By Deena Beasley

(Reuters) – The U.S. government’s first-ever negotiated prices for prescription drugs are still on average more than double, and in some cases five times, what drugmakers have agreed to in four other high-income countries, a Reuters review has found.

Medicare’s New Maximum Prices

The U.S. Medicare health plan, which covers more than 67 million people, recently unveiled new maximum prices for the first 10 high-cost medicines negotiated under the Biden Administration’s Inflation Reduction Act.

This is the first time Medicare has disclosed actual drug prices, which are largely hidden behind a complicated U.S. system of rebates and discounts. The lower prices will result in savings of $6 billion in 2026, the first year they take effect, Medicare said.

Comparison with Other Countries

A Reuters review of publicly available maximum prices set by other wealthy nations – Australia, Japan, Canada, and Sweden – shows that they have negotiated far lower prices for the same drugs. A 30-day supply of nine of the 10 drugs will cost $17,581 for Medicare in 2026, compared with $6,725 in Sweden this year. Comparable prices were not available for the 10th drug, Novo Nordisk’s insulin, Novolog.

“In the U.S., we’ve always accepted that we are the country that overpays relative to the rest of the world,” said Stacie Dusetzina, a health policy professor at Vanderbilt University.

The U.S. sees value in being the preferred customer, evidenced by the early availability of COVID vaccines.

Price Negotiation Framework

Many countries have universal prescription drug coverage that relies on centralized price negotiation with manufacturers, but U.S. law previously prevented Medicare from doing so. Bristol Myers stated pricing was country-specific and influenced by national health systems and their regulatory policies. Merck noted that comparing U.S. prices to overseas generics was not valid.

A spokesperson for the U.S. agency overseeing Medicare mentioned that laws require consideration of factors like manufacturer data and alternative treatment availability, but did not include an international price review in negotiations.

U.S. Prices and Market Dynamics

A study by the non-profit RAND Corp found that U.S. health plans paid more than three times for brand-name pharmaceuticals in 2022. Faster uptake of new, expensive drugs drives U.S. prices, while other high-income nations impose tighter prescription restrictions.

The U.S. willingness to pay high prices contributes to lower prices overseas. If one buyer covers sunk costs and ongoing costs, selling more volume at lower prices can still be profitable.

Lower-cost generic or biosimilar versions are already available outside the U.S. Generic Januvia has been on the Canadian market since late 2022, while U.S. patents remain until 2026.

Once patents expire, prices typically drop sharply, but drugmakers can extend U.S. patent coverage by making minor changes such as dosage or formulation.

Price Differences for Biologics

Currently, there are no U.S. biosimilar competitors for Amgen’s Enbrel, which was first approved in 1998 for rheumatoid arthritis. U.S. courts have upheld Amgen’s patents, preventing biosimilars until 2029. Other countries, including Sweden, already offer affordable options, with a 30-day supply of an Enbrel biosimilar costing $709 compared to Medicare’s negotiated price of $2,355.

As drugmakers raise U.S. prices annually, “the longer a drug is in the U.S. market, the more we pay,” said Mariana Socal from Johns Hopkins, contrasting this with declining prices in other countries over time.

Medicare’s negotiations are expected to most benefit drugs with limited market competition. A Brookings Institution analysis found three drugs may account for over half of the $6 billion in expected savings for Medicare, highlighting disparities in pricing practices.

The maximum price for AstraZeneca’s diabetes drug Farxiga negotiated by Medicare is $179 for a 30-day supply. In comparison, Sweden’s maximum price is $35 and Canada’s around $60.

Future of Price Negotiations

Every year, more drugs will be subject to price negotiation by Medicare, which represents about a third of U.S. drug spending. “We’re going to see the U.S. pushing the market to balance affordability, innovation, and incentives,” stated Brookings’ Frank.