Launch prices are frequently not aligned with the value the product generates, and they continue to increase over time.
Although the US does not have a government body that conducts health technology assessments (HTAs) like many other countries do, the high costs and increasing spending on medicines has elevated the prominence of ICER. As an independent and non-partisan drug pricing watchdog, ICER conducts detailed and transparent drug assessment reports that evaluate each new drug and publish a “value-based price benchmark” for consideration by payers, manufacturers and other stakeholders.
- 34 out of 40 products in our analysis had a WAC price that was more than 50% higher than the ICER cost-effective price at $150,000-per-QALY. Only three products came in at or below the $150,000-per-QALY threshold.
- Across our sample, the average premium of WAC over the ICER cost-effective price was 130%.
- The average premium of the NET price over the ICER cost-effective price was 97%.
80% of the drugs we analyzed have NET prices above the $150,000-per-QALY threshold.
Excessive pricing in the U.S. generates outsized premiums relative to R&D investments.
In the Executive Orders on drug pricing that President Trump issued in September 2020, he focused on the fact that Americans frequently pay substantially more for the same prescription drugs than residents of other high-income countries. This is the basis for his “Most-Favored Nation Price” benchmark for Medicare reimbursement, as well as for similar international reference pricing bills that have been introduced in Congress, including H.R.3. In a Health Affairs Blog article published in 2017, we refuted the pharmaceutical industry’s common claim that the higher prices they charge in the US provide them with funds that are required to conduct high risk research and development programs.
- Reimbursement prices in other high-income countries average 43% of US net drug prices for the top 15 companies, with a range from 37% in the UK to 50% in Denmark.
- Overall in 2015 the premium earned by US net prices exceeding other countries’ list prices generated $112 Bn, while that year the companies spent 69% of that amount, or $77 Bn, on their global R&D.