Why Do American Spend So Much on Prescription Drugs?

Why Do American Spend So Much on Prescription Drugs?

Did you know that although the U.S. comprises 5% of the world’s population, it holds 50% of pharmaceutical company profits? On a per capita basis, Americans spend about $1,000 per person each year on drugs. That’s approximately 40% more than the next highest spending country, which is Canada.

There are a number of reasons why this spending imbalance is occurring and some of these are discussed in the PBS articles linked to below. Americans use more drugs and have more access to the newest drugs on the market. They also pay more for them. U.S. prices for brand-name drugs are 50% to 60% higher than in France and twice as high as what citizens of the United Kingdom or Australia pay. That’s because in many countries, government agencies essentially regulate the prices of medicines and limit the amount they will reimburse. There is also a technique called “pay for delay,” in which brand-name manufacturers pay generic manufacturers settlements to keep their competition from producing identical drugs. Another option drug manufacturers use is called “evergreening.” This strategy is to redirect the customer from the drug they are taking to another brand drug the same company is making in an effort to keep them from purchasing the generic alternative

See the PBS Newshour articles below for more information on why Americans spend so much more on pharmaceuticals than citizens in other democratic countries.

Our blogger Karen J. Fletcher is CHA's publications consultant. She provides technical expertise, writing and research on Medicare, health disparities and other health care issues. With a Masters in Public Health from UC Berkeley, she serves in health advocacy as a trainer and consultant. See her current articles.