Exposing Big Pharma: Unjust Overpricing for Americans

On Sep 2, 2023

In reaction to the newly launched program enabling Medicare to negotiate lower drug prices, pharmaceutical companies are expressing concerns, suggesting it could limit patients’ access to medication and hinder the creation of new treatments. This is despite the fact that in many cases, these same medicines are sold in foreign markets at a fraction of the costs in the U.S., according to our analysis.

A closer look at the pricing structure reveals that Americans, who indirectly fund the development of virtually all approved medicines through their taxes, are often charged up to 1,000 percent more for the same drugs compared to patients abroad. Conversely, these same pharmaceutical companies recently reported earnings upward of $4 billion in revenue from six of these drugs sold at lower prices in foreign markets.

For years, Democrats have pushed for Medicare negotiation rights, a strategy already adopted worldwide to lower healthcare costs. President Joe Biden made a campaign pledge in 2020 to “repeal the existing law explicitly barring Medicare from negotiating lower prices with drug corporations.” This promise has come into effect, albeit in a limited form due to intense industry lobbying efforts.

Despite the recent victory allowing Medicare to negotiate drug prices, the pharma industry has responded with a series of lawsuits and heated reactions, fearing this may open the door to more stringent regulations in the future.

Our review shows that companies manufacturing the ten drugs identified in the Biden administration’s negotiation list have been selling these products for significantly less in other countries. For example, Januvia, a once-daily pill from Merck, was found to be priced 1,020 percent higher in the U.S. compared to international markets, according to a 2019 report from House Democrats.

While the U.S. heavily subsidizes R&D through a $45 billion annual investment in the National Institutes of Health (NIH), a 2021 Congressional Budget Office study suggests that a 15 to 25 percent profit reduction on top drugs would have a negligible effect on the number of new drugs introduced over the next decade.

Interestingly, a study last year found that the largest publicly traded pharmaceutical firms spent more on stock buybacks and dividends to reward shareholders than they did on research and development.