Why Americans Pay More for Prescription Drugs
Walk into a pharmacy in Europe or Asia and fill a prescription for a common brand-name drug. Then do the same in the United States. The medication is identical: same molecule, same dose, same manufacturer. The price is astonishingly different. Americans routinely pay two to five times more than patients in peer nations for the exact same drugs, and the reasons why are not accidental. They are the product of deliberate policy choices made over decades, with enormous amounts of money spent to keep those choices in place.
In this inaugural edition of my newsletter, I examine the machinery behind U.S. drug pricing, from how pharmaceutical companies set launch prices, to why pharmacy benefit managers operate in near-total opacity, to what Congress has (and hasn’t) done about any of it.
Why Other Countries Pay Less
The lower drug prices found across the industrialized world are not accidents of geography or culture. They are the direct result of deliberate legislative frameworks that give governments the authority to say no — or at least, not at that price.
Most peer nations use some form of structured price negotiation tied to clinical evidence. When a new drug launches, manufacturers are typically required to demonstrate its added benefit compared to existing treatments. An independent body evaluates that evidence, and the result directly determines what the government will pay. If a drug shows little or no added benefit, it’s reimbursed at the rate of cheaper existing alternatives. Manufacturers face immediate, evidence-based price discipline from day one.
Other countries use federal pricing boards that set ceilings for all patented drugs, calculated by comparing prices across a basket of peer nations. Still others operate centralized reimbursement systems where the government sets prices for all drugs and automatically reduces them over time as a drug ages in the market. Manufacturers who want access to national health insurance systems — which in most peer countries cover virtually the entire population — must accept the government’s terms. There is no meaningful alternative.
The common thread across all of these systems is that government payers have real authority to walk away from a negotiation, and manufacturers know it. In the United States, that authority has historically been absent by law, and the price difference shows up at every pharmacy counter in the country.
The Core Issues
Pricing Power: No Negotiation at Launch — By Design
Unlike virtually every other wealthy country, the United States has historically prohibited Medicare — the single largest drug purchaser in the country — from negotiating prices directly with pharmaceutical manufacturers. The Inflation Reduction Act of 2022 created a narrow negotiation process for a small number of high-cost drugs, but the pharmaceutical industry has challenged the program in court at every turn. For the vast majority of drugs, manufacturers set launch prices based on what the market will bear, unconstrained by government reference pricing or binding cost-effectiveness thresholds.
Pharmacy Benefit Managers: The Middlemen Who Pocket the Difference
Between drug manufacturers and patients sit pharmacy benefit managers — PBMs — large intermediaries that negotiate rebates from drug makers on behalf of insurers and employers. The three largest PBMs (CVS Caremark, Express Scripts, and OptumRx) control roughly 80% of the U.S. market. The rebates they negotiate are often not passed on to patients at the point of sale. Instead, they flow to insurers or are retained by PBMs themselves. Critics argue this system creates a perverse incentive: higher list prices generate larger rebates, giving PBMs a financial reason to favor expensive branded drugs over cheaper generics.
Patent Strategy: “Evergreening” Extends Monopolies — Sometimes for Decades
Standard drug patents last 20 years. But manufacturers have developed strategies to extend market exclusivity well beyond that window. “Evergreening” involves filing new patents on minor reformulations — a new dosage form, a new delivery mechanism, a slightly altered molecule — that reset the exclusivity clock and delay generic entry. A 2023 study in JAMA found that the top-selling drugs in the U.S. had an average of 140 patent applications each. So long as generics are blocked from entering the market, there is no price competition — and no meaningful downward pressure on what patients pay.
The Human Cost: What Skipping Medications Actually Does
Behind every statistic about drug prices is a person making an impossible calculation — whether to fill a prescription or pay rent. The consequences of those calculations are not abstract. They show up in emergency rooms, in ICUs, and in death certificates.
Mortality: An Estimated 112,000 Americans Die Each Year Because They Cannot Afford Their Medications
A study by the West Health Policy Center projected that cost-related medication nonadherence causes roughly 112,000 premature deaths among Medicare beneficiaries alone each year — placing it among the leading causes of death in the United States, ahead of diabetes, influenza, and kidney disease. Over a decade, researchers estimated more than 1.1 million Medicare patients could die prematurely due to drug unaffordability. These figures do not capture deaths among the broader insured and uninsured population under 65.
