Top 60 U.S. Brand Name Drug Prices 75% Lower Internationally, According to Rand Corporation Study

The Rand Corporation has released an impressive study showing that brand name drugs cost far more in the United States than in other countries – on average 344% more. For those of you looking for a methodologically strong analysis of international drug prices and a history of related studies, this is the report for you. In looking at all drugs, brand and generic, the percentage goes down to 256%. That’s because, as the report shows, generic drugs in the U.S. were found to be priced at 86% of those in other countries. The report was based on drug prices from 2018.

The report’s title is very descriptive of its contents: “International Prescription Drug Price Comparisons: Current Empirical Estimates and Comparisons with Previous Studies”

Explaining the report’s approach in the simplest terms: it accomplishes its main objectives by creating price indices for 32 member countries of the Organisation for Economic Cooperation and Development (OECD) and comparing them for all drugs, brand name and generic. That’s the report’s main focus. It has additional results for other categories, notably biologic drugs and the top 60 drugs in terms of sales. For biologics, which are generally the most expensive prescription products, U.S. prices are on average 295% the international price. For the top 60 drugs by sales, U.S prices are on average 394% higher.

Using some simple math, let’s turn these numbers into percentage savings figures that Americans, who are angry about high drug prices, want to know about. The average savings for brands is 71%; for all drugs (brand and generic), the savings is 61%; for generics, 19% (because U.S. generics are usually cheaper); the average savings for biologics is 66%; and, for the top 60 drugs by sales, 75%.

It’s that last figure to which I turn my attention now. A key research point of the report is that it is the first substantive, methodologically rigorous analysis of international drug price comparisons in ten years. In short, this deep dive is long overdue. I agree, but other reports in the interim have shown strikingly if not identical results:

In 2019, the Congressional House Ways and Means Committee released a report comparing U.S. prices to those in 11 high-income countries and found that the average savings was 75%! The Committee report looked at the top 79 drugs by sales sold in Medicare. The top 60 drugs by sales category from the Rand report were likely included among these 79 drugs. Those were based on ex-factory prices, meaning the prices charged by drug manufacturers paid by wholesalers, for example.

PharmacyChecker.com looked at online retail prices for those drugs included in the Committee’s reports that are available for sale through retail mail order internationally and found the average potential savings were 72%.

The pharmaceutical industry flacks have already criticized this report for using drug company list prices, which do not include the rebates provided to third parties, most notably pharmacy benefit managers, referred to as net prices. Big Pharma thinks that’s not fair! Here’s a retort. The report actually DOES address net prices and includes an estimate of the price differentials based on additional analysis. Compared to net prices for brand name drugs U.S. prices are still 230% higher than the average of OECD countries. That’s without doing similar adjustments for net prices in any of the other countries. Furthermore, there are about 35 million uninsured and tens of millions more underinsured Americans who are potentially subject to the list price without rebates, so let’s stop pretending that list prices don’t matter.