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Why US Consumers Pay Such High Prices for Prescription Drugs

FILE - A prescription is filled at a pharmacy in Sacramento, Calif. On Friday, May 11 2018.
FILE - A prescription is filled at a pharmacy in Sacramento, Calif. On Friday, May 11 2018.
Why US Consumers Pay Such High Prices for Prescription Drugs
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Democratic lawmakers in the U.S. Congress have proposed an addition to President Joe Biden’s climate and social spending legislation. The addition would permit Medicare to negotiate with drug companies over the cost of some prescription medications.

Medicare is the federal government’s health care program for Americans over 65 years old.

Americans pay higher prices for prescription medications than people in almost any other developed country. For many years, politicians and health care representatives have struggled without success to change the system. If passed, the proposal would bring a small improvement to the situation for older Americans.

The plan in discussion would permit Medicare officials to negotiate pricing on a small number of the thousands of prescription medications for sale in the United States. It would begin with about 10 drugs and end at 20. Some members of Congress at first had hoped to permit Medicare officials to negotiate the prices of up to 250 costly drugs every year.

Although the number is small, the drugs that would be covered by the proposal make up a large amount of the money Medicare patients spend each year.

A study by the Kaiser Family Foundation released this year found that the 10 top-selling drugs covered under Medicare made up 16 percent of spending in 2019. The top 50 drugs made up 80 percent of spending.

Complex system

In many other countries, governments are able to negotiate drug prices and bring down the cost for a single national health care system. In the United States, however, people under 65 are mostly covered by for-profit health insurance companies.

Americans 65 years and older can received Medicare, which takes the place of private insurance. But for many years, Medicare did not offer prescription drug coverage. Older Americans had to pay for medication or get additional private insurance to pay for it.

In 2003, Congress created a new Medicare drug plan, which was meant to help older Americans pay for their medication. Many believe it was poorly designed. The plan asks each insurance company to negotiate with each drug company, rather than using the power of Medicare to force drug companies to lower their prices.

‘Subsidizing R&D for the world’

For years, critics of drug companies have pointed out that they set prices in the U.S. far above those in other countries where they sell the same drugs. A study by the research organization Rand Corporation compared the U.S. with 32 other countries. It found that drugs cost about 256 percent more in the U.S.

“Americans are paying for “R&D for the world,” said Lovisa Gustafsson. She is vice president of the Controlling Health Care Costs program at the Commonwealth Fund, a research organization in Washington, D.C.

R&D stands for Research and Development, or the science behind finding new drugs and bringing them to the market. R&D is very costly. Many drug companies include R&D cost in the prices of their products sold in the United States.

“Patients in the U.S. face far higher cost-sharing than in a lot of other countries,” Gustafsson said. She added that even Americans with insurance do not always have the money to buy their needed medications. She also says there are many studies that show about 25 percent of Americans have difficulty paying for their medications, even with insurance.

Putting a lid on costs

The proposal being considered in Congress calls for a limit on the yearly amount Medicare patients can be asked to pay for their medication.

Jo Ann Jenkins is the head of the AARP, a powerful Washington organization that represents older Americans.

“Allowing Medicare to finally negotiate drug prices is a big win for seniors,” she said. She called the proposed change a “real relief for seniors.”

Drug firms unhappy

PhRMA is a powerful trade organization that represents the drug industry. It reacted unhappily to news of the proposal.

The head of PhRMA, Stephen J. Ubl, said in a statement that the proposal would harm the environment that “brought us lifesaving vaccines and therapies to combat COVID-19,”

“It gives the government the power to dictate how much a medicine is worth and leaves many patients facing a future with less access to medicines and fewer new treatments,” Ubl added.

Industry claims exaggerated?

Many supporters of permitting the government to negotiate drug prices say that the drug companies are exaggerating the effects of the proposal on their industry.

In August, the Congressional Budget Office released the results of a study that looked at what would happen if drug companies were forced to accept lower profits. The study found it would decrease the number of new drugs on the market by .05 percent.

I’m Susan Shand.

VOA News reporter Rob Garver reported this story. Susan Shand adapted it for Learning English. Ashley Thompson was the editor.


Words in This Story

prescription – n. a written message from a doctor that officially tells someone to use a medicine, therapy

anticoagulant – n. a substance that prevents blood from forming clots

rheumatoid arthritis – n. a serious disease that continues to become worse over a long period of time and that causes the joints to become very painful, stiff, and swollen

relief – n. the removal or reducing of something that is painful or unpleasant

dictate – v. to say or state (something) with authority or power

access – n. a way of getting near, at, or to something or someone

exaggerate v. to think of or describe something as larger or greater than it really is

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