Fred L. Goldenberg: Drug prices out of control
Mar. 13—My last column regarding the complexity of the Medicare Part D prescription drug program generated quite a few questions about the Inflation Reduction Act (IRA) and its effect on the overall cost of drugs. It comes as no surprise that Americans pay the highest prices for our medication. The question is why?
On Feb. 22, President Biden addressed a crowd in California regarding the cost of drugs: "If I put you on Air Force One with me, and you have a prescription — no matter what it's for, minor or major — and I flew you to Toronto or flew to London or flew to Brazil or flew you anywhere in the world, I can get you that prescription filled for somewhere between 40-60% less than it costs here."
He is not wrong. According to a study conducted by the Peterson-KFF Health System Tracker, overall, U.S. prescription drug prices are significantly higher, sometimes two to four times as high, compared with prices in other high-income industrialized countries. Cynthia Cox, director of the study, says "the available evidence suggests that the U.S., on average, has higher prices for prescription drugs, and that's particularly true for brand-name drugs." She goes on to say "Americans also have relatively high out-of-pocket spending on prescription drugs, compared to people in similarly large and wealthy nations."
In a 2024 Rand study, of the 38 member nations of the Organization for Economic Cooperation and Development (OECD) — a group of advanced, industrialized countries — U.S. prices were 2.78 times a high as prices in 33 other countries. Name-brand drugs sored to 4.22 times as high as those in the study.
After adjusting for pharmaceutical companies' rebates, we are still paying more than triple for name-brand drugs than other countries.
Every study conducted, going back to a 2021 Government Accountability Office, found that the prices for 20 brand-name drugs in the U.S., Canada, Australia and France were more than two to four times as high as in the U.S.
So, what is the reason for these huge discrepancies in pricing? What makes these other 38 countries different from the U.S.?
It's the same answer every time. They all have a single-payer system. It's really that simple.
Did you know that in 2024 there are more than 700 different Medicare Part D Drug plans out there? Although not every plan is in every state, but overall, the number of plans that are involved in the pricing is staggering. Not to mention the manufacturer to the wholesaler to the insurance company to the consumers cost structure.
Other countries often rely on a single regulatory body to determine whether prices are acceptable and negotiate accordingly. Many nations conduct public cost-benefit analyses on new drugs, comparing them with others on the market. If those studies find the cost is too high, or the health benefit too low, they'll reject the drug application. Plus, they set price controls.
Currently the IRA is working to lower drug prices for Medicare beneficiaries with a $35 cap on insulin and a max-out-of-pocket of $2,000 starting in 2025. But the drug industry still has a strangling hold on the overall cost of what we pay.
Drug patents and exclusivity have stopped the manufacturing of generic drugs and the higher prices. There are instances where drug manufacturers bought generic drug companies just to stop them from producing.
The other lie we're being fed is that the higher drug prices we pay fuel research and development. Without it, no new drugs would be developed. Well, guess what?
One 2023 study found that from 1999 to 2018, the world's largest 15 biopharmaceutical companies spent more on selling and general and administrative activities, which include marketing, than on research and development. The study also said most new medicines developed during this period offered little to no clinical benefit over existing treatments.
Currently our system allows for the buying and selling of political capital and for many, this means that their loyalty goes to the highest bidder. Getting corporate dollars out of politics, setting controls for pricing and allowing for single-payer negotiations for drugs are just a few steps we need to end the never-ending cycle.
Fred L. Goldenberg is a Certified Senior Advisor (CSA) working with Michigan Planners, a financial services and certified health insurance organization in Traverse City. With questions or comments about this column or interest in monthly Medicare classes, call 231-944-1400 or email fgoldenberg@miplanners.com.
