Americans are asked to pay the highest prices in the world for brand name pharmaceuticals. How much higher? In the report Multinational Comparisons of Health Systems Data, 2009, Johns Hopkins researchers Gerard F. Anderson, Ph.d., and Patricia Markovich provide two examples.
Lipitor is one of the world's most prescribed medicines to treat high levels of serum cholesterol. In 2008, it was the most dispensed medicine and the medicine with the most sales revenue in America as you'll see in Table 1 and Table 2 here. In 2006-2007, Americans and their health plans paid about twice as much as health plans and citizens of seven other nations paid. Americans paid almost $1 per tablet (or 54 percent) more for Lipitor than Canadians, who paid the next highest price. (Click to enlarge graph.)
If the graph, above, gives you heartburn, you really won't like what you see next. Nexium, used to treat gastroesophageal reflux disease, was the seventh most dispensed medicine in America in 2008, but because of its relatively higher price, produced the second largest sales revenue as you can see in Table 1 and Table 2 here. (Click to enlarge graph.)
Canadians' health plan paid about half what Americans paid for Nexium. Citizens of the United Kingdom, the Netherlands and France and their health plans paid about one-third what Americans paid for Nexium. German's paid only 22.5 percent of what Americans paid for this medicine. For more on Nexium's history, read this.
One bright spot in America's pharmaceutical costs is in generic medicines. Our costs are generally lower than those of the rest of the world as Anderson and Markovich demonstrate in this table. (Click to enlarge table.)
Why are generics less expensive in the United States? In a study authored by Patricia Danzon, a Wharton health care systems professor, and Michael Furukawa, a Wharton doctoral candidate funded by Merck and Company and appearing in Health Affairs in 2003, competition is an important part of the answer.
Because some generics are available from multiple sources, whereas branded drugs and some generics are available from only a single source, competition can work to lower prices where multiple manufacturers compete. In most countries compared with the United States, prices for drugs are negotiated or regulated, keeping brand name prices lower relative to the U. S., but, according to Danzon, resulting in higher post-patent pricing. Danzon does not explain why she believes this is so.
Certainly there is no requirement that lower brand name negotiated prices must lead to higher post-patent pricing. Post-patent drugs are usually made by a different manufacturer than the brand name manufacturer, so negotiations or price controls could be as strict for generic as for name-brand products. Perhaps negotiations are based on therapeutic equivalency, so that a country is unwilling to pay much more for Nexium, than for Prilosec, Nexium's predecessor, which is now available as an over-the-counter medicine in America.
Generic drugs, with their lower relative cost and growing share of pharmaceuticals dispensed in the United States -- 68.3 percent in 2008 according to IMS, and growing -- is one bright spot, helping to control overall prescription drug spending in the United States.
For years, Americans have crossed borders to Canada or Mexico to access the far lower-priced branded pharmaceutical products available in those countries. A few years ago, several states were setting up websites to enable residents to purchase medicines from Canadian pharmacies, essentially getting around prohibitions on drug reimportation.
At $878 per capita, pharmaceutical spending was highest in the United States, by far, than in any of the 11 countries compared. Pharmaceutical spending per capita in the United States was nearly twice as high as the median of $446 in 30 Organization for Economic Cooperation and Development (OECD) Countries. Americans spend 27 percent more per capita for pharmaceuticals than the next most expensive country -- Canada, as you can see in this graph. (Click to enlarge graph.) The report's authors, provide another way to look at the relative costs of prescription medicines. Comparing prices for the 30 most commonly prescribed drugs in 2006 and 2007, and setting the United States at a relative position of 1.0, the rest of the countries compared pay only a fraction of the amount paid in America. Canadians pay 23 percent less. The British pay 49 percent less. The French pay 56 percent less. New Zealanders pay 66 percent less. (Click to enlarge graph.)
Tomorrow, I will take a look at prices for two of the world's most prescribed prescription medicines, and also look at one area where pharmaceuticals in America cost less than in the rest of the world.
Prices for brand-name prescriptions soared 9.1 percent during 2009, which was the largest increase in the past five years, according to Express Scripts, a pharmacy-benefit manager quoted by the Wall Street Journal.
For 2009, the Bureau of Labor Statistics reports that the Consumer Price Index for Urban Consumers (CPI-U) rose 2.7, so branded prescriptions rose about 3.4 times faster than the all-items CPI-U. For 2009, Medical Services component of CPI-U increased only 3.4 percent, meaning branded prescription drugs rose 2.7 times faster.
For 2009, CPI-U measured the increase in professional services at only 2.5 percent. Even hospital and related service costs, one of the most rapidly increasing components of medical services, rose just 7.1 percent. So branded prescriptions rose 3.64 times faster than physician services and and 32 percent faster than hospital costs.
As Kaiser reports here, there have been many years in which prescription drug pricing has outpaced other health costs. In fact, 2009 represents the eleventh year of the past 14 in which drug prices have risen faster -- sometimes far faster -- than the prices of professional services or hospital care. Here's the picture. (Click to enlarge graph.)
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