Hello everyone, I would like to know why drug prices are higher in the US compared to other countries. Who regulates/sets drug prices and conducts negotiations with pharma?
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So overall, the government does not regulate drug pricing, meaning that drug companies can set whatever price they deem fit, which explains why drug prices are more and more higher in the US compared to other countries
The absence of central negotiator body can due to the fragmented health insurance system (between federal programs and private insurance).
In fact:
• Medicare (insurance for Americans over 65), is the pharma industry’s biggest single customer and is not allowed to negotiate at the federal level. It can negotiate with insurance companies but with limitations!
• The private insurance system, which covers the majority of Americans who are not on Medicare or Medicaid, is fragmented into hundreds of different employers and insurance providers, limiting their ability to negotiate steep discounts.
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I agree with you @R_Geller. The fragmented and complicated Health insurance system makes it hard for pricing negotiations.
However, recent cost containment strategies have been put in place to control inflation in drug prices. For example, The Build Back Better Act (BBBA), now rebranded as an inflation-control, climate, and deficit-reduction bill, enacted in 2022, did authorize Medicare to negotiate directly with drug companies over the prices of a small number of drugs years after they entered the American market. Also, the FDA authorized Florida to import drugs from Canada as they are cheaper. Something that many US citizens have been already doing for years and years now!
That’s true. Manufacturers will have to comply with this negotiation process or they will be punished with high fine. What’s more Medicare will introduce rebate system, so prices of drugs covered by Medicare won’t be able rise faster than inflation.
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Does this mean that Medicare will only be able to negotiate the prices of new drugs, or will it also apply to drugs that are currently covered by health insurance?
It will be able to negotiate drugs which are more then 9 years old (for small-molecule drugs) or 13 years old (for biological products).
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As you said, the US health care system is complicated. I highly recommend to take a look at this report published by ISPOR:
https://www.ispor.org/heor-resources/more-heor-resources/us-healthcare-system-overview
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