Bernie Sanders has the correct diagnosis: U.S. prescription drug prices typically highest in world

One theme Sen. Bernie Sanders has repeatedly touched on during his run for the Democratic nomination for president has been the high cost of prescription drugs.

His comment during the Feb. 11 Democratic debate at the University of Wisconsin-Milwaukee was typical as he rattled off a list of problems with the U.S. health care system: "In America, we pay, by far, the highest prices in the world for prescription drugs."

We asked the Sanders campaign for the source of his claim. We didn't get a response. So we searched on our own.

One organization that tracks such things is the International Federation of Health Plans, based in London. Their latest price report, from 2013, lists eight common drugs. Compared with England, the Netherlands, Spain, Switzerland and Canada, U.S. prices were far higher, sometimes dramatically so.

Consider Nexium, the medicine widely used to treat acid reflux. A prescription that would cost $60 or less in other countries costs, on average, $215 in the United States. And that's just the average. Prices vary widely in this country: In 5 percent of the cases, the cost was $395.

"What Bernie says is true. There's nowhere that pays the same price as America," said Tom Sackville, the federation's CEO. In addition, "there is this huge variation in price across America. Anything above the average is quite unjustified. When you get up to the 95th percentile, you're talking grand robbery."

The findings were similar in an April 2013 study published in the journal Health Affairs, which looked at the prices of brand name drugs in the United States, United Kingdom, Switzerland, Germany, France, Canada and Australia. In each of the three years studied -- 2005, 2007 and 2010 -- U.S. prices were consistently higher. The one exception: Switzerland.

In addition, researchers found that, between 2005 and 2010, "the gap between the United States and other countries seemed to widen." And it wasn't just new drugs being embraced first in the United States that was driving up costs. They concluded that "prices for older products rose faster in the United States than in other countries."

But Joel Farley of the University of North Carolina at Chapel Hill's Eshelman School of Pharmacy cautioned that the rule doesn't always apply to generic drugs. A 2008 comparison of 19 generic drugs found that some U.S. prices were lower than Canadian prices. "In some cases it has to do with availability," he said. In other cases, a country may set the drug price low and in that fixed-price market "there's no incentive to go lower."

The Wall Street Journal published an analysis in December that concluded 98 percent of 40 top branded drugs were more expensive in the United States than in England. In Norway, 93 percent of the 40 top branded drugs cost less than in the United States. And in Ontario, a comparison of 30 drugs showed that U.S. prices were also higher for 93 percent of the products.

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Why are the brand name prices so much lower in other countries, and why is there so much variation in the United States?

Big customers can negotiate big discounts. So the countries with socialized medicine have a lot of leverage at the negotiating table, the experts told us. In the United States, hospitals, wholesalers and insurance companies all do their own negotiations. The Veterans Administration can -- and does -- negotiate dramatically lower prices. Under Medicaid, the drug companies are required to provide their medicines at a price that's as low as it is for any of their regular customers.

But Medicare has been prohibited by law from negotiating lower prices since 2006, and that's a huge chunk of the U.S. health care industry. (When Barack Obama was first running for president, he promised to repeal that Bush-era restriction, but then backed off in an attempt to get passage of the Affordable Care Act.)

The pharmaceutical industry says it needs the extra income to pay for research to keep new, desperately needed drugs coming. But with everyone getting a bargain, Americans are financing that research for the rest of the world, experts told us.

Yet there's another way to look at the issue, said Amitava Dasgupta, a clinical toxicologist at the University of Texas Health Science Center at Houston. The tablet that costs a dollar in the United States may only cost 20 cents in India, but that drug is far more expensive to the average person in India because their income is so much lower.

"The U.S. subsidizes research for the world," he said. "But I would look at that as philanthropy."

Our ruling

Sanders said, "In America, we pay, by far, the highest prices in the world for prescription drugs."

When it comes to brand-name drugs, which yield the highest profit for the pharmaceutical industry, studies support Sanders' claim -- although not always on a drug-by-drug basis.

In addition, the differences in price can be dramatic because the U.S. health care system is so splintered, and Medicare is prohibited by law from using its market share to bargain for lower prices.

We found one study comparing the United States and Canada that found exceptions for generic drugs, where the profit margin is much lower and which make up a much smaller share of prescription drug spending.

But on balance, we rate his statement Mostly True.