The study says that the reason why drug prices in the U.S. are the highest among the developed countries is because of the state-supported drug monopolies setting the prices as high as they want.
The study conducted by the Harvard Medical School reveals some results that are uncomfortable for many. After analyzing medical policy literature of the past 10 years, the researchers concluded that the drug prices in the U.S. are the highest among 19 most developed countries. They say that these uneasy numbers can be explained by the U.S. government reinforcing the monopolies of the big pharmaceuticals in the country, what suppresses the competition and allows for drug prices to reach unaffordable levels.
Now let's look at the numbers. Spendings on prescription drugs per capita in 2013 amounted to $858 in the U.S. as compared to about $400 in other developed countries (mostly European). As the state Food and Drug Administration keeps on approving monopoly of the branded patented drugs, it seems like the state regulation of the drug prices in the U.S. works very different from the other countries in the analysis.
"The most important factor that allows manufacturers to set high drug prices is market exclusivity, protected by monopoly rights awarded upon Food and Drug Administration approval and by patents," write the paper's authors Kesselheim, Avorn and Sarpatwari.
ABC news cites an example of a common prescription drug such as a steroid inhaler for asthma patients that costs more than $300 per month in the U.S. while it is available for only $35 a month in France. In addition to that, the prices for insulin drugs are 8 times higher in the U.S. This price difference is particularly shocking as last year's study published in the same Journal of American Medical Association revealed that over 50% of American adults have diabetes or are in a pre-diabetic state. Forbes reported that in 2012, diabetes-related costs in the U.S. reached an estimated $245 billion. And these are just some examples of the drastic price differences of the exact same drugs marketed in America compared to other countries. The list goes on and on.
The natural way to counteract the exclusivity of a certain drug would be to launch a cheaper generic version of it as an alternative for patients, the researchers say. However, new patented drugs receive the aforementioned "market exclusivity" and "monopoly right" that prevents any other company to launch a cheaper version of the medicine for a certain period of time. Most of the time a generic drug can only enter the market after about 5-7 years of restricted waiting period, what allows the monopolistic manufacturers to rise the prices leaving patients with no other choice.
This is exactly what happened to EpiPen when a previously inexpensive life-saving drug saw a price increase from about $100 to over $600 per package thanks to Mylan's (NASDAQ: Mylan [MYL]) market monopoly.
In addition to that, the drug suggestion of physicians is another key factor that contributes to the high drug spendings in the country. The researchers say that American doctors keep on prescribing the expensive branded drugs even if there are other cheaper alternatives available.
“Although brand-name drugs comprise only 10 percent of all dispensed prescriptions in the United States, they account for 72 percent of drug spending,” the study says.
Again, the researchers point out that the "unhealthy" price levels in the U.S. indicate that the American pharmaceutical market is far from being free.
"Almost all of these instances of monopoly prices are the outgrowth of government interference with business. They were not created by the interplay of the factors operating on a free market. They are not products of capitalism, but precisely of the endeavors to counteract the forces determining the height of the market prices."