Why we pay more for drugs than any other developed country according to the Wall Street Journal.
Unless you have not been paying attention, the media has been reporting about the rise in drug prices due to consolidation of companies (mega mergers), generic drugs rising four fold over the past several years and companies buying the patent rights to produce drugs, while raising the cost to consumers in the USA rediculously.
The amount spent on television advertising alone by big pharma has been reported to outstrip the amount spend in research and development of new drugs. Many newer and more expensive drugs are no better or in some cases, less effective and riddled with side effects than some of the current ones that are tried and proven to work effectively.
In other countries, the government negotiates with drug companies, wanting to know what the real cost of making the drug is, the production cost, and the margin required to keep the company healthy and profitable. It has been reported that many drugs have markups up to 4000 times their cost of production which is unbelieveble.
As the game of pricing drugs, without a true effective marketplace continues in the USA, even with insurance, many drugs are wholly unaffordable. In other countries, they are willing to just say no to drugs that are too expensive, and play hard ball when negotiating drug prices. In our country, the Medicare prescription benefit does anything but that, which has been a true give-a-way that has been abused by the drug industry and has helped develop the current problem of healthcare costs.
A true marketplace would not have drug prices buffered by reimbursements by insurance companies, or by discount coupons offered on their expensive name brand medications. Often, their coupons lower the prices to the consumer but not to the insurer, who merely passes these costs back to us in the form of higher premiums the following year. A true marketplace allows for comparison shopping and consumers looking for the best deal, something that rarely happens in health care, especially since patients follow a doctors recommendation on what to take, or their generic equivalent if they so desire. Perhaps, this is why most developed countries have gone single payer and negotiate directly to get the best prices for drugs.
Check out the Wall Street Journals article on why we pay so much for drugs. Should we be supporting the rest of the developed world by paying way too much?
Why the U.S. Pays More Than Other Countries for Drugs
Norway and other state-run health systems drive hard bargains, and are willing to say no to costly therapy
By JEANNE WHALEN
Norway, an oil producer with one of the world”™s richest economies, is an expensive place to live. A Big Mac costs $5.65. A gallon of gasoline costs $6.
But one thing is far cheaper than in the U.S.: prescription drugs.
A vial of the cancer drug Rituxan cost Norway”™s taxpayer-funded health system $1,527 in the third quarter of 2015, while the U.S. Medicare program paid $3,678. An injection of the asthma drug Xolair cost Norway $463, which was 46% less than Medicare paid for it.
Drug prices in the U.S. are shrouded in mystery, obscured by confidential rebates, multiple middlemen and the strict guarding of trade secrets. But for certain drugs””those paid for by Medicare Part B””prices are public. By stacking these against pricing in three foreign health systems, as discovered in nonpublic and public data, The Wall Street Journal was able to pinpoint international drug-cost differences and what lies behind them.
What it found, in the case of Norway, was that U.S. prices were higher for 93% of 40 top branded drugs available in both countries in the third quarter. Similar patterns appeared when U.S. prices were compared with those in England and Canada”™s Ontario province. Throughout the developed world, branded prescription drugs are generally cheaper than in the U.S.
The upshot is Americans fund much of the global drug industry”™s earnings, and its efforts to find new medicines. “œThe U.S. is responsible for the majority of profits for most large pharmaceutical companies,” said Richard Evans, a health-care analyst at SSR LLC and a former pricing official at drug maker Roche Holding AG.
The reasons the U.S. pays more are rooted in philosophical and practical differences in the way its health system provides benefits, in the drug industry”™s political clout and in many Americans”™ deep aversion to the notion of rationing.
The state-run health systems in Norway and many other developed countries drive hard bargains with drug companies: setting price caps, demanding proof of new drugs”™ value in comparison to existing ones and sometimes refusing to cover medicines they doubt are worth the cost.
The government systems also are the only large drug buyers in most of these countries, giving them substantial negotiating power. The U.S. market, by contrast, is highly fragmented, with bill payers ranging from employers to insurance companies to federal and state governments.
Medicare, the largest single U.S. payer for prescription drugs, is by law unable to negotiate pricing. For Medicare Part B, companies report the average price at which they sell medicines to doctors”™ offices or to distributors that sell to doctors. By law, Medicare adds 6% to these prices before reimbursing the doctors. Beneficiaries are responsible for 20% of the cost.
The arrangement means Medicare is essentially forfeiting its buying power, leaving bargaining to doctors”™ offices that have little negotiating heft, said Sean Sullivan, dean of the School of Pharmacy at the University of Washington.
Asked to comment on the higher prices Medicare pays compared with foreign countries, the Centers for Medicare & Medicaid Services said: “œThe payment rate for Medicare Part B drugs is specified in statute.”
In the U.S., few payers, public or private, cite cost as a reason to deny drug coverage, partly owing to a traditional emphasis in the U.S. on doctor and patient autonomy. “œThey don”™t want to impinge on individual choices,” said Neeraj Sood, a health policy and economics expert at the University of Southern California.
Medicare Part B, for example, typically covers drugs and services deemed “œreasonable and necessary.”