Drug costs are 3X in the U.S. what other countries pay, study finds

A comparison of drugs targeted for price negotiations under recent legislation finds that currently, retail prices for those drugs are on average three times higher in the U.S. than in other high-income countries. 

The findings are part of an analysis of Medicare’s decision to negotiate drug prices for the program’s enrollees, which will end up saving money for both enrollees and the federal agency. The study, published by the Commonwealth Fund, compared U.S. drug prices to prices in other countries, both before and after the changes. Even when those changes take effect, U.S. consumers will pay significantly higher costs when compared to consumers in those other countries, the data showed.

“Americans pay more for brand-name prescription medications than do residents of most other countries, with per capita spending on pharmaceuticals nearly three times the average of other member nations of the Organization for Economic Co-operation and Development (OECD),” the report said. “In 2022, high costs forced 1 of 5 U.S. adults age 65 and older to skip or delay filling a prescription, miss or reduce doses, or use someone else’s medication. More than half of patients resort to cost-coping strategies like coupons or free samples so they can get the medications they need but cannot afford. Such stopgap measures can have particularly serious consequences for older people who rely on medications to control chronic health conditions.”

High drug prices are certainly on the minds of both consumers and health plan sponsors, but the good news is that the U.S. is finally following the lead of other OECD countries in directly negotiating the price of drugs with manufacturers—that is, for Medicare enrollees, and for a select list of drugs. The Inflation Reduction Act of 2022 (IRA) allowed a phased-in program of negotiating prices for ten drugs currently covered by Medicare. 

The ten drugs were: 

• Four for diabetes: Farxiga, Fiasp/NovoLog, Januvia, and Jardiance. 
• Three for blood diseases: Eliquis, Xarelto, and Imbruvica. 
• Two for heart failure Entresto and Farxiga. 
• Two for Psoriasis: Stelara and Enbrel.
• One for Rheumatoid arthritis: Enbrel. 
• One for Crohn’s disease: Stelara.

Officials with the Congressional Budget Office estimated that the drug price negotiations will save the U.S. government $100 billion over the next ten years.

Drug cost remains higher than in other countries

The bad news: even when the lower prices take effect, U.S. drug costs will remain significantly higher. The Commonwealth Fund report found that prices after discounts and rebates in the U.S. are higher than almost all prices even before discounts and rebates in peer countries, with the exception of the drug Xarelto. The report said there remains “significant room for further reductions” for U.S. prices in the future. 

The report went through the list of drugs, comparing the U.S. prices to estimates for seven other nations in the OECD. For all of the drugs grouped together, U.S. prices are from three-times to eight-times higher than in other countries, depending on the country. Most price estimates were based on data from 2021 to 2022. In one example of how the U.S. prices compare, the net price of Entresto in the U.S.—recently at $11.82 per dosage unit, would fall to $9.57 with rebates. The next highest price among all countries was in Switzerland, at $4.51 per unit. The least expensive country for that drug was Japan, at $1.25 per unit. The estimated U.S. price of a Novolog FlexPen, recently at $39.72, would drop to $19.86, a notable reduction for the diabetes treatment, but still far above the second-most expensive country, Switzerland, which recently charged $5.36 per pen. The least expensive country from this treatment was Australia, at $2.26 per pen. 

The most expensive drug on the list, Stelara, cost $2,431 per dose in Australia, the least-expensive country. The second-most expensive country for the drug was Germany, at $9,223. The U.S. cost recently was $18,234 per dose; with the expected rebate, it would cost $12,946.

Part of a push to lower costs for consumers

Medicare’s decision to negotiate with drug companies for lower prices is long overdue to some observers, but it fits the Biden Administration’s larger push to bring down costs for consumers. There’s a great deal of debate over the long-term impact of Medicare’s move—some say drug companies will make up the difference by charging those not on Medicare higher prices, others argue that employer health plans and other payers will put more pressure on drug companies to lower prices on a wider basis. 

Related: Sticker shock at the pharmacy counter: What employers can do about the high cost of drugs

Industry observers said that drug companies are likely to continue to oppose the government’s efforts to reduce prices. In some ways, the U.S. consumer may be subsidizing the lower prices in other countries, some have suggested. “The U.S. market is the bank for pharmaceutical companies,” said Ameet Sarpatwari, an expert in pharmaceutical policy at Harvard Medical School, quoted in the New York Times. “There’s a keen sense that the best place to try to extract profits is the U.S. because of its existing system and its dysfunction.”