to their actual contributions to patient outcomes.

The United States has long spent more on prescription medications than other countries.7 In 2013, per capita spending on prescription drugs was $858 compared with an average of $400 for 19 advanced industrialized nations (Figure 1).8 List prices for the top 20 highest-revenue-grossing drugs were on average 3 times greater in the United States than the United Kingdom.9 These disparities are reduced but remain substantial even after accounting for undisclosed discounts (“rebates”) that manufacturers offer to US payers. In 2010, estimated average postrebate prices for medications were 10% to 15% higher in the United States than in Canada, France, and Germany (Table 1).11


News categories: Access, Pharma industry