Model-name medicine in the USA price greater than in different nations. The first motive is that the US has a sort-of-constrained however fairly free market in setting drug costs, whereas in different nations it’s common for the federal government or nationwide well being service to offer pharmaceutical corporations what quantities to a take-it-or-leave-it provide: cost a lower cost, or the drug received’t be prescribed on this nation.
However what’s much less well-known is that generic medicine promote for much less in the USA. A dialogue by Alex Tabarrok on the invaluable Marginal Revolution web site despatched me to an article by Andrew W. Mulcahy, Daniel Schwam, and Susan L. Lovejoy, who present some fundamental information in “International Prescription Drug Price Comparisons: Estimates Using 2022 Data” (Rand Well being Quarterly, June 2024). They write:
U.S. costs for brand-name originator medicine have been 422 p.c of costs as compared nations, whereas U.S. unbranded generics, which we discovered account for 90 p.c of U.S. prescription quantity, have been on common cheaper at 67 p.c of costs as compared nations, the place on common solely 41 p.c of prescription quantity is for unbranded generics. U.S. costs for brand-name medicine remained 308 p.c of costs in different nations even after changes to account for rebates paid by drug corporations to U.S. payers and their pharmacy profit managers.
Right here’s a determine summarizing the outcomes by nation. The numbers present US drug costs as a proportion of costs within the different nation: total, for brand-name medicine, and for generics.
For US well being markets, there’s room for exasperation right here. It’s a very good factor to have incentives for growing new and higher medicine. The well being advantages could be extraordinary. However we dwell in a world the place the US market is offering the incentives for improvement of recent medicine, whereas governments all over the world are if not fairly “free”-riding on these drug-development incentives, using at a a lot decreased charge. This doesn’t appear proper or honest (any greater than having many nations depend on US navy spending for his or her safety wants is true or honest). However the resolution of getting the US authorities management costs of brand-name medicine, which might tremendously cut back the inducement to develop new and improved medicine, is worse than unfair–it will be outright dangerous.
Additionally, it’s price remembering the 90% of precise US prescriptions that contain generic medicine is one space the place US customers are paying much less for well being care.
