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Why are medications so expensive in the US?

Written and medically reviewed by Dorcas Morak, Pharm.D

Updated on March 27th, 2023

Save up to 88% on your medications

If you’re American and take a prescription medication, you may have wondered why medications are more expensive in the United States than in other countries. A 2019 survey showed that the prices of branded medications in the United States are some of the highest among developed countries. For example, five syringes of Humalog (Insulin Lispro) which cost an average of $524 in the US, cost just $79 in Germany and $54 in Chile. This is just one instance among many; read on to learn why prices in the US are higher and how you can make your medications more affordable.

Four Reasons Prescription Drug Prices Are Higher in the US

1. There is no single-payer negotiation. In the United States, unlike other countries, the government does not negotiate with pharmaceutical companies for lower costs. The United States government lost the power to bargain with the pharma industry in 2003 under the law that created the Medicare Part D prescription drug benefits. However, in countries where the government covers most healthcare costs primarily through tax revenue, the government holds extreme negotiating power to drive down drug costs. In the United States, private insurers and small government programs negotiate with pharmaceutical industries individually with minimal impact on the overall cost of medications. The good news is that enacting the proposed Inflation Reduction Act will help change the status quo, empowering the United States government to negotiate the cost of high-price medication for Medicare beneficiaries. In anticipation of this as well as in response to recent government inquiries, some drug companies have begun reducing prices on life-saving medications, such as Eli Lilly’s recent introduction of a $35 per month cap on some types of insulin.

2. The United States lacks government regulation on drug costs. There is currently no law in the United States that controls how much pharmaceutical companies can charge for medications. Pharmaceutical companies can set prices for medications at their will. This has led to skyrocketing medication costs on many drugs. In contrast, countries such as Canada have established systems that control medication costs and stabilize prices.

3. Medication cost increases at a faster rate than the general inflation rate. Research on 260 commonly used medication brands in the United States between 2019 and 2020 shows that the cost of those medications increased by 2.9%, whereas the inflation rate stood at 1.3%. One high profile example of this is the increasing cost of EpiPen. The enactment of the Inflation Reduction Act will help curb price increases on prescription medications covered by Medicare, providing greater affordability for millions of Americans.

4. Drug patents grant pharmaceutical companies control over availability. The exclusive patent rights given to pharmaceutical companies over the medications they produce puts them in a strategic position to increase prices. Pharmaceutical companies receive drug patents to recover the cost incurred during research and development and to be able to raise enough money to discover more drugs. But particularly in cases where a generic version does not exist or is not readily available, pharmaceutical companies often use that exclusivity to justify price hikes.

How can I save on my prescription in the United States?

Despite the prohibitive cost of many medications in the United States, there are various ways to save on your prescriptions:

  • Consider a generic version: Ask your healthcare provider if your medications have a generic version available. Switching from brand name to generic can result in significant savings. However, if you must take a brand, consider the options below.
  • Use a free RxLess discount card: When you use RxLess to pay for your medications, you can save as much as 88% on the retail price. For example, the average cost of 90 tablets of atorvastatin (Lipitor) 40mg is $466.26, but with RxLess, you can get the same medication for about $44.35. Even when RxLess isn’t the most affordable, presenting it at the pharmacy prompts the pharmacist to access other pricing options that will help you save. Because of this, by using your RxLess prescription savings card each time you fill a prescription at the pharmacy, you’ll guarantee yourself the best available price.

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