Rx COSTS: USA Today Looks at Why Americans Pay More
"Why does the United States have the highest drug prices in the world?" today's USA Today cover story asks. The United States is the lone industrialized country not to have imposed some form of price controls on prescription drugs. Americans pay, on average, about one third more for prescription drugs than those in other wealthy nations, leading some to complain that "the United States is being played for a sucker in the world market." Indeed, drug costs are now "the fastest-growing segment of health care costs" in the nation, rising about 12% annually. Alan Sager, head of the Access and Affordability Project at Boston University's School of Public Health said, "Pharmaceutical companies use the U.S. as their safety valve. If other countries negotiate or regulate to win lower prices, drugmakers raise their prices on the hapless American consumer. Our pockets are being picked." Sager has estimated that Americans overpaid for drugs by at least $16 billion in 1998 on a total drug bill of $120 billion. He further asserts that "bringing prices down to international levels would save enough money to provide prescription drugs to all 44 million uninsured Americans." The U.S. government currently imposes price controls, but only for government contracts: Pharmaceutical companies must sell drugs to the government at "the best wholesale price." The Veterans Administration, the Defense Department, the Coast Guard and the Public Health Service/Indian Health service get an additional 24% discount. Those four departments only account for 1.5% of the U.S. market. Medicaid prescriptions, which account for 10% of the market, only get a small discount, leaving states to pay the bulk of the bill. The paper notes that more than a dozen states have considered legislation to control prescription drug prices.
Two other reasons account for higher U.S. prices, including the fact that the United States is "the only industrialized nation that permits prescription drugs to be advertised directly to consumers through television commercials and print ads." This year, the pharmaceutical industry will pay about $1.8 billion on advertising. The United States also prohibits wholesalers and retailers from buying drugs at lower prices in other countries because the FDA has said it cannot "assure the safety of the imported drugs."
U.S. pharmaceutical companies defend the high prices, insisting that "lowering prices to international levels would devastate research and development." Judith Bello, executive vice president of the Pharmaceutical Research and Manufacturers Association (PhRMA), said, "Many industrialized countries do control prices, but we don't think the solution is to emulate those practices. ... The bottom line is less investment means less research, and less research means fewer results." Other companies have insisted that price comparisons are not fair because other factors like government price regulation and currency exchange fluctuations come into play. Bill O'Donnell of Schering-Plough said, "It is not possible to make valid comparisons of prices by country."
America's Drug Store: Canada?
Faced with high prescription costs, many American consumers, especially senior citizens, have become "border crossers," seeking lower-priced drugs in Canada and Mexico. Other seniors cut pills in half, taking only half the prescribed dose to keep costs lower. Some seniors have requested free samples from doctors or some even go without medicines or rely on charitable government programs to facilitate their costs. USA Today provides a sidebar, "What to know when buying in Canada, Mexico" and also examines how other countries regulate prices (Cauchon, 11/10). On yesterday's MSNBC's "The News," Kelly O'Donnell reported on the border-crossing trend: "The Mexican border has become a check-out line for cheap prescription drugs. ... So many American citizens come here (that one Mexican border town) has more pharmacies than restaurants. And it's all perfectly legal." How big is the savings? Diabetes medication Diabeta costs $26 in the U.S., but less than three dollars in Mexico. Allergy medicine Claritin: "$50 here, but in Mexico (it is) less than a third of the cost -- just $14." Stanford University's Dr. Phillip Lee discourages the practice, saying, "To get a drug that may have half the content of effective medication in it, or even a drug that has none of it, it's just not worth the risk" (11/9).