Hospitalization: Skipping Doses Sends People to the Hospital — and Costs the System Billions
Research published in the journal Preventing Chronic Disease found that medication nonadherence is associated with up to 25% of hospitalizations in the United States each year. A separate study of adults with cardiovascular disease found that those who skipped or rationed medications due to cost had a 47% probability of hospitalization in the following two years, compared to 38% for those who took their medications as prescribed. Duke Health researchers have estimated the annual cost of nonadherence-related hospitalizations at tens of billions of dollars — money spent treating conditions that affordable medication could have prevented.
Everyday Reality: One in Five Americans Has Not Filled a Prescription Due to Cost
According to KFF’s 2025 Health Tracking Poll, about one in five American adults report not filling a prescription in the past year because of cost. One in seven report cutting pills in half or skipping doses to make medications last longer. Adults with chronic conditions — the people who need medication most consistently — are twice as likely as healthier adults to skip or delay prescriptions due to cost. Among uninsured adults, nearly three in four report having skipped or postponed care entirely.
“112,000 Americans die each year because they cannot afford the medications their doctors prescribed. That is not a side effect of the system — it is the system working exactly as designed.”
What's Being Done
The Inflation Reduction Act’s drug negotiation provisions — the first of their kind for Medicare — represent the most significant legislative intervention in decades. CMS has finalized prices for an initial set of drugs including blood thinners and diabetes medications, with savings projected to reach tens of billions of dollars over ten years. But the program covers a fraction of the market, and legal challenges from the pharmaceutical industry continue to create uncertainty about its durability.
At the state level, several states have enacted drug affordability boards with authority to set upper payment limits for high-cost drugs in state programs. Maryland, Colorado, and Minnesota have been among the most aggressive. Whether these state-level experiments can survive federal preemption challenges, and whether they can meaningfully affect prices in the commercial market, remains an open question.
What Congress Is Doing Now
Drug pricing has become one of the rare pressure points in Washington where bipartisan agreement is at least possible, if not always reliable. Several bills are currently in various stages of consideration, with co-sponsors from both parties, an encouraging signal that constituent pressure is being felt, even if pharmaceutical lobbying dollars remain formidable.
The DRUG Act — Lowering Launch Prices Through International Benchmarking (Senate · Bipartisan)
The Drug Pricing Reform Using Good Benchmarks Act would cap Medicare drug launch prices at the average paid by a basket of peer nations. Backed by senators on both sides of the aisle, it represents the most direct legislative attempt to import international pricing discipline into the U.S. market. The pharmaceutical industry opposes it vigorously, arguing it would reduce investment in new drug development.
PBM Transparency and Reform Bills Gain Momentum (House & Senate · Bipartisan)
Multiple bills targeting pharmacy benefit managers have advanced in committee with bipartisan support, including proposals that would require PBMs to pass drug rebates directly to patients at the point of sale, ban spread pricing in Medicaid, and force disclosure of PBM compensation. The FTC’s ongoing investigation into the three largest PBMs has given these legislative efforts new urgency — and new evidence to point to.
The PATENT Act — Cracking Down on Evergreening (Senate · Bipartisan)
The Preserving Access to Treatments for Everyday Needs and Taming Act targets the practice of filing dozens of secondary patents to block generic competition. The bill would require manufacturers to certify that new patent filings represent meaningful clinical improvements — not just minor reformulations designed to extend monopoly pricing. It has attracted co-sponsors from both parties who argue that the current patent system is being gamed at patients’ expense.
What’s holding these bills back? In a word: money. The pharmaceutical industry spent over $370 million on lobbying in 2023 alone — more than any other sector. Until that equation changes, constituent voices remain one of the most meaningful countervailing forces available.
From the Editor
Drug pricing is often framed as a clash between innovation and access — as if protecting pharmaceutical profits and protecting patients are the only two positions available. That framing benefits the people who profit from the status quo. There is much more to say on this topic, and following editions will explore some of the concepts introduced here with more depth.
This is my first edition. I’m glad you’re here. If this was useful, forward it to someone who needs