The Food and Drug Administration's approval this month of Florida's plan to save money by importing medicines from Canada has put renewed attention on prescription drug costs in the United States.
Studies consistently show that drug prices in the United States have increased significantly. taller than than people in other wealthy countries. In 2018, they almost twice The same is true in France and the UK, even after taking into account the discounts that can significantly reduce the amount paid by American health insurance and employers.
“The U.S. market is the drug companies' bank,” said Ameet Sarpatwari, a drug policy expert at Harvard Medical School. “There is a strong sense that the best place to extract benefits is the United States because of the existing system and its dysfunction.”
Here are six reasons why drug prices are so high in the United States.
1. No central negotiator will leave on his own.
Other wealthy countries rely on a single negotiating body, usually the government, to accept the prices drug companies want to charge. In the United States, negotiations with drug companies are divided among tens of thousands of health plans, resulting in far less bargaining power on the part of buyers.
Other countries are also conducting careful analysis of how much additional benefit new drugs offer compared to those already on the market, and at what cost. Those countries will aggressively say no to new drugs if the cost is too high and the effects are too small.
“The main reason we're paying more than other countries is that we're not as strong in our negotiations. Another reason is that they are not willing to engage in such intense negotiations.”
The Inflation Control Act of 2022 allowed Medicare to negotiate prices directly with drug companies for a few years after a small number of drugs entered the U.S. market. Health policy analysts say this is a start, but broader negotiating powers are needed to bring down overall drug prices.
Drug companies claim higher prices come with extra profits: Industry-funded analysis finds U.S. patients are getting drugs Fasterthere are fewer restrictions on insurance compared to other countries.
2. There is no price control.
some countries Set limits on how much you pay for drugs. FranceFor example, there is a limit to the growth of a pharmaceutical company's sales, and if sales exceed that threshold, the government receives a rebate.
U.S. drug companies have avoided legal restrictions on prices for patients covered by commercial insurance and on introductory sticker prices when drugs are first brought to market.
“The reason drugs are so expensive in the United States is because we neglect them,” said Michelle Mello, a professor of law and health policy at Stanford University. “We designed a system that uses only the engine, without the brakes, from a pharmaceutical cost perspective.”
3. This system creates perverse incentives.
Pharmaceutical companies are not the only ones profiting from high drug costs. Doctors, hospitals, and various intermediaries also see increased profits as costs rise.
One case in point: Under Medicare policies for some drugs, doctors pay upfront for drugs they administer intravenously to patients in their offices, such as chemotherapy. To recoup costs, they send a bill to Medicare for both the cost of the drug and a percentage of that cost set by Medicare to cover overhead costs. This billing system creates an incentive for physicians to choose more expensive drugs. For example, if he applies the 6% Medicare rate to a $10,000 drug, he will pay $600. This is much more expensive than the $6 fee paid to inject a $100 drug.
Experts also point to an imbalance in incentives caused by pharmacy benefit managers (PBMs), large companies that negotiate with manufacturers on behalf of employers, and health plans, which pay most of the prescription drug bills. are doing.
The higher the drug's list price, the more the PBM makes in fees from the manufacturer. Patients may be required to take a drug that costs more than the list price, even if cheaper alternatives are available.
4. The system is fragmented and complex.
Pharmaceutical industry executives say they are paying high prices while other players, such as PBMs and insurance companies, are profiting from a growing share of drug spending and imposing high copayments on patients. They often complain that they are unfairly blamed.
“The United States is the only country that allows intermediaries such as PBMs to freely profiteer from pharmaceutical products,” said Alex Schreiber, an official with the Pharmaceutical Research and Manufacturing Association (PhRMA), the pharmaceutical industry's main lobbying group. says Mr.
One report found that manufacturers keep only half of the money health care payers initially spend on prescription drugs before discounts are applied. 2022 survey Funded by PhRMA.
The system is so confusing that doctors and patients trying to choose between seemingly equivalent drugs have no easy way to determine what the actual cost will be at the pharmacy counter.
Even researchers have a hard time parsing the system, especially the complex transactions that take place between drug companies, intermediaries, and insurance companies when trying to identify problems and find solutions.
5. Patent games keep prices high for a long time.
Countries around the world issue patents to drug companies, giving them temporary exclusivity during which they prevent low-cost generic competitors from entering the market. But in the United States, drug companies have been particularly successful in finding ways to extend their exclusivity through tactics such as piling up patents to protect inventions not directly related to the drug in question.
For example, drug company AbbVie delayed competition for its blockbuster anti-inflammatory drug Humira by more than four years in the United States than in Europe. Patents were an important factor. According to sources, many of AbbVie's patent applications have been rejected by European patent examiners or canceled due to opposition. analysis This is by the Initiative for Medicines, Access and Knowledge, a nonprofit organization that tracks drug patents.
AbbVie declined to comment for this article.
6. Drug prices are borne by the market.
Pharmaceutical industry executives often say their prices reflect the value their products provide to society. For example, a one-time $3 million treatment may be a bargain if it ultimately saves you $10 million in hospital bills and lost wages.
However, when compared to other valuable resources, we see that that model can cause prices to skyrocket out of control. “If we allowed water companies to charge us the full value of the water in our lives, society would quickly collapse,” said Christopher Moten, a pharmaceutical law expert at Columbia University.
Pharmaceutical companies also say drug prices reflect the huge increased costs of running clinical trials and the need to recoup high investments in failed drugs.But scientists have discovered it doesn't matter It's between the amount of money drug companies spend on research and the amount they charge.
In reality, companies are setting prices as high as the market can bear, experts say.
Reed Abelson contributed reporting.
