The debate over drug pricing in the U.S. has intensified as pharmaceutical companies resist public scrutiny and sue the Biden administration over modest regulations. Many experts and advocates argue that the U.S. should follow the example of other countries and impose price controls on all drugs to ensure affordability and accessibility.
The U.S. pays the highest drug prices in the world
One of the main reasons why drugs are so expensive in the U.S. is that the government has little power to negotiate with drug manufacturers and limit their profits. Unlike other countries, where the government sets the price of drugs or bargains with the industry, the U.S. allows drug companies to charge whatever they want, as long as they can justify it to the market.
This has resulted in Americans paying two to three times more than what people in other OECD countries pay for the same drugs, even after accounting for rebates and discounts. For example, U.S. gross prices for insulin, a life-saving drug that has been around for 100 years and costs drug companies just $10 a vial to make, were on average almost ten times higher in the U.S. than in comparison countries.
The high drug prices in the U.S. have a devastating impact on millions of Americans who struggle to afford their medications, especially seniors, low-income people, and those with chronic conditions. According to a Kaiser Family Foundation poll in August 2023, 29% of Americans reported not taking their medicines as prescribed in the past year because of the cost. Many people have to choose between paying for their drugs or other basic needs, such as food, rent, or utilities.
The Biden administration faces resistance from Big Pharma
In 2022, President Biden signed the Inflation Reduction Act (IRA), which was the first major legislation to address drug pricing in the U.S. since 2003. The IRA tied Medicare drug prices to inflation and required companies to issue rebates if prices rose too fast. It also gave Medicare the authority to negotiate drug prices for the first time, starting with 10 drugs in 2024 and expanding to 50 drugs by 2074.
The IRA was expected to save Medicare $456 billion over 10 years and lower out-of-pocket costs for millions of seniors5. It was also projected to reduce the federal deficit by $69 billion over 10 years and lower premiums for private insurance plans6.
However, the IRA faced fierce opposition from the pharmaceutical industry, which spent $306 million on lobbying in 2023, more than any other sector. Three major drug companies, Johnson & Johnson, Merck, and Bristol Myers Squibb, sued the Biden administration in July 2023, claiming that the IRA violated their constitutional rights and harmed innovation. They also refused to cooperate with a Senate hearing on drug pricing, led by Senator Bernie Sanders, who has been a vocal advocate for price controls on all drugs.
The case for universal price controls on drugs
Many experts and advocates argue that the IRA is not enough to solve the problem of drug pricing in the U.S. and that the government should impose price controls on all drugs for all Americans, not just Medicare beneficiaries. They point out that price controls are not only fair and effective but also necessary to protect public health and welfare.
Price controls are fair because they ensure that drug companies do not exploit their monopoly power and charge exorbitant prices for drugs that are often developed with public funding and research. A report by Sanders’ staff found that 97% of the new drugs approved by the FDA from 2010 to 2019 were supported by public funding, yet the government had no say in how they were priced.
Price controls are effective because they lower drug spending and increase access to medicines without compromising innovation or quality. A study by the Congressional Budget Office found that price controls could save the U.S. $345 billion over 10 years while having a negligible impact on the number of new drugs entering the market. Another study by the RAND Corporation found that price controls could reduce U.S. drug spending by $63 billion in 2020 while maintaining the same level of health outcomes.
Price controls are necessary because they protect the public from the harmful consequences of high drug prices, such as poor health, financial hardship, and reduced productivity. A study by the Commonwealth Fund found that high drug prices contributed to 10.5 million avoidable deaths in the U.S. from 2000 to 2019 and cost the economy $2.2 trillion in lost income and output. Another study by the Center for American Progress found that high drug prices increased the risk of mortality, hospitalization, and complications for people with chronic conditions such as diabetes, asthma, and hypertension.
Conclusion
The U.S. should put price controls on all drugs for all Americans as a matter of justice, efficiency, and necessity. The current system of drug pricing in the U.S. is unsustainable, unfair, and harmful to the public. The Biden administration’s efforts to regulate drug prices for Medicare are a step in the right direction, but they are not enough to address the magnitude of the problem. The U.S. should follow the example of other countries and impose price controls on all drugs to ensure that everyone can afford and access the medicines they need.
