Benefit Bulletin: August 2018

Benefit Bulletin: August 2018

Drug Prices: How Other Government Programs Negotiate

Why are drug prices so high here in the United States?  A recent article by Sarah Kliff of uses the following example of Humira, an injectable medication used to treat conditions like arthritis, to illustrate how prices in the U.S. compare with other countries.  In the United Kingdom, a Humira prescription will cost, on average, $1,362.  In Switzerland, the drug runs around $822.  But here in the U.S., your Humira prescription will run about $2,669.

Unlike all other industrialized nations, the U.S. doesn’t regulate or negotiate prices of prescription drugs for its citizens or for Medicare beneficiaries.  This is true even when the medication is one that consumers can’t live without.  Medicare patients and other U.S. consumers consequently pay the highest drug prices in the world.  Yet dozens of other nations have made the decision to negotiate drug prices to ensure medical treatment remains within reach for all citizens, regardless of income.  Why aren’t we doing the same?

In fact, several federal programs, including Medicare Part B (doctors and outpatient services), already use a number of negotiation tools for reducing drug prices.  Here’s how it works:

  • Medicaid — The federal and state healthcare program for people with low incomes, Medicaid negotiations differ by state, but require discounts from drug manufacturers.  The rebates lower the prices paid by Medicaid programs to whichever is lower — 23.1% less than the average price paid by other buyers — or the lowest price at which the drug is sold to other buyers.  In addition, Medicaid programs get an additional rebate if the drug price rises faster than inflation.  (In recent years, some drug prices made huge jumps of several hundred percent in a single week.)
  • VA and Department of Defense require discounts from drug manufacturers of 24% off the drugs’ average price, or the lowest price paid by nonfederal buyers, as well as additional discounts if the drug’s price goes up faster than inflation.  Both programs use a formulary to strengthen bargaining power.
  • Medicare Part B regulates drugs administered in doctor’s offices and hospitals, like chemo, and anesthesia drugs.  The co-pay that patients pay is 20%, but some or all of that may be covered if the patient has a Medigap supplement or is enrolled in a Medicare Advantage plan.

We urge all of you who are sick of high drug costs to say so with your vote this November.  To learn more about legislation to lower prescription drug costs, click here.

Sources: The True Story of America’s Sky-High Prescription Drug Prices, Sarah Kliff,, May 10, 2018.  “Drug Price Control:  How Some Government Programs Do It,” David Blumenthal, MD, The Commonwealth Fund, May 10, 2016.