Donald Trump has identified his new enemy. The object of his anger this time is the big pharmaceutical companies. The White House is taking an aggressive strategy for cheaper drugs - by decree. The goal is to drastically reduce drug prices by 59 to 90 percent. "Although only 4% of the world's population lives in the US, pharmaceutical companies make more than two-thirds of their profits in America," Trump said when signing the decree to reduce prices. According to him, the United States "subsidizes" the health systems of other countries where prices were not so high - for example, "socialist" Germany's system.
American consumers pay nearly three times higher prices for drugs
The prices of prescription drugs in the United States are indeed significantly higher than in other countries, notes the German public media ARD.
Data from the American think tank RAND Corporation shows that drugs in the United States are on average 2.78 times more expensive than in 33 other countries of the Organization for Economic Cooperation and Development (OECD). Compared to Germany, the difference is even greater - Americans pay almost 3 times more for medicines, writes ARD.
The price difference between the US and other countries for original drugs is even greater: US citizens pay an average of 4.22 times more than people in some similar countries.
Space prices for insulin
In this situation, it is not surprising that 28% of Americans experience “some” or “great” difficulties in purchasing medicines, as is clear from data from the non-profit organization Kaiser Family Foundation (KFF). This share increases to 37% for people who take four or more prescription drugs.
A particularly striking example of the high prices of medicines in the US is insulin - a hormone that regulates blood sugar levels. Insulin injections are vital for diabetics. According to a 2022 RAND Corporation study, insulin costs almost seven times more in the US than in Germany, notes the ARD.
What is the difference in pricing
But how come drug prices in Germany are so low compared to the US? This is primarily due to the different pricing structures. In Germany, there is a centralized and state-regulated pricing of drugs, especially those that are prescribed by a doctor. What does this mean specifically?
The manufacturer can initially set the initial price, i.e. in the first year after market launch, it receives the full list price - as a positive incentive to create innovative drugs. But after this first year, an early assessment of the benefit of the drug in question is made.
Based on this assessment, negotiations are then held between the manufacturers and the Association of Health Insurance Funds in Germany on the final price that will be reimbursed. And this price is subsequently valid for all public health insurance funds in the country. It is not unimportant that the Association unites the interests of a total of 94 existing health insurance funds in Germany, which gives them a strong position in price negotiations. If these negotiations fail, the final price is determined by an arbitration body.
There is no centralized price negotiation in the USA
There are no similar mechanisms for centralized pricing in the USA. Instead, individual market entities negotiate individually with pharmaceutical companies, which means that drug manufacturers in the USA are largely free to set their own prices, explains the ARD. This in turn leads to large price differences and very high co-payments for patients in the US.
There is another factor that plays a big role in the cheaper medicines in Germany - this is that so-called generic drugs are used to a much greater extent than in the US - equivalents of the original pharmaceutical product, but at a lower price.
Insufficient incentive for new drugs?
Indeed, one of the criticisms leveled at the German healthcare system is that it offers too few financial incentives for research and innovation in the field of new drugs, because it consistently promotes the use of generic drugs.
Not only Donald Trump, but also Hann Stoetel, chairman of the German Association of Research-Based Pharmaceutical Companies, is of this opinion: "Without the income from research and development in the US, new therapies for European patients would in many cases be unthinkable," he says.
But the picture is a bit more nuanced. For new drugs with little or no additional benefit compared to existing drugs, manufacturers in Germany receive minimal financial incentives. The situation is different for drugs that provide real and proven medical progress - this is especially evident in the case of innovative drugs that allow for the treatment of cancer or mRNA vaccines.
There are, for example, innovative drugs against cancer with proven effects - in which case German health insurance funds pay patients in need around 80,000-150,000 euros per year for therapy.
Author: Angela Göpfert (ARD)