The U.S. has long been the global leader in biopharmaceutical innovation, investing in research and development that has led to breakthrough treatments and life-saving medications that have extended both the length and quality of life of patients around the world. Yet many developed countries pay only a fraction of what Americans do for these medical miracles—effectively leaving the U.S. to shoulder the cost. This system of global freeriding is plainly inequitable and places a disproportionate burden on American patients and the American healthcare system.
This is not a new or surprising issue—it is well established that the U.S. generally pays significantly more for patented prescription medications than other developed nations. The question is why and what can be done about it?
The principal reason for the disparity in biopharmaceutical pricing is that governments in other developed countries use price control schemes to limit prescription drug prices while the U.S. relies upon a competitive free-market economy that incentivizes innovation and rewards value. Innovative biopharmaceutical companies determine list prices for new therapies at launch in the U.S. and then negotiate the actual price paid with intermediaries across the health care system to optimize patient access and health outcomes. This competitive system has led to net price decreases for prescription drugs in real (inflation adjusted) dollars in the U.S. every year since 2017.
Most other developed countries employ some form of government price controls, many of which also use a system known as international reference pricing, which caps drug prices based on what some other group of countries pay. Not only does this type of system limit the revenue that is available for research and development of innovative new drugs, but it also allows more wealthy countries to link their prices to those from less wealthy countries—the very definition of not paying their fair share.
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