Exorbitant prices of brand name drugs

By Andrew W. Mulcahy, Christopher M. Whaley, Mahlet G. Tebeka, Daniel Schwam, Nathaniel Edenfield, Alejandro U. Becerra-Ornelas
RAND, Research Report, January 28, 2021

Conclusion

Although several prior studies compare drug prices in the United States with those in other countries, the most recent of these studies used data that are nearly a decade old. In our analysis using 2018 data, we found that, with the exception of unbranded generics, 2018 drug prices in the United States were substantially higher than those in other countries. The United States had lower prices for unbranded generics than most comparator countries. Unbranded generics account for 84 percent of U.S. prescription drug volume—a much larger share than the 35 percent for the OECD comparison countries—but only 12 percent of prescription drug spending at manufacturer prices. In contrast, brand-name originator drugs accounted for only 11 percent of U.S. prescription drug volume and 82 percent of U.S. prescription drug spending. Overall, the United States’ considerable unbranded generic market share and low average unbranded generic prices did not fully offset higher brand-name originator prices.

The magnitude of the difference between prices in the United States and those in other countries was substantial. For all drugs, U.S. prices were 256 percent of prices in other countries. U.S. prices for brand-name originator drugs were 344 percent of prices in other countries. U.S. prices for unbranded generics were 84 percent of prices in other countries. Although different methodological decisions did change the magnitude of results, the overall pattern of higher drug prices in the United States was generally consistent—again, with the exception of unbranded generics. All G7 comparator countries had lower prices than the United States; France, Italy, and the United Kingdom had particularly low prices across drug categories regardless of methodological decisions.

The results of our study provide evidence that prescription drug prices are higher in the United States than in comparison countries. These results are consistent with the existing literature. Although we apply an estimated adjustment to U.S. prices to approximate rebates and other discounts applied to manufacturer prices as one of our sensitivity analyses, we recognize that the resulting prices will almost certainly differ from the actual net price to payers for individual presentations. We also recognize that resulting price indices will understate differences between prices in the United States and other countries because they adjust only U.S. prices downward even though rebates and similar discounts are increasingly common in other countries.

Future analyses should examine the association between purchasing power and drug prices across countries. We also recommend studying specific active ingredients and presentations that contribute most to the differences in aggregate prices between the United States and other countries, and we recommend long-term tracking of price indices that are relevant to the nascent U.S. biosimilars market.

The full study (71 pages) can be downloaded at this link:
https://www.rand.org…

News release:
https://www.rand.org…

Comment:

By Don McCanne, M.D.

This current RAND study confirms that U.S. drug prices were 256 percent of drug prices in other countries, while brand name originator drugs were 344 percent of prices in other countries. Although these brand drugs represented 82 percent of U.S. prescription drug spending, they accounted for only 11 percent of U.S. prescription drug volume. High prices indeed.

The one positive note is that 84 percent of U.S. prescription drug volume is for unbranded generics, but it represented only 12 percent of prescription drug spending at manufacturer prices. However the large volume of low cost generics does not make up for the exorbitant prices of the brand name originator drugs. We are continuing to spend way too much on brand name drugs. Think of all of the television ads that you see for these expensive drugs.

Although the authors recommend further analyses of these relationships, it really is time to switch to government administered pricing which we could easily do by enacting and implementing a well designed, single payer, improved Medicare for All. Decades of relying on markets has just not been effective.

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