US will still pay at least twice as much after negotiating drug prices

The US government's first-ever negotiated prices for prescription drugs are still on average more than double, and in some cases five times, what drugmakers have agreed to in four other high-income countries, a Reuters review has found.

The US Medicare health plan, which covers more than 67 million people, recently unveiled new maximum prices for the first 10 high-cost medicines negotiated under the Biden Administration's Inflation Reduction Act.

This is the first time Medicare has disclosed actual drug prices, which are largely hidden behind a complicated US system of rebates and discounts. The lower prices will result in savings of $6 billion in 2026, the first year they take effect, Medicare said.

A Reuters review of publicly available maximum prices set by other wealthy nations - Australia, Japan, Canada and Sweden - show that they have negotiated far lower prices for the same drugs.

A 30-day supply of nine of the 10 drugs will cost $17,581 for Medicare in 2026, compared with $6,725 in Sweden this year. Comparable prices were not available for the 10th drug, Novo Nordisk's insulin Novolog.

"In the US we've always accepted that we are the country that overpays relative to the rest of the world," said Stacie Dusetzina, professor of health policy at Nashville's Vanderbilt University.

The US sees value in being the preferred customer, she said, pointing to early availability of COVID vaccines as an example of that advantage.

Many countries have universal prescription drug coverage that relies on centralized price negotiation with manufacturers, but US law previously prevented Medicare - the nation's single biggest government program - from doing so.

Bristol Myers said pricing was country specific and depended on national health systems and their regulatory policies, while Merck said it was not valid to compare US prices to overseas generics. Amgen declined to comment and the others drugmakers did not respond.

A spokesperson for the US agency that oversees Medicare said the new law requires consideration of factors such as manufacturer data and availability of alternative treatments, but Congress did not include review of international prices in the negotiations.

A study by the non-profit RAND Corp looking at 2022 prescription prices found that US health plans paid more than three times as much for brand-name pharmaceuticals, even after estimated discounts.

Studies have shown that faster uptake of new and more expensive drugs helps drive US prices, while other high-income countries directly footing the bill for healthcare place tighter restrictions on prescriptions.

The willingness of the US to pay up for drugs also contributes to lower overseas prices, said Richard Frank, director of the Brookings Institution's Center on Health Policy.

"If you've got one of your buyers who's willing to cover your sunk costs, plus some of your ongoing costs," selling more volume to others, even at lower prices, can still be profitable, he said.

In some cases, lower-cost generic or biosimilar versions of the original branded drugs are already available outside the US Generic versions of Merck's Januvia, for instance, have been on the market in Canada since late 2022, while US patents for the diabetes drug are in place until 2026.

Once patents expire on a brand-name drug and copycat versions hit the market, prices fall sharply. But drugmakers are often able to extend US patent coverage by making small changes to things like dosage or formulation.

There are still no US biosimilar competitors for one of the most expensive of the negotiated drugs, Amgen's Enbrel, which was first approved in 1998 for rheumatoid arthritis. US courts have upheld Amgen's patents, blocking biosimilars until 2029.

Other countries already have multiple options. Sweden's price for a 30-day supply of an Enbrel biosimilar is $709, compared with Medicare's newly-negotiated price of $2,355.

Since most drugmakers hike US prices annually, "the longer a drug is in the US market, the more we pay," said Mariana Socal, associate scientist at Johns Hopkins Bloomberg School of Public Health, noting that in other countries prices typically come down over time.

An analysis by the Brookings Institution showed that Medicare's negotiations yielded the biggest benefit for drugs with little market competition. It found that three drugs - Enbrel, Bristol Myers' and Pfizer's blood thinner Eliquis, and Johnson & Johnson's Crohn's disease drug Stelara - will account for more than half of Medicare's expected $6 billion savings.

Even for the medicines with no generic competition outside the US, other governments have set lower prices.

The most Medicare agreed to pay for AstraZeneca's diabetes drug Farxiga is $179 for a 30-day supply. Sweden's maximum price for 30 days of Farxiga's standard dose is $35, and the price in Canada is about $60.

Each year, more drugs will be up for price negotiation by Medicare, which accounts for about a third of US drug spending.

"We're going to see the US pushing the market ... so that the US pays something that sort of does a better job of balancing affordability, innovation, and incentives," Brookings' Frank said.