The U.S. Pays a Lot More for Top Drugs Than Other Countries
By Robert Langreth Robert Langreth , Blacki Migliozzi Blacki Migliozzi & Ketaki Gokhale Ketaki Gokhale
December 18, 2015

Prices for brand-name drugs are typically higher in the U.S. than other developed countries. The drug industry has argued it's misleading to focus on U.S. list prices that exclude discounts struck behind closed doors with insurers.

A Bloomberg News analysis finds that even after these discounts, prices are higher in the U.S. than abroad. Seven of eight top-selling drugs examined still cost more in the U.S. than most other countries.

Monthly Price in Dollars
The U.S. Pays a Lot More for Top Drugs Than Other Countries

Bloomberg estimated the actual amounts that drug manufacturers are paid on a sample of top-selling drugs. SSR Health, an investment research firm, used prescription data and U.S. list prices to determine the drugs' sales in the country before discounts. To approximate the discounts, SSR Health subtracted the actual U.S. sales reported by the companies. Bloomberg compared the discounted monthly prices with list prices from 14 countries, using local data from IHS Inc., a data analysis and consulting firm, and other sources.

"We can no longer sustain a system where 300 million Americans subsidize drug development for the entire world," said Steve Miller, chief medical officer for Express Scripts Holding Co., the largest U.S. manager of prescription-drug benefits.

The drug industry sees it differently.

"The entire health-care system in the United States is more expensive than other countries," said Robert Zirkelbach, a spokesman for the Pharmaceutical Research and Manufacturers of America trade group. "The difference in prices here in the U.S. compared to other countries is often vastly overstated," because comparisons don’t include all the discounts drugmakers give to various payers.

It's true: insurers and pharmacy benefit managers often obtain significant discounts on drugs' list prices. Sometimes the discounts can be 50 percent or more.

Of the eight drugs analyzed, seven cost more in the U.S. after estimated discounts than in most other high-income countries. Discounts for the eighth drug, the cancer treatment Gleevec, couldn't be obtained, but its list price in the U.S. is far higher than in the rest of the world.

The list price of Merck & Co.'s diabetes pill Januvia is cut in half on average by estimated discounts, according to the SSR Health data. Even so, Merck gets more than twice as much in the U.S. for a monthly supply of the same drug as in Canada, the next most costly place to buy it, Bloomberg found. Humira, AbbVie Inc.'s best-selling rheumatoid arthritis treatment, costs an estimated $2,500 a month in the U.S. after discounts, compared with about $1,750 in Germany, Bloomberg found. In other nations, the drug's price drops even lower.

A Merck spokeswoman said the company doesn’t disclose the discounts for competitive reasons. AbbVie said U.S. drug sales go through many channels with different levels of prices and rebates.

The analysis found that Roche Holding AG's Herceptin breast cancer drug, after rebates of roughly 15 percent, still cost about 85 percent more in the U.S. than in other high-income countries, and a third more than in Saudi Arabia, where the price is highest after the U.S. Roche takes drug prices "very seriously" and strives for the right balance between ensuring patient access to important medicines and investment in future breakthroughs, a spokeswoman said.

In the U.S., drug companies set their own prices and raise them over time. One of the biggest U.S. buyers of medicine, Medicare, is prohibited from negotiating prices directly with drug companies. Private insurers and benefit managers strike their own rebate deals with drug companies, and details of these contracts are almost never disclosed.

In Europe, drug prices are often set by government health systems and decline over time as countries demand additional price cuts, said Floriane Reinaud, a principal analyst at IHS.

"In the U.S., list prices are just a little bit crazy, and even with discounts that are tied to that it is still higher than Europe," Reinaud said.

Drugs account for only about 12 percent to 14 percent of U.S. health spending, and it's unfair to single them out as a cost driver, according to the industry. The U.S. free-market system has advantages that include cheaper generic medicines and faster access to new cures than in many foreign countries, said Zirkelbach, the PhRMA spokesman.

However, even very large discounts don't erase the price differentials between the U.S and other countries. After an estimated discount of 60 percent, AstraZeneca still charges more than twice as much in the U.S. for Crestor, a cholesterol pill, compared to Germany, and in other countries the price is even lower, according to the analysis of IHS data.

Sanofi gives U.S. discounts of about 50 percent on Lantus, a long-acting insulin, SSR Health found. It still costs 30 percent more in the U.S. than in China, the second-most expensive country. After an estimated 50 percent discount in the U.S. market, GlaxoSmithKline Plc's Advair asthma inhaler costs at least twice as much in the U.S. compared to other countries analyzed.

AstraZeneca said each country has its own "pricing structure," while Sanofi declined to comment on drug discounts. Glaxo said it's working with governments to find solutions to significant cost challenges in health care, trying to maintain patient access while "acknowledging the value of our medicines." Rebates on its drugs in the U.S. vary widely, and the discount on Advair for a patient covered by Medicaid, the health program for the poor, is about 85 percent, the company said.

The U.S. was not an outlier on prices for Sovaldi, Gilead Sciences Inc.'s hepatitis C pill. The blockbuster product was only slightly more expensive in the U.S. than most other high-income countries after rebates, and a little less costly than in Saudi Arabia. In February, Gilead said U.S. discounts on its hepatitis C treatments — which include a second drug, Harvoni — would more than double this year to 46 percent from 22 percent in 2014.

Gilead said its pricing is based on countries' economic and health backgrounds, and negotiations with most governments are confidential.

SSR Health was not able to estimate discounts for Gleevec, Novartis AG's drug for leukemia. Still, the analysis of IHS data found that the U.S. list price for that drug is more than triple the price that Novartis gets in other high-income nations. Novartis says it offers rebates for Gleevec, and that its prices vary between countries for reasons including differences in income, regulations, and type of health system.

U.S. price increases for Gleevec over the last decade far outpaced "the modest discounts" Novartis has offered, David Whitrap, a spokesman for Express Scripts, said. A generic version of the drug is expected to be available in the U.S. in February 2016, Novartis said.

—With assistance from Natasha Khan and Li Hui.

Letter to the Editor: U.S. Drug Costs Must Be Weighed Against Benefits