29 October 2004

U.S. drug prices 81% higher than in 7 Western nations
Study of name brands shows steep rise in differential since 2000

Americans on average paid 81 percent more for patented brand-name drugs last year than buyers in Canada and six western European countries, according to a report issued Thursday.

That gap represents a significant increase from 2000, when the cost differential between the United States and the seven other countries was 60 percent.

The study by Boston University's School of Public Health relied on comparative data on the costs of drugs in the United States and European countries released earlier this month by the Canadian government. The Canadians use the information to set pharmaceutical prices in their country.

Americans pay the world's highest drug prices. The rapid increase in the cost of brand-name pharmaceuticals has become an issue in the presidential campaign and is often cited as a key factor in runaway health care outlays.

The United States allows pharmaceutical companies to freely set their prices. Other countries impose cost controls, such as negotiated price levels and profit limits.

Drug prices varied significantly from country to country, according to the study.

Prices 108 percent more

Americans pay 108 percent more than the French and 118 percent more than Italians for the same drugs, the largest gap found in the study, but only 58 percent more than the Swiss, the country with prices closest to those in the United States.

Canada sets its prices at the median level of the countries it surveys. U. S. buyers pay 75 percent more than Canadians for drugs.

The study looked at a formulary of more than 1,000 drugs still under patent, including such widely used brands as the top-selling cholesterol- lowering drug Lipitor and the heartburn remedy Nexium. It did not identify the prices of specific drugs.

The Boston study did not include generic drugs, which are generally cheaper in the United States than elsewhere because of heavy competition.

"Congress has left prescription drugmakers free to raise their prices here without controls, so we see the consequences over time," said Deborah Socolar, co-director of Boston University's health reform program and co- author of the study.

Fast-growing component

Drugs are not the largest component of U.S. medical costs. They account for just 11 percent of the health care dollar. But they represent one of the fastest-growing components, according to a report released earlier this month by the Henry J. Kaiser Family Foundation.

The report found that the cost of prescriptions increased 15 percent from 2001 to 2002, compared with 9 percent for all health care. From 1993 to 2003, retail prescription prices increased an average of 7.4 percent per year.

The drug industry says that the ability of producers to set prices spurs development of life-saving products. Price controls in other countries have suppressed innovation, led to rationing and delayed drug approvals, forcing the United States to pick up the slack in research and development, according to the Pharmaceutical Research and Manufacturers of America, an industry trade group.

"These nations with the lower prices have government-mandated price controls that have clearly hurt the ability of pharmaceutical companies in those countries to create new medicines," said spokesman Jeff Trewhitt, adding that the United States produces 60 to 70 percent of the world's new drugs. He declined to comment directly on the Boston study because his organization had not had time to review it.

Canadian sources

Many Americans are turning to Canadian sources for cheaper drugs, which violates U.S. law. The two presidential candidates are divided on the issue. President Bush does not support such action. Democratic challenger John Kerry argues that the government should use its clout to negotiate better drug deals and supports the right to buy drugs from Canada.

The U.S. government negotiates prescription drug prices for the Veterans Administration and select government programs. But last year's Medicare reform law, which provides a drug benefit starting in 2006, specifically prohibits negotiating drug prices.

Importing drugs is a stop-gap measure, not a solution, said Boston University's Socolar. "What we really need to be doing in this country is obtain Canadian-type prices rather than Canadian prescription drugs themselves, " she said.

Victoria Colliver, SFChronicle Staff Writer

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