The US has the highest prices for brand-name drugs but has some of the lowest prices for generic drugs in the world and generic drugs account for 90 percent of prescriptions. I have been saying this for years but here is the latest research:
US prices for original brand-name drugs were 422 percent of prices in comparable countries, while generics without US brands, which we found cost 90 percent of US prescription volume, were on average 67 percent cheaper than prices in comparable countries, where on average only 41 percent of prescription volume is for unbranded generics. US prices for brand-name drugs remained 308 percent of prices in other countries even after adjustments to account for rebates paid by drug companies to US payers and their pharmacy benefit managers.
Brand name drugs are expensive but that’s why we have effective, albeit far from perfect, insurance. For example, insurance and low cost of generics are one of the reasons that out-of-pocket costs for treatment are low in the United States.
If you don’t want to pay the high prices of brand name drugs just use generics! As I wrote 20 years ago, in what was called a heartless and cruel post:
People talk about high drug prices as if the high prices are permanent. In fact, within a year of pharmaceutical patents expiring, prices will drop by more than 50 percent as generic drug manufacturers enter the market. Nominal patents last 20 years but active patent life is much shorter because patents are usually granted years before a product clears FDA review. I active patent life the average for new drugs in the 1990s was just 12 years [new reference for today, 13.5 years, AT]. Competition from competing but non-infringing pharmaceuticals makes patent life very short.
So, my answer to seniors and others who complain about low drug prices is to be more patient. Does this sound harsh? Think about it, people who want price controls are not just asking for lower drug prices, they are asking for lower prices very new drugs. The low prices for drugs that were introduced 15 years ago are here. Remember, those drugs have just been considered the best modern medicine has to offer, so it’s not like I expect those who can’t afford the new drugs to go back to using worms.
Price controls or other such programs such as reimbursing may bring cheaper drugs for a short time but then we will have very little supply of new drugs. forever. Only the blind would buy that book.
Don’t fail the marshmallow testers!
People get upset when I say generics—not everyone should have access to the best prescription drugs! Yes! But that goes to show another point–these drugs are worth the price!
Hat tip: Steve.
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