Exorbitant Drug Prices in the US: Why They Don’t Exist in Other Countries?

Exorbitant Drug Prices in the US: Why They Don’t Exist in Other Countries?

By Moses Im

From the scandal filled US elections to Michael Phelps’ record breaking twenty-third Olympic gold medal, 2016 has been full of big and unexpected news. Unfortunately, included in all this is the steep price hike of the Epipen (auto-injecting medicine for allergy emergencies). A set which cost $103.50 in 2009 now cost $608.61 this past May. The Epipen situation is hardly the first time when drug prices have risen to ridiculous levels in America. The alarming fact about the issue of drug prices is that it is unique to the US; most other European nations and Canada have established systems and regulations that allow the government to maintain moderate drug prices.

The alarming fact about the issue of drug prices is that it is unique to the U.S.

According to Wall Street Journal, 93% of the 40 branded drugs shared in both America and Norway are more expensive in the U.S. A vial of Rituxan, a cancer drug, costs $1,527 with Norway’s tax-funded healthcare while it costs $3,678 with America’s Medicare program. In countries such as Norway, governments are able to negotiate pricing and therefore maintain low drug prices. Often times, government established health services purchase the country’s supply of drugs and thus have enormous bargaining power. They can set their own drug prices and refuse to buy drugs from companies if they do not meet their standard or pricing. Many countries often have an NGO or government agency that reviews the cost effectiveness of drugs. Canada, for instance, has a drug review board that according to CNN, gives recommendation that helps providers determine a price they are willing to pay for the drug.” With massive negotiating power through bulk buying and drug efficacy reviews, the governments in other nations can effectively limit prices, and forcing pharmaceutical companies to oblige.

America’s health care systems, on the other hand, does not work this way. In America, pharmaceutical companies sell to numerous different consumers such as  Medicare, private insurance companies, and hospitals. As a result, each consumer has little bargaining power and thus the range of drug prices can fluctuate at the ease of the companies. In fact, Medicare is the largest consumer of pharmaceutical drugs in America, yet by law it cannot negotiate prices or gauge effectiveness of drugs. The U.S. also lacks an NGO or agency that does drug reviews like other countries. Consequently, pharmaceutical companies can set their own prices, resulting in branded drugs  being 300% more expensive in the US than in other countries.

Some argue that international price comparisons are inaccurate because they do not factor potential discounts American consumers receive when purchasing drugs. However, Bloomberg News did an analysis of drug prices accounting for these discounts, and the U.S. still constantly had the more expensive prices for top selling drugs. Pharmaceutical companies justify their dramatic price hikes as necessary to fund research and development.  Despite these justifications, Director Dr. Peter B. Bach from Memorial Sloan Kettering’s Center for Health Policy and Outcomes says that Americans are charged high prices for drugs because the companies simply can and that “we have no rational system in the U.S. for managing prices of drugs.”  

The current drug pricing situation may seem bleak in America, but to address these issues Democrats Hillary Clinton and Bernie Sanders have proposed to give Medicare the ability to negotiate drug prices much like its counterparts in other nations. This policy alone may be able to reduce about 16 billion dollars a year in spending. Perhaps it may prove to be beneficial to take inspiration or learn more from other nations’ policies as we continue our debate over healthcare and health policy here in America.



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