Updated: Aug 3, 2020
American health care system has always been a complex issue, even for Americans themselves. Specially, since there’s not one big system, but many that work together to provide health care to different parts of our society. But it is our aim to simplify and explain these topics for you to understand what’s going on in this world.
According to the Organization for Economic Cooperation and Development, Americans spend more than any other developed country in prescription drugs. The latest figures says it’s around $1200 a year.
There are many factor that we can list, being innovation one of them. It makes sense that all the research and time invested on making new and better drugs have a cost. However, there’s a bigger reason, and that it’s not so much related to the drugs and the improvement itself.
In most of countries, such as Canada and the UK, the government has a panel that sits and negotiates the price of drugs with the Pharma companies. They main goal is to keep the prices affordable, so all citizens can have access to a good quality health treatment. For example, in Argentina, in 2018, the government had a rough negotiation with the Pharma companies to reduce by 30% the prices of the drugs for PAMI (Argentine equivalent of Medicare).
But the case is quite different in the USA. In America, there are not this kind of negotiating or bargain panels. This allows the drug making companies to set the prices that best suits them.
These negotiations will end up refusing to pay and let into the market a drug that is too expensive. This might result is less options, but more affordable drugs. Since there’s not such a negotiation in the USA, there are more drugs available, but not in the reach of everybody.
The different insurance systems have to negotiate their own deal, which, as you can imagine, it’s not the ideal scenario. “Divide and conquer” would suit perfectly in this situation. Let’s take Medicare as example. By law, it’s prohibited to them to negotiate the prices of the drugs they cover and it’s required to cover nearly all drugs approved by FDA.
There are many reasons that we could name, but the lack of free negotiation between Pharma companies and health insurance companies, it’s the main reason we can mention when we talk about the high prices in drugs in the USA.