Healthcare Revisited    The Cost of Prescription Drugs

2017 Prescription Drug Cost Savings

The average percentage saved outside the U.S. for select prescriptions.

France 67%                        Italy   53%

Spain   55%                        Japan      65%

Germany      51%

One significant factor in the cost disparity is that the R & D costs by US pharmaceutical companies are borne via domestic pricing. Export sales are considered “incremental” and pricing is much, much lower.

“Hopkins University, tells NPR that raising the cost of existing drugs benefits drugmakers and insurers.

Research and development is only about 17 percent of total spending in most large drug companies,” he says. “Once a drug has been approved by the FDA, there are minimal additional research and development costs so drug companies cannot justify price increases by claiming research and development costs.

The study did not examine why prices of existing drugs have gone up, but the researchers say a lack of competition and the regulatory environment in the U.S. allow “for price increases much higher than in other countries.”

From 2008 through 2014, average prices for the most widely used brand-name drugs jumped 128%, according to prescription-benefit manager Express Scripts Holding Co. Reasons include increasing research costs, insufficient competition, and drug shortages.

However, none of these issues completely explain the price disparity. We do need some form of price controls, especially on “mature drugs” and also some assurance that R&D costs are factored into worldwide pricing. Also, we need to investigate the pricing in the baseline countries for the most consumed drugs. If there is a significant price difference, then the companies should be called before Congress to justify. Based on the data from the baseline countries, these costs should be reduced by 50% at a minimum.