This Statistic Sums Up Why People Are Outraged by Drug Prices
Bubba
25 Oct
One of the most important topics that came up during podcaster Theo Von’s interview with Donald Trump running mate J.D. Vance this week: why are American medications so much more expensive? (This Past Weekend w/Theo Von)
The numbers: As Von noted, in 2022, U.S. drug prices (including both brand and generic drugs) were 2.78 times higher than in comparison countries.
Brand name drugs cost 3.22 times more than in comparison countries, even after factoring in estimated U.S. rebates.
A KFF analysis last year found that the U.S. spends more than $1,000 per capita on prescribed medicines—compare that to Sweden, which spends less than $400 per person.
Vance:
Price transparency is a big part of it. But you ask, why hasn't it happened? Because every time that we try to force price transparency, the service providers, the insurance companies or the pharmaceutical companies don't actually want that transparency. Here's one of the reasons why the pharmaceutical companies don't want transparency. It's because if Americans realized how much more we were paying for pharmaceuticals over the Europeans, there would be a revolution in this country.
Common ground (sort of): Both Trump and Kamala Harris have been critical of Big Pharma and vowed to reduce prescription costs, if elected.
As president, Trump signed various executive orders aimed at lowering prescription drug prices.
So did President Biden, and his Inflation Reduction Act also contained a provision allowing the government to negotiate drug prices directly with pharmaceutical manufacturers.
Meanwhile, Harris has campaigned on capping out-of-pocket drug costs and expanding Biden’s drugs-savings policies to more Americans.
The other side: Manufacturers often claim the high costs of prescription drugs reflect research and development costs.
David Henderson, a research fellow at Stanford’s Hoover Institution:
Why do other advanced countries get their drugs more cheaply? They have monopsonistic government agencies that negotiate drug prices with the attitude that if they can’t get it cheaply, their citizens will do without.
Pharmaceutical companies go along with this because drugs have high upfront costs and relatively low incremental costs. After those upfront costs are paid by someone, drug companies decide that the extra revenue, perhaps from Canada, covers incremental costs and is better than nothing. Drug companies would prefer that everyone pay the high price, but they have little control over the situation. If the price is too low in Canada, the company won’t launch there.
Bubba’s Two Cents
I’m sympathetic to the idea that removing profit incentives risks stifling innovation and the creation of life-saving new drugs. But something has to change. A huge majority of Democrats and Republicans (84% and 89%) blame corporate profits for the high price of prescription drugs. There’s (mostly) a bipartisan consensus that the issue needs to be tackled. Doing nothing is almost certain to breed resentment and discontent.