Why Are Prescription Drugs More Expensive in the U.S. than in Other Countries?

Why are prescription drug prices so high in the U.S. compared to other countries? In 2019, the U.S. spent $1,615 per capita (per person) on prescription drugs. Take a look at Harvoni, a medication for hepatitis C. People in the U.S. paid $30,808 on average for a 28-day supply. The same prescription costs $4,944 in Chile, and $14,720 in Switzerland, according to a 2019 survey. 

Lantus is used to control blood sugar in people with diabetes. Five syringes cost $419 in the U.S., but people in Chile paid $68. Those in South Africa paid just $55. 

Why are prescription drugs so expensive?

Here are five reasons that explain why drug prices are so high in the U.S.

1. No single-payer negotiation

The U.S. doesn’t negotiate prices with pharmaceutical manufacturers like other countries do. This practice was banned in 2003 under the law that created the Medicare Part D prescription drug benefit. 

In countries where there is single-payer healthcare — in other words where the government pays for most healthcare costs — those governments have significant negotiating power with drug companies to lower prices. 

In the U.S., however, various private insurers and smaller government programs negotiate prices with drugmakers individually. This in turn lowers their bargaining power.

A change is coming because of the Inflation Reduction Act. The U.S. government will now have the right to negotiate drug prices on some high-price medications for Medicare beneficiaries starting in 2026.

2. Lack of government regulation 

In many other parts of the world, governments regulate how much medications can cost. Here are some examples: 

• European Union (EU) member states make decisions about pricing when a new drug enters the market. 

• Hospitals in Austria work out discounts for high-cost drugs to keep outpatient medical costs stable.

• Canada’s Patented Medicine Prices Review Board (PMPRB) caps the price of a medication based on its price in other countries. 

The U.S. does not set similar rules. Therefore pharmaceutical companies set the prices for medications at their will. This leads to high prices, especially for innovative or unique drugs.

3. Prices are rising faster than inflation

Pharmaceutical companies not only set the prices for new drugs when they hit the market, they raise the prices of existing drugs too. According to AARP, between 2019 and 2020, the cost for a selection of the 260 commonly used brand name drugs by older Americans increased by 2.9%. Whereas the inflation rate was at 1.3%. Especially for older brand-name drugs and generics, dramatic increases can occur.  EpiPen and Daraprim are two medicines that have spiked in cost recently.

4. Lack of comparative research across drugs

A recent study found that a lack of comparative research across drugs is yet another cause for higher drug spending among Americans. 

While most healthcare providers are aware that their patients want to avoid high drug prices, their primary goal is to treat patients effectively. It is often easy to find medical research about the efficacy of particular drugs, but there is less research comparing brand-name drugs to one other. 

Without that research, providers may be hesitant to prescribe a cheaper drug that they are less familiar with. An example of comparative research working in favor of a cheaper drug can be seen in a trial of hypertension medication that favored the cheaper alternative.

5. Drug patents and exclusivity

Higher drug prices are often the result of drug patents that pharmaceutical companies hold. Strategic drug patenting prevents companies that make generic drugs from competing. This is because their generic products could be subject to court action.

Drug prices in the U.S. compared to other countries

Countries in the EU regulate the price of prescription drugs by dealing directly with pharmaceutical companies. That’s something that’s uncommon in the U.S. where drug companies generally set their own prices, making the cost of medicines much higher.

Some important medicines like Harvoni for hepatitis C and some diabetes medications can be close to double the cost of buying the same medications in other countries.

Ways to save money on prescription drugs in the U.S. 

Even while prescription medications are considerably more expensive in the U.S., there are some ways you can save:

• Ask your healthcare provider about cheaper options: Especially once generic versions of drugs are available. There may be less expensive choices out there.

• Use a GoodRx coupon: GoodRx helps you compare drug prices at various pharmacies and provides free coupons for the lowest prices for many drugs. 

• Make sure your insurance covers your medication, or go for a different one: Your insurance may not cover a particular drug. However, usually it will cover another option for your condition.

• Manufacturer assistance programs or coupons can lower prices: If you’re purchasing a brand name drug, pharmaceutical companies often offer coupons or patient assistance programs. GoodRx highlights manufacturer coupons in the savings tips sections of our drug pages.

• Purchase a 90-day supply: Purchasing a larger supply of your medication can cut costs. Just make sure to clear it with your insurer. In order to fill a 90-day supply, you need a new prescription from your healthcare provider.

• Cut higher dose pills in half: In some cases, cutting pills in half can save money. This is only if a healthcare provider says this is a safe option for you. You’ll need to get a new prescription from them.

• Use a mail-order pharmacy: Private insurance and Medicare may offer discounts if you fill your prescriptions through their mail-order pharmacies. This can be especially helpful for generic drugs.

• Use an online pharmacy, but with caution: Online pharmacies can provide good deals, but be wary of the “too good to be true” offers. Follow these tips to make sure you’re dealing with a reputable online pharmacy.

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Written by:

Camilo Hannibal Smith

Camilo Hannibal Smith is a journalist with more than a decade of experience. His bylines have appeared in numerous online and print publications.

Reviewed by:

Kristen Gerencher, MSOT

Kristen Gerencher is an award-winning writer who has reported on healthcare, medicine, and insurance for a variety of national publications. Before contributing to GoodRx, she was a healthcare and personal finance reporter for MarketWatch.

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