New Report: U.S. Drug Prices Are 2.56 Times Higher Than Other Nations


February 23rd, 2021

A new study shows drug prices are 2.56X higher than those in other nations. Drug costs also equate to over 10 percent of healthcare costs.

drug prices

RAND Corporation, a research organization, published a new report on U.S. Drug Prices. The report, International Prescription Drug Price Comparisons: Current Empirical Estimates and Comparison with Previous Studies, offers some interesting analysis. According to the study, U.S. drug prices are 2.56 times higher than other nations. The Office of the Assistant Secretary for Planning and Evaluation in the U.S. Department of Health and Human Services (HHS) sponsored the research to discern how much higher prices are in America. 

The sponsors were already aware of the fact that the U.S. spends more on prescriptions per capita than any other. The question was how much, and now we know. 

About the Study

This study on drug prices is unique because it focuses on differences in costs without considering volume or mixes of medications. They did this by looking at price indexes. The calculations in the report come from 2018 data. The comparison was between the U.S. and 32 other countries. 

The pricing model used was manufacturer pricing. Net pricing wasn’t available, which would take into account rebates and discounts. The reason for this is because they aren’t available across the board. 

The researchers made comparisons regarding overall pricing as well as brand-name and generic prescriptions. 

Key Findings

  • Overall pricing revealed that the U.S. prices are 2.56 times greater than those of the other countries. 
  • With brand-name drugs, the gap was even greater at 3.44 times. Those that were the most expensive in this category included treatments for cancers or hepatitis C. They can cost thousands of dollars per dose. 
  • Generic drugs are slightly lower in the U.S. than others; however, that group represents only 12% of U.S. spending. Although generics make up 84% of prescriptions sold in the country. 
  • Of the 32 countries, looking specifically at the G7, the United Kingdom, France, and Italy generally have the lowest prescription prices. Canada, Germany, and Japan tend to have higher prices.

Thus, the conclusion is that brand-name drugs are the key component in that overall, 2.56 number. No matter the methodology, brand-name drugs were the high price driver. Even when adjusting U.S. pricing for known discounts, the U.S. remained substantially higher than its peers. 

The authors assert that competition among the highest-priced medications could steer costs down. However, these are specialized drugs, so it’s not likely this will happen soon. 

Prescriptions Percentage of All Healthcare Costs

The study notes that estimates state that prescription drug spending accounts for around 10% of all healthcare costs. Drug spending in the U.S. rose by 76% between 2000 and 2017. Further, this area is forecasted to increase faster than any other segment. 

What’s the Future of Drug Prices?

Currently, the healthcare system has a target focus on the pandemic. Drug companies have put most of their time and effort into a vaccine. Much of the healthcare system is up in the air as to what comes next. New legislation, innovation, and more could all impact the future. 

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