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.
Here in the United States, there are numerous hospitals and insurance companies that buy or reimburse our drug purchases so pharmaceutical companies can take advantage of this to try and make a profit. They negotiate a variety of pricing rates, instead of charging a set price.
3) No National Drug Board
The United States does not have an independent organization that can do research, testing and comparison of drugs intended to treat the same condition to determine efficacy. The FDA does not have authority to do this type of comparison testing.
Canada does have such a review board called the Canadian Agency for Drugs and Technologies in Health. The CADTH plays a decision-making role in what drugs will be used in Canada. The agency demands evidence regarding effectiveness compared to other drugs used for similar conditions. This evaluation influences pricing.
In Norway, the Norwegian Medicines Agency reviews patient information in order to decide whether a new drug is cost-effective. “Its maker must request a reimbursement price at or under the maximum Norway has set and submit a detailed comparison of the drug’s cost and benefits versus existing treatments,” stated the Wall Street Journal.
4) Medicare Cannot Bargain
Here in the United States, Medicare is the largest provider of medications. But interestingly, the federal government does not allow Medicare to bargain drug prices, even though Medicare determines an allowable set reimbursement rate for other medical treatments.
This is an issue both Democratic presidential candidates Hillary Clinton and Bernie Sanders want to change.
“In Germany, nonprofit health insurers are able to bargain with pharmaceuticals and health providers to get the best price possible,” reported CNN.
Here in the United States, the attitude among patients would also have to change. We tend to take the position that we have paid our insurance premium and want to have access to any drug out there to treat our conditions.
This makes cost containment more difficult, but in the future this will be necessary to consider.
People are living longer and may be faced with conditions that we want new drugs to treat, but if the likelihood of a true benefit from the use of an expensive drug is low, then it does not make sense for it to be provided.
Why the U.S. Pays More Than Other Countries for Drugs. Wall Street Journal. Retrieved December 25, 2015.
Why pharmaceuticals are cheaper abroad. CNN.com. Retrieved December 25, 2015.
Michele is an R.N. freelance writer with a special interest in woman’s healthcare and quality of care issues.
Edited by Jody Smith