Comparing Factors that Influence Pharmaceutical Pricing and Access in the US and five other Countries

Drug prices in the United States are some of the highest in the world, which has triggered several policy proposals aimed at adopting pricing strategies used by other countries.
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Originally published on 12/20/2021 Drug Pricing Lab

The payment mechanisms and existing policies that govern how drug prices are determined and passed through the supply chains are poorly understood and may have important consequences for the potential impact of such reforms in the domestic context.

In this Drug Pricing Lab report, we compare the unique levers in the price negotiation process and supply chains of the US, Canada, Germany, Sweden, Australia, and Japan that allow for different prices for the same products. Countries were selected based on their economies, geography, healthcare delivery, and prescription drug spending. Targeted literature reviews examined the journey of specialty self-administered drugs from initial marketing approval to patient dispensing, which were used to develop discussion guides for interviews with in-country experts.

Country-specific findings were compared using an internal assessment tool designed to capture information about each step of a drugs’ journey (Table 1). Compared to the US, other countries establish a single price through negotiation, and ensures that this is the benchmark price throughout the supply chain. In doing so, the ability for pharmacies and wholesalers to benefit from markups and spread pricing on high-priced products is limited, and the need for third-party administrators so heavily utilized in the US, are non-existent (Table 2).

Proposals to reform US prescription drug prices by adopting negotiating strategies used in other countries should consider how these countries pull prices through their supply chains. Reforms in the absence of such policies may result in fewer savings than hoped; coupled with them, they might be further amplified.

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Key Takeaways

Policymakers have increasingly turned their attention to how foreign countries assess and negotiate drug prices without fully considering differences in payer purchasing power and incentives within the supply chain.

The US is unique in that the purchasing power of its payers relies on a fragmented system of private, third-party intermediaries, resulting in many negotiated prices that are confidential to each payer. This creates considerable opportunity to generate revenue from spread pricing.

In some cases, mechanisms used to manage prices abroad are also used stateside; however, the ways in which payers and supply chain participants interact results in different prices.

Table 1. Country Selection Criteria
Table 2. Supply chain margin regulation and oversight
Acknowledgements: The Economist Intelligence Unit provided research on international markets and their dynamics around the physical and financial drug journey. Any analysis and/or views expressed in this report are those of the author and not necessarily of The Economist Intelligence Unit or its affiliates.
Funding: Arnold Ventures (formerly Laura and John Arnold Foundation) grant.
Conflicts of Interest: The authors have no relevant conflicts of interest to disclose.



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