A Uniquely American Problem
Compared to the experience in other parts of the world, Americans get a raw deal.
A 2022 study found that, across all OECD countries, average prescription drug prices were 36% of the US average. This means that the average American patient is paying approximately three times as much for the same medication.
At the same time, the US’s healthcare spending is significantly higher than that of other high-income countries. This is despite similar drug utilization rates and patients being responsible for a greater share of medical costs. And the data suggests that the gap is only getting wider.
It wasn’t always like this. Back in the 1980s, America was much more in line with the rest of the world. But, as record numbers of new treatments were patented in the early 1990s, spending spiked sharply.
While every developed country saw healthcare spending increase over this period, America comfortably outpaced the pack. This happened again in the mid-2010s when another wave of breakthroughs pushed growth in spending skyward.
As this highlights, the upward trend in American drug prices is largely driven by on-patent treatments. Generic medications account for around 90% of prescriptions in America, and their prices are often lower than in comparable countries. It is the newer, more specialized drugs, with their virtually unlimited price tags, that blow out healthcare costs.
Why do Medications Cost So Much?
Some blame other countries for America’s high drug prices. This includes many drug companies that claim high prices in America are needed to offset low prices elsewhere, and that adhering to price controls in other countries means they must charge Americans more. This is misleading, at best.
Even if you take this argument on its own merits, it highlights the comparative weaknesses of the American drug market. It centers on the structural issues that allow drug companies to take advantage of American consumers. It hints at the preferencing of profit over public good.
The most obvious thing that sets America’s healthcare system apart is the comparatively high number of people without insurance. The percentage of the population that is uninsured has halved since the introduction of the Affordable Care Act (ACA). However, it still sits well above that of countries with universal healthcare.
In addition to this, around one-quarter of American adults are underinsured. And, even with sufficient coverage, American patients are often required to pay a greater proportion of their medical costs.
Notably, unlike other developed countries, America also limits centralized negotiation on drug prices. Select agencies, like the Veterans Health Administration, can deal directly with manufacturers and typically secure significant discounts for their members. All other negotiations are left up to private companies and are usually managed through intermediaries known as pharmacy benefit managers (PBMs).
As PBMs generally negotiate on behalf of multiple providers, they can theoretically leverage greater buying power than a single insurer. However, these negotiations lack transparency, and there may be incentives for PBMs to push more expensive treatments. As such, cost-efficiency is often not the focus or outcome of these discussions.
Cost-effectiveness is also rarely a consideration when approving new drugs. Where many other countries also assess efficacy compared to currently available treatments, US regulators focus solely on basic safety standards. As a result, new drugs are regularly released with high price tags and limited evidence of any additional benefit.
This is exacerbated by the patchwork of federal and state laws that create significant loopholes drug companies can easily exploit. Efforts to prolong patents and have treatments reclassified as “orphan drugs” are common. These reduce competition between companies, allowing those first to market to maintain their monopoly and maximise their shareholder returns.
Souece : by danilo.alvesd on Unsplash
Feed the Brand, Starve the Patient
As every visitor from another high-income country will attest, the pervasiveness of consumer drug advertising in the US is startling. Virtually non-existent elsewhere, drug marketing is omnipresent, facilitated by already lax regulations that are only being further eroded.
The result? A more aware and engaged, but no better informed, consumer base. Even higher prices for potentially lifesaving medication, as the lack of competition allows advertising costs to be passed on. Patients are choosing todelay or forgo treatment due to cost.
A Blueprint for Fairer Pricing
Polling consistently shows thata vast majority of voters support the federal government actively working to bring down drug prices. While opinions on the best way to do this vary, many suggest following the lead of our international peers. In particular, successful price control strategies like centralized negotiation with drug manufacturers.
The recentdeal with obesity drug makers, Novo Nordisk and Eli Lilly, could be the template for a new model. Though questions remain about how widespread adoption of such a model could impact future investment in drug research and development. The potential impact of a patchwork of targeted deals, without the support of broader regulatory change, is also uncertain.
Addressing these systemic issues requires strong clinical leadership dedicated to prioritizing patient advocacy over profit margins. Nurses with advanced degrees are stepping into these leadership roles and influencing key decisions. For those looking to help shape clinical practice and health policy,MSN to DNP online options are available to further their education.