Why Is U.S. Medicine More Expensive than Other Countries?

By Dr. Brian Dixon

|Sep 25, 2018

It’s really easy to be cynical about American healthcare. After years of partisan debates and millions of marketing dollars spent by pharmaceutical companies, it’s hard to see through the smokescreen. What’s really going on?

As a licensed child psychiatrist and owner of my own practice in Fort Worth, Texas, I am a firm believer in the phrase,

“You value what you pay for; you pay for what you value.”

Makes sense, right? Hard-working Americans and small business owners know this to be true. It’s the reason free handouts aren’t typically valued by those who receive them.

But when it comes to the case of healthcare in America — more specifically prescription drug prices — something is off. The axiom doesn’t work.

We simply expect too much for the money we've invested.

Why are prescription drugs so expensive in America?

“In America the idea is that you’ll be a consumer. That you’ll do what you do when you go to Best Buy and buy a television. But that just doesn’t work in healthcare,” says Ezra Klein in a 2018 video about the cost of prescription medicines.

Why? Because whether or not someone can afford a TV doesn’t matter. Whether or not they can buy a life-saving drug — a different matter altogether.

According to the Kaiser Family Foundation survey using data from 2015-2018, 80% of Americans say that the cost of prescription drugs in unreasonable and 44% report worrying about whether or not they will be able to afford a prescription. 24% say that they or a person they know has decided against getting a prescription because of price.

In our country, someone is benefitting from the current system and it's likely not you; it might be your neighbor if they have money in the stock market because those pharmaceutical stocks pay excellent dividends. So in a sense, your neighbor and friend (or yourself) may be the cause of your healthcare misery.

Paying for the World’s Drugs

As Sarah Kliff from Vox writes, “Right now, the United States’ exceptionally high drug prices help subsidize the rest of the world’s drug research. We benefit from that work with new and better prescriptions — and so does the rest of the world.”

Other countries who pay in taxes, they understand that you have to financially invest or sacrifice to make it work.

Though we do produce many of the world’s experimental drugs, it’s worth noting that not all drugs are created equal. Many complain that new expensive drugs hit the market that don’t demonstrably provide a better cure than drugs for similar illnesses that are already on the market.

Marketers make appeals to the American people that their pharmaceutical company has made a miracle drug; other countries have governments that actually look at the results of studies to determine whether the value of a drug matches its actual results for patients.

Countries like Australia and Switzerland have governmental committees that set the prices for procedures, prescriptions, and medical devices.

Steven Brill, in his groundbreaking book, America's Bitter Pill, summarizes this idea by writing, “because we don’t control the prices of prescription drugs the way every other developed country does, we typically spend 50 percent more on them than what people or governments everywhere else spend.”

Critics might say that this type of bargaining by committees prevents some drugs from going to market, but these determinations are based on value. If a “new miracle drug” doesn’t have the scientific proof to actually treat the disease or condition, then these committees will not introduce it to the country. If the pharmaceutical company can prove the value of the drug, it hits the market. Most importantly, this practice does successfully prevent the painful price-gouging that we see in America.

So why don’t we just import foreign prescription medications, you say? Well, that’s because it’s actually illegal to sell cheaper overseas versions of drugs like the Hepatitis C medications that cost over $1,000/pill here in America.

How’s that for oppressive regulation?

Pharmaceutical companies easily rebrand drugs for foreign markets. Major American drug companies sell identical drugs with the same exact chemical structure — but foreign markets pay a quarter of the price.

American companies charge Americans a lot more.

What’s To Be Done?

AARP reports that several states including California, Utah, Vermont, Ohio, Kansas, and Oregon are exploring statewide initiatives to reduce prescription drug costs and increase transparency.

For my part, I am of the conviction that well-meaning laws don't control personal responsibility very well. People know what type of diet to eat. People know they need exercise. People are well aware that smoking is terrible. And yet we continue to do these things.

To create a law that mandates health coverage without punishing vices means the cost will continue to increase as we collectively become less and less healthy. Our solution to achieving lower medical costs isn’t as simple as providing subsidized healthcare. We must also incentivize making good decisions about individual health. (I have a few ideas about what such a combined solution looks like.)

Moving forward, we must remember that we’re still living in a free market. How you spend your money is a direct investment in the type of healthcare you can expect in the future. With due diligence, you can live healthily, buy from companies offering the greatest value, and vote for politicians who know what they’re talking about and take your healthcare seriously.

Have more questions? Explore other blogs to learn more about the healthcare system in America. You can also contact me directly to ask a question or book me to speak at your next event. I look forward to hearing from you.

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About the author

Dr. Brian J. Dixon

With accolades spanning my career as a child psychiatrist, entrepreneur, writer, and public speaker, I advocate for a more sensible U.S. healthcare solution that appeals across all party lines. I am a Texan, born and raised. My psychiatry practice, Progressive Psychiatry, is based in Fort Worth.

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