Americans pay from two to six times more than the rest of the world for prescription drugs.

Market Expertz   |     September 20, 2018


While the USA reports the lowest usage of prescription drugs, it also pays the highest prices for these drugs, compared to the rest of the world. According to a study done by the International Federation of Health Plans, Americans pay from two to six times more than the rest of the world for prescription drugs. According to pharmaceutical groups, this is done to match the research and development it takes to bring a drug to the market. However, independent researchers disprove this claim by finding out that the cost of research and development is only 10 percent of the $1-2.6 billion figure that is claimed in industry-supported studies. It was also found that more than 50 percent of important discoveries are made in independent academic centers, funded by taxpayers, and 85 percent of basic research is conducted in academic centers. The drug industry spends 1.3 percent of its budget on basic research, but 20-40 percent on advertisements and related activities. Some studies show no relationship between drug benefits and price. There are measures that can be implemented to bring American drug prices down, such as establishing a post-FDA mechanism to review the benefits of drugs and define fair prices or Requesting that drug companies report transparently the costs of research and development to justify prices. However, these measures are opposed in Congress because of the influence of the drug industry lobby. Hence, the lowering of the prescription prices is doubtful.

If by some chance, a bill passes that allows the capping of prescription drug prices, pharmaceutical companies would try their level best to get it repealed, or just outright stop production of more expensive drugs, citing a lack of revenue. This has happened in the past, as pharmaceutical giants AstraZeneca and Eli Lilly and Co. have given up their research of Alzheimer’s, which they had invested about USD 2 billion. Due to the unfeasibility of finding a cure, they have stopped all research and investment. This may be the same case for other expensive drugs in the coming future. One might argue that the invisible hand of the market would enable smaller drug companies to take advantage of this vacuum in production, and it is a likely possibility. However, this may also lead to the acquisition of these smaller companies by larger, non-compliant pharmaceutical companies to force the government into repealing any measures taken. There is also a possibility of massive unemployment in America and the rest of the world as the corporations would have to consider lay-offs in order to preserve their profit.

In any of the above scenarios, the consumer would receive a devastating blow either way, as they would have to deal with a shortage and rationing of prescription drugs, or large-scale unemployment which may or may not lead to a tax hike to further fuel the burgeoning welfare spending in the United States.

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