Last week’s Executive Order on drug pricing didn’t mince words: it called out the pharmaceutical industry for charging Americans nearly three times more for the same medicines sold abroad. It accused foreign governments of freeloading, American patients of footing the bill for global R&D, and drug companies of resisting price reform at home while yielding to pressure abroad. The rhetoric is strong to be sure, but the underlying question is a good one: Are we paying more than our fair share?
The American Burden
Prescription drugs in the United States cost about 2.78 times more than they do in other countries. Multiple independent studies have confirmed that Americans pay more for nearly every category of drug — brand-name, biologic, and specialty — compared to peer countries like Germany, the UK, and Japan.
As noted in our earlier blog, “A Global Tour Through Prescription Drug Pricing,” Americans spend around $1,500 per person per year on prescription drugs, more than double what patients pay in the UK.
Where Does the Money Go?
Pharma companies often defend high U.S. prices by pointing to the cost of innovation. But as the House Oversight Committee found in 2021, price hikes were just as often tied to revenue targets and executive bonuses, not new discoveries.
Meanwhile, U.S. taxpayers fund a large portion of that innovation through public subsidies like National Institute of Health (NIH) grants. According to a study published in JAMA Health Forum, funding from the NIH contributed to 354 out of the 356 drugs (99.4%) that were FDA approved from 2010 to 2019 totaling $187 billion in grants.
The Global Free Ride?
There’s truth to the idea that many wealthy nations negotiate harder and get better deals. But this isn’t freeloading. It’s negotiation leverage, something the U.S. has historically refused to exercise, until now. With Medicare gaining the power to negotiate drug prices last year, the tide may be turning. Still, for private payors and self-funded employers, this new EO won’t impact the price at the pharmacy register for years, if ever.
What Can Be Done Now?
Even as policymakers wrestle with global pricing reform and its significant legal hurdles, effective solutions are already in play. One of the most effective tools is ensuring that physicians are prescribing drugs aligned with plan formularies. That’s where health tech solutions like RazorMetrics come in.
RazorMetrics: Solving High Drug Costs Now
At RazorMetrics, we’re not waiting on Washington. Our platform uses data analytics to identify high-cost prescriptions and suggest clinically equivalent, lower-cost alternatives already covered by the plan’s formulary, including biosimilars and specialty drugs. We engage directly with prescribers with no member disruption, no app downloads, and no headaches.
When physicians approve a change, patients save money, plan sponsors reduce costs, and no one has to wait for a policy change to see results. It’s an elegant, data-driven solution to a deeply entrenched problem. And it’s working … right now.
