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American Drugs Are Expensive But Why?

An EpiPen is a device that injects you with adrenaline if you are having a deadly allergic reaction. If you have severe allergies, you need it. If you live in the U.K., an Epi-pen will cost you the equivalent of $38 U.S. dollars. However, in the U.S., it will cost about 300 dollars. It is not just the EpiPen. Advair, a brand name asthma inhaler, is more expensive in the U.S. Lantus, a type of insulin: more expensive in the U.S. Sovaldi for Hepatitis C costs more the U.S., etc. Americans spend more on prescription drugs than anyone else in the world. Why? The first thing you need to understand is that drugs get to patients differently in the U.S. than almost everywhere in the world. For example, Hepatitis C drug in Sovaldi. In 2014 Sovaldi became the first drug to cure hepatitis C completely. In the United Kingdom system, a government agency has to decide whether Sovaldi was safe and worked. Then It is evaluated by a regulatory agency to see if it was worthwhile. Are there Too many side effects? Is there already a similar drug? Is there a cheaper option? Sovaldi was deemed worthwhile. Next, they negotiate the price. In the U.K., the government buys medicine for the country.

That means they can usually get a lower rate, kind of like a bulk discount, which keeps prescription drugs cheaper for U.K. citizens. In almost every developed country besides the U.S., this is what the system looks like. Safety evaluation, assessment of whether the country needs it, price negotiations, sold to patients. In the U.S. System, first, the drug is evaluated, and that is it. If it is safe, they can sell it, end of the story. Drugs are sold by the drug companies to patients, usually through insurance and since the U.S. system lets them sell it for any price, Gilead, the company that makes Sovaldi, charged Americans more for it. When it first came to the market, the entire treatment cost about $84,000 in the U.S. In the U.K., it was about 58k U.S. dollars.

That is a lot of money, but it is a full 30% less. So it seems like the U.K. has the better system right. Well, it is complicated, there are protests in the U.S. about high prices of Epi-pens, and in the U.K., there are protests over the lack of access to a cystic fibrosis drug called Orkambi. When there is a committee that determines whether a new drug is worthwhile and sometimes they say no and when they negotiate the prices, sometimes they do not come to an agreement and get into a heated argument. That is what is happening with Orkambi. Both systems require trade-offs. Regulated drug markets tend to make drugs more affordable, but some drugs are entirely unavailable. While the U.S. has more drugs technically available, they are often too expensive to afford. Americans without insurance are most likely to skip medication because of the cost, even Americans with insurance or second. However, the commonality between these two systems is the drug companies developing new drug products are not cheap. Suppose Gilead did not think that researching and developing a Hepatitis C cure would make them money in the end. They might not have, moreover, with these regulated markets keeping costs down. The only place the drug companies can make their money is in the U.S. Americans are essentially subsidizing the cost of drugs for the rest of the world. The reason why the prescription drug is expensive in the U.S. is that they are cheaper everywhere else.


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