The United States spends more on prescription drugs than any other country in the world — not just in total, but per person. Americans pay, on average, roughly two to three times what residents of peer countries pay for the same medications. That gap is not explained by Americans using more drugs, or by Americans having access to better drugs. It is explained by price. The same pill, manufactured by the same company, costs dramatically more in the United States than it does in Canada, Germany, the United Kingdom, or Japan.
Understanding why requires understanding how drug prices are actually set — a process that is neither transparent nor simple, and that involves multiple intermediaries between the company that makes a drug and the patient who takes it.
What the Price Comparison Looks Like
The price difference between the United States and peer countries is consistent across drug classes and well-documented. A 2021 RAND Corporation analysis found that US drug prices were 2.56 times higher on average than prices in 32 other countries. For brand-name drugs specifically, the gap is larger — US prices average about 3.5 times what the same drugs cost in comparable nations.
Specific examples make the gap concrete. Humira, one of the world’s best-selling drugs used to treat rheumatoid arthritis and other conditions, had a US list price of approximately $84,000 per year in 2023. In Germany, the same drug cost approximately $18,000. In the United Kingdom, approximately $9,000. Eliquis, a blood thinner taken by millions of Americans with atrial fibrillation, costs roughly $600 per month in the United States. In France, approximately $60. Ozempic, increasingly prescribed for both diabetes and weight management, costs around $900 per month in the United States and approximately $100 in Germany.
These are not cherry-picked outliers. The pattern holds across cardiovascular drugs, cancer treatments, diabetes medications, biologics, and most other major drug categories.
The Pricing Chain
A drug does not have a single price. It has a series of prices that move through a chain of transactions before reaching the patient, and the amount a patient pays depends on where they sit in that chain and what coverage, if any, they have.
The list price — sometimes called the wholesale acquisition cost — is the price set by the manufacturer. It is the starting point for all negotiations and the number that gets cited in headlines. Almost nobody actually pays the list price. But it anchors everything else, and patients without insurance or whose insurance has not yet met a deductible often pay amounts based on it.
The negotiated price sits below the list price. Insurance companies and their intermediaries negotiate discounts and rebates with manufacturers. The size of those discounts varies enormously depending on the negotiating power of the payer. Large insurers negotiate better prices than small ones. Government programs negotiate differently than private insurers. The gap between list price and negotiated price can be substantial — sometimes 40 to 60 percent for major drugs — but the negotiated price is rarely disclosed publicly, which makes the system difficult to evaluate from the outside.
Pharmacy Benefit Managers — PBMs — sit between insurers and manufacturers and play a central role in determining what drugs cost in practice. PBMs negotiate rebates from manufacturers in exchange for favorable placement on a drug formulary — the list of drugs an insurance plan will cover and at what tier. A manufacturer that wants its drug covered at a low patient copay pays a rebate to the PBM. The mechanics of how those rebates flow, and how much of the savings reaches patients versus stays with the PBM or insurer, is one of the central controversies in the drug pricing debate.
The formulary tier determines what a patient with insurance actually pays at the pharmacy. A drug on Tier 1 might have a $10 copay. The same drug on Tier 3 might require 30 to 40 percent coinsurance — meaning the patient pays a percentage of the negotiated price, which can run to hundreds or thousands of dollars per month for specialty medications.
Out-of-pocket costs for uninsured patients, or for insured patients before meeting their deductible, are typically based on the list price or a cash price negotiated with the pharmacy — both of which are substantially higher than the prices negotiated by large insurers. This means the patients with the least financial cushion often pay the highest prices.
Why US Prices Are Higher
The fundamental reason US drug prices are higher than prices in peer countries is that the United States does not have a centralized mechanism for negotiating or regulating drug prices at the national level. Most peer countries do.
In Germany, the government conducts a health technology assessment of each new drug and negotiates a price with the manufacturer based on the assessed benefit relative to existing treatments. In the United Kingdom, the National Institute for Health and Care Excellence evaluates clinical and cost-effectiveness and sets thresholds for what the National Health Service will pay. In Canada, the Patented Medicine Prices Review Board sets a ceiling on the prices manufacturers can charge. In Japan, the government sets prices directly through a fee schedule updated every two years.
In each case, a single large buyer — the national government or a government-backed negotiating body — has the market power to negotiate prices down. Manufacturers accept lower prices in those markets because access to a large patient population at a lower price is more profitable than no access at all.
The United States, by contrast, has historically prohibited Medicare — which covers more than 65 million Americans — from negotiating drug prices directly with manufacturers. That prohibition, established in the 2003 legislation that created Medicare Part D, meant that the largest single drug purchaser in the country was legally barred from using its purchasing power. The Inflation Reduction Act of 2022 created a limited negotiation authority for Medicare for the first time, allowing negotiation on a small number of high-cost drugs beginning in 2026. The scope of that authority and its effects are still being determined.
Private insurers negotiate individually, producing a fragmented market in which manufacturers can charge more than they could if payers were coordinated. The result is that the United States bears a disproportionate share of the revenue that funds pharmaceutical research and development — a point the industry makes frequently — while patients in other countries access the same drugs at prices their governments have negotiated down.
What Patients Are Actually Paying
The pricing structure described above has direct consequences for patients. Approximately 30 percent of American adults report not taking medications as prescribed because of cost — skipping doses, splitting pills, or not filling prescriptions at all. For insulin-dependent diabetics, that rationing carries life-threatening risk. For patients managing chronic conditions with expensive maintenance medications, it means ongoing harm that compounds over time.
The consequences are not evenly distributed. Patients without insurance, patients in the gap between Medicaid eligibility and affordable private coverage, patients in high-deductible health plans, and patients whose drugs are not covered favorably by their formulary bear the highest out-of-pocket costs. The structural features of the pricing system produce predictable patterns of who can and cannot afford the medications their doctors prescribe.
What This Hub Is Here to Do
The pricing structure described here — list prices, PBM negotiations, formulary tiers, the absence of centralized price-setting — is the factual foundation