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It is often taken as a given that drug prices in the U.S. are higher than those in other nations. And while there is a difference in price, that difference is often exaggerated and taken out of context.
First, Americans do not spend more on retail prescription drugs as a percentage of overall health spending.
- About 12% of the health care dollar goes to retail pharmacy spending in the U.S., which is about on par with our international peers, according to the Organisation for Economic Co-operation and Development.
- Canada and Germany spend a little more than we do. Switzerland spends a little less.
- The percentage of overall health care spending accounted for by retail pharmaceuticals has remained relatively stable for the past decade, according to U.S. government figures.
The reason? The prices of hospital care and physician services in other countries. No one calls out the vast gulf between the cost of a coronary bypass in the U.S. versus overseas or the higher fees charged by specialists. Instead, pharmaceuticals have become an easy scapegoat, even though—ironically—medical treatment can reduce the chances of interaction with the truly expensive parts of the health care system.
Second, differences in spending should be adjusted to account for different GDP and purchasing power between countries, a point acknowledged by proposals for international reference pricing. Japan’s GDP by that measure is nearly 40% lower than that of the U.S. Greece’s is half of the U.S. figure, which impacts pricing more broadly.
Finally, nowhere else in the world does as good a job at transitioning to generic medicines once a medicine’s patents have expired. This provides the budgetary “headroom” for broader use of new medicines.
- An estimated 90% of all prescriptions in the U.S. are for generic medicines.
- When a therapy goes generic, the price falls faster and further than in peer nations, a 2024 analysis published in JAMA Health Forum found.
- When factoring in the volume and price of generic medicines, drug costs in the U.S. are lower than elsewhere in the world, according to University of Chicago researchers.
BIO’s View: The cost of medicine in the U.S. must be viewed in a broad context, including how the high prices of other medical products and services compare to international prices and how those differences boost the value of medicines in the U.S. market. The role of generic medicines in creating budgetary headroom for breakthroughs can’t be underestimated and is at the core of a compromise that allows American patients both the most innovative new medicines and the lowest-cost generics.
