US drug prices lower than they may appear

According to the Financial Times (US claims of higher drug costs under fire) a study to be published soon in Health Economics, Policy and Law will demonstrate that US prices for branded drugs are similar to prices paid in Europe, once discounts and rebates are taken into account. That is quite different than the conventional wisdom, which is that US buyers subsidize R&D in other rich countries by paying more for drugs. It’s actually not that surprising, because US based pharmacy benefit managers (PBMs) specialize in negotiating with drug companies.

There is a modest price premium in the US compared to Europe, but the premium is declining over time.

The FT doesn’t say much about generic drug prices, but the market for generics is cutthroat in the US and perhaps less so elsewhere. Considering that generics are such a big part of the market here I wonder whether are overall unit drug costs are actually lower here than in Europe.

Incidentally when I registered to view the article on the Financial Times site it asked me what industry I’m in. Health care wasn’t even one of the approximately one dozen choices in the pull-down menu! Now there’s a big difference between the UK and US.

July 9, 2010

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