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I heard that...

...prescription medication prices are cheaper in other countries. Is that true?

This is true. The U.S. pays more for brand-name prescription drugs than any country except Japan.

Americans pay 18-67% more (U.S. Department of Commerce, 2004) for brand-name prescription drugs than people in any other country except Japan (Danzon and Furukaway, 2003). Prescription prices in these other countries are regulated by each country’s government, which limits what pharmaceutical companies can charge. Government regulations also lower prices for some U.S. payers. For example, the Medicaid program pays less for the same prescription drugs than Medicare Part D drug coverage plans or private insurance plans pay (Outterson and Kesselheim, 2009). Government limits on the price of prescriptions drugs, however, may lead manufacturers to spend less on developing the new drugs patients and physicians want (Danzon and Furukaway, 2003).

The Patient Protection and Affordable Care Act (PPACA) includes changes to Medicare Part D, the prescription coverage component of Medicare. Beginning in 2011, beneficiaries will receive a 50% discount off negotiated prices on brand-name drugs covered under Part D while in the coverage gap. Co-pays for generic and brand-name drugs will be reduced beginning in 2011 and 2013, respectively, and will eventually be reduced to 25% for all drugs while in the coverage gap.

Sources:

U.S. Department of Commerce, International Trade Administration. 2004. Pharmaceutical Price Controls in OECD Countries: Implications for U.S. Consumers, Pricing, Research and Development and Innovation. www.trade.gov/td/health/DrugPricingStudy.pdf.

Danzon, Patricia M., Michael F. Furukawa. 2003. Cross-National Price Differentials for Pharmaceuticals: Evidence from Nine Countries. Health Affairs Web Exclusive, October 29: w3-522-w3-536. www.content.healthaffairs.org/cgi/reprint/hlthaff.w3.521v1.pdf.

Outterson, Kevin, Aaron Kesselheim. 2009. How Medicare Could Get Better Prices on Prescription Drugs. Health Affairs Web Exclusives, July 30: w832. www.content.healthaffairs.org/cgi/content/abstract/hlthaff.28.5.w832.

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