Health Policy Issues An Economic Perspective Copyright © 2015 Foundation of the American College of Healthcare Executives. Not for sale.

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Health Policy Issues An Economic Perspective Copyright © 2015 Foundation of the American College of Healthcare Executives. Not for sale.

Chapter 27 Why Are Prescription Drugs Less Expensive Overseas? Copyright © 2015 Foundation of the American College of Healthcare Executives. Not for sale.

LEARNING OUTCOME Examine the accuracy of cross-national drug price studies and why prices for prescription drugs in the United States are typically higher, along with the implications of requiring US drug manufacturers to charge a single uniform price Copyright © 2015 Foundation of the American College of Healthcare Executives. Not for sale.

LECTURE Accuracy of Studies on International Variations in Drug Prices Exhibit 27.1 Why Prescription Drugs Are Expected to Be Priced Lower Overseas Exhibit 27.2 Public Policy Issues Exhibit 27.3 Copyright © 2015 Foundation of the American College of Healthcare Executives. Not for sale.

Prices for Celebrex, Selected Countries, 2012 Exhibit 27.1 return to lecture Copyright © 2015 Foundation of the American College of Healthcare Executives. Not for sale.

World Pharmaceutical Market, 2012 Exhibit 27.2 return to lecture Copyright © 2015 Foundation of the American College of Healthcare Executives. Not for sale.

Pharmaceutical Expenditures as a Percentage of Total Health Expenditures, Selected Countries, 2011 Exhibit 27.3 return to lecture Copyright © 2015 Foundation of the American College of Healthcare Executives. Not for sale.

DISCUSSION Why can drug manufacturers charge more for drugs in the United States than in other countries? What are some of the consequences of regulated lower drug prices in overseas countries? Copyright © 2015 Foundation of the American College of Healthcare Executives. Not for sale.

SUMMARY Cross-national comparison studies that claim drug prices are lower in other countries have been seriously misleading. Although the retail prices of certain prescription drugs may be lower overseas than in the United States, the more relevant comparison is the cost of drug therapy in different countries. Only a small percentage of the US population pays retail prices for drugs. The majority of the US population has some form of third-party payment for drugs, and these large purchasers buy their drugs at discounted prices. Generic drugs are also much more widely used in the United States than in other countries. Absent from these cross-national comparisons is any discussion of the availability of innovative drugs overseas. Copyright © 2015 Foundation of the American College of Healthcare Executives. Not for sale.

SUMMARY (CONTINUED) Public policy affecting prescription drugs should be evaluated on its effect on R&D expenditures. Without government enforcement of patent rights and pricing freedom, the drug industry would decrease its investment in R&D—as drugs are easy to copy but expensive to develop. Seniors were provided with a prescription drug benefit as part of the 2003 Medicare Modernization Act; they now have a financial incentive to choose among competing drug plans based on the premiums charged and the plan’s drug formulary. Copyright © 2015 Foundation of the American College of Healthcare Executives. Not for sale.