Why Prescription Drugs Cost So Much More in America

The US spends more per capita on medication than anywhere else in the world. It’s a key electoral issue. From a report on Financial Times (paywalled): All over the world, drugmakers are granted time-limited monopolies — in the form of patents — to encourage innovation. But America is one of the only countries that does not combine this carrot with the stick of price controls. The US government’s refusal to negotiate prices has contributed to spiralling healthcare costs which, said billionaire investor Warren Buffett last year, act “as a hungry tapeworm on the American economy.” Medical bills are the primary reason why Americans go bankrupt. Employers foot much of the bill for the majority of health-insurance plans for working-age adults, creating a huge cost for business. In February, Congress called in executives from seven of the world’s largest pharmaceutical companies and asked them: why do drugs here cost so much? The drugmakers’ answer is that America is carrying the cost of research and development for the rest of the world. They argue that if Americans stopped paying such high prices for drugs, investment in innovative treatments would fall. President Trump agrees with this argument, in line with his “America first” narrative, which sees other countries as guilty of freeloading. For the patients on the trip, the notion is galling: insulin was discovered 100 years ago, by scientists in Canada who sold the patent to the University of Toronto for just $1. The medication has been improved since then but there seems to have been no major innovation to justify tripling the list price for insulin, as happened in the US between 2002 and 2013.