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Cross-country comparisons of medicine prices are like comparing apples to oranges

Nicole Longo   |     March 22, 2021   |   SHARE THIS

Looking at differences in medicine prices between the United States and other countries can be misleading, often ignoring the complexities in the U.S. system and the repercussions of other countries’ reliance on government price-setting policies. As the discussion unfolds, here are five often overlooked facts that are critically important to keep in mind.

  1. Americans have better access to medicines than people in other countries. Americans often have access to new medicines years earlier and can access more medicines than people in any other country. Why? Because in many other countries the government determines what medicines are worth it and which ones are not – and availability of medicines suffers as a result. Not so in the United States, where nearly 90% of new medicines launched globally since 2011 are available, compared to less than half, on average, in OECD countries that allow the government to determine whether and how much to pay for medicines.

  2. Americans benefit from robust generic competition. More than 90% of all medicines dispensed in the United States are lower-cost generic medicines, a number that exceeds other developed countries. In fact, only 69% of medicines prescribed in other OECD countries are generic medicines, and generics are generally less expensive in the United States, on average, than in other developed countries.

  3. We all benefit from America’s global leadership in biomedical innovation. The United States has a collaborative research ecosystem system that fosters and supports medical innovation. It also makes it possible for America’s biopharmaceutical industry to work together with government agencies, universities and hospitals to develop lifesaving vaccines and treatments. It is because of this unique system that the United States leads the world in the discovery of new cures and treatments, as we’ve seen in our efforts to combat COVID-19. But it wasn’t always this way. Europe was once the dominate player in biopharmaceutical innovation, but after it began focusing on government price-setting, innovation migrated to the United States. To protect U.S. leadership in drug discovery and the nearly 4 million U.S. jobs that go along with it, we need to preserve a policy environment that encourages a robust innovation ecosystem. 

  4. Negotiations between biopharmaceutical companies and payers drive down prices, but patients don’t always pay less. Comparing prices in the United States to other countries is like comparing apples to oranges, because doing so compares undiscounted U.S. list prices to artificially low prices set by foreign governments. This flawed logic ignores the close to $200 billion in rebates, discounts and savings negotiated by insurance companies, pharmacy benefit managers, the government and others in our complex drug cost system. In fact, nearly 50% of all spending on brand medicines goes to entities other than the companies that discover and manufacturer the medicines. But too many Americans – particularly those with high insurance deductibles or other out-of-pocket requirements – don’t benefit from these negotiated savings at the pharmacy counter.

  5. Americans need smart solutions for lowering prescription drug costs. Rather than importing draconian price-setting policies from other countries that often use methods that can discriminate against seniors and people with disabilities, we need to find common ground on responsible solutions that will lower health care costs, including prescription drug costs, for Americans. There are a number of commonsense proposals that would help do just that, such as capping seniors’ out-of-pocket costs in Medicare Part D, allowing Medicare beneficiaries to spread their medicine out-of-pocket costs throughout the year and making sure savings negotiated by others in the supply chain are shared with patients at the pharmacy counter.

We can and should address patient affordability challenges, but proposals like foreign reference pricing would only make matters worse. America’s biopharmaceutical research industry is ready to do its part to advance solutions that lower costs for Americans, while also protecting access to the best treatments available and supporting biomedical innovation. 

Nicole Longo

Nicole Longo Nicole is senior director of public affairs at PhRMA focusing on Medicare, 340B, importation and more. She previously worked for a D.C.-based public affairs firm where she assisted a wide range of clients with communications efforts on everything from trade policy to agriculture policy to health care policy. Outside the office, Nicole can be found trying new restaurants (usually Italian), taking an occasional barre class and cheering on the Cincinnati Bengals.

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