Highest Medicine Costs in Europe: Rankings and Underlying Factors Falling Short Compared to the U.S.
Rewritten Article
US President Donald Trump aims to lower the price of medicines for Americans, accusing the European Union of being "difficult," "brutal," and "nasty" in their dealings with drug companies. But is Trump's claim justified, or is there more to the story?
Let's take a closer look at the European approach to medicines pricing and compare it to the US.
The US spends a colossal $617.2 billion on medicines annually, compared to just $233.5 billion combined in 24 European countries, according to RAND Corporation data. So, what makes European countries so "difficult," exactly?
European countries negotiate prices with drug manufacturers to secure discounts, while the US government largely leaves this task to private insurers and pharmaceutical companies. This difference might explain the higher prices in the US.
The European negotiation process involves confidential rebates and agreements, allowing countries to balance affordability and innovation incentives. However, critics argue that the lack of transparency in negotiations can drive up the cost of already-expensive drugs.
But it's not all gloomy in Europe. Prices vary among nations. For instance, Switzerland spends an average of €525 per person on drugs annually, while Croatia spends only €262.
Despite its flaws, the European system shows some resilience. Even in countries where drug prices have risen in recent years, such as Germany, concerns about budget strain have been raised. Health insurers warned last year that climbing drug prices could already be straining national budgets.
Notably, the rise in European drug prices may encounter barriers as US policies or drug companies could potentially pressure them to raise prices further, which could be "highly disruptive." European countries differ in terms of who shoulders the cost of medicines, with public health systems typically covering most expenses.
There are also differences within Europe concerning how the same medicine is priced based on location and the specific disease a patient has. Meanwhile, some countries have prescription fees or other fixed co-payments.
In Cyprus, the government covers 90% of all spending on medicines, whereas in Bulgaria, it covers only 23%. This variation shows the diversity within Europe when it comes to medicines spending.
In summary, European countries employ negotiated processes with confidential rebates, managed access agreements, and multi-year price-volume deals to set drug prices. However, US policymakers inch towards benchmarking US drug prices against lower European prices, leading to potential upheaval in the pricing strategies of both markets.
- Drug Affordability: A Look into Europe and the US
- The Impact of Government Involvement in Drug Pricing
- Understanding Pharmaceutical Pricing Strategies
- The Evolution of Drug Pricing in Europe: Recent Developments
- Navigating the Pharmaceutical Industry in a Globalized World
[1] EuropeanCommission (2019). Based on the Commission Staff Working Document Impact Assessment. https://ec.europa.eu/competition/antitrust/cases/dec_docs/38611/38611_7067_21.pdf
[2] HSBC (2021). Global Healthcare: The PHARMA Report. https://www.hsbcnet.com/gbm/corporate/research-and-insights/research-reports/global-healthcare-the-pharma-report-december-2021.pdf
[3] PwC (2020). Pricing and Reimbursement Strategies for Pharmaceuticals in Europe. https://www.pwc.com/gx/en/services/health-industries/pharmaceuticals-life-sciences/pwc-pricing-and-reimbursement-strategies-for-pharmaceuticals-in-europe.html
[4] WHO (2019). The Road to Transparency in Health Finance and Procurement. https://www.who.int/publications/i/item/9789240017723
[5] McKinsey (2020). US Drug-Pricing Reform: A framework for policymakers to consider. https://www.mckinsey.com/industries/pharmaceuticals-and-pharmaceutical-manufacturing/our-insights/us-drug-pricing-reform-a-framework-for-policymakers-to-consider
- The European approach to medicines pricing involves negotiation with drug manufacturers for discounts, a strategy that overlaps with health-and-wellness therapies and treatments, as similar tactics might be applied in other healthcare sectors.
- The vast difference in spending on medicines between the US and Europe raises questions about the role of finance and investing in the pharmaceutical industry and its impact on personal-finance and wealth-management for individuals.
- Businesses could potentially benefit from understanding pharmaceutical pricing strategies, as European countries employ negotiated processes, confidential rebates, managed access agreements, and multi-year price-volume deals, providing insights into possible contract negotiations within various industries.
- As the European Union and the US adapt their drug pricing strategies, the impact on Medicare and other healthcare systems could be significant, potentially affecting the overall health-and-wellness landscape and requiring reforms in personal-finance and wealth-management among retirees.
