Are drug prices higher in the United States than in other countries? – Health Economist

Conventional wisdom holds that drug prices are higher in the United States than in other countries. But is that really the case? And yes, how much?

What price?

The question we have to answer is “what price” do you mean? There is the manufacturer’s wholesale price (i.e., gross price) which is how much the wholesalers pay for the drugs from the manufacturers. Next, there is the wholesale retail price which is how much do pharmacies pay for drugs after they are bought from wholesalers with some additional markings. Yet another component of the price are discounts and rebates that drug manufacturers pay to pharmacy benefit managers after the fact. Taking into account these discounts, we get the net price. Of most interest to patients is the cost of the bag which depends on: (i) whether someone has insurance, and (ii) how much of the insurance the cost of the drug will cover. Benefit designs can include complicated rules with deductibles, co-insurance, copayments and drugs at different levels of form.

For the purpose of this exercise, we look at the gross and net prices of drugs to ignore any difference in the cost of patients solely due to conception of health insurance benefits.

The answer: Yes, the drug in the United States is the most expensive.

Now that we have the definitions out of the way, let’s take a look Report from the Government Accountability Office (GAO) which compares drug prices in the United States, to those in Australia, Canada and France. GAO examined 41 brands, a single source (i.e., without generic or biosimilar availability) of prescription drugs that ranked highest in terms of U.S. Medicare Part D costs in 2017. The analysis accounted for discounts in the United States using both Part D discount data and a 43% overall discount alternative. Discounts and discount data for other countries were not available for GAO. Although discounts and rebates are generally larger (both in absolute and relative terms) than in other countries, the GAO method applies discounts only to the United States; thus price differences between countries are estimated to be conservative.

Based on GAO analysis, drug sales and sales prices are 2.5 times higher in the United States than Canada and about 4 times higher in the United States than France or Australia.

Where does drug R&D take place?

Another interesting finding from the GAO report was where most of the drug development took place. GAO found that the United States had a much larger share of pharmaceutical research and development spending located within its borders than Australia, Canada or France combined (either in absolute terms or as a whole). of GDP).

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