Here in the United States, certain drugs can be priced at levels that are two and three times higher than in other countries.
The drug Herceptin, which is used to treat breast cancer, costs $858 per 100 mg in the United States (prices per Medicare) but costs $483 in Norway, $424 in England, and $493 in Canada.
Aranesp, a drug used to treat anemia, costs $ 1,995 per 500 mcg syringe in the United States, but costs $633 in Norway, $1,146 in England, and $1,223 in Canada, according to the Wall Street Journal.
CNN reports that Humira, which treats rheumatoid arthritis, costs $2,246 in the United States, compared to $881 in Switzerland, and $1,102 in England.
At the same time, the United States spends a lower percent of our total health care expenditures on drug purchases, as compared to other developed countries.
In 2013, U.S. pharmaceutical spending was only about 12 percent of our total health care spending. Canada spent 17.5 percent and Italy spent 18.6 percent of their total spending on drugs, according to data collected by OECD.org.
What exactly accounts for these higher costs?
1) Research Costs
According to PhRMA, a pharmaceutical trade group, the higher price of U.S. drugs is due to the cost to do research and bring a drug to market. They claim that it can take 10 years, and over $2.6 billion dollars, to make it through the entire approval process, reported CNN.
In addition, drug companies lose money on pharmaceuticals that never do make it to market, so some of those lost costs are rolled into the price of drugs that do make it.
2) Fragmented Buyers
In other countries, drugs are purchased by a single authorized purchaser, or a very limited number of them . “In the United Kingdom, the National Health Service, purchases drugs for the entire country's supply, known as a formulary,” described CNN.
Norway and other countries set pricing caps and demand evidence of a new drug’s effectiveness compared to existing ones, the Wall Street Journal explained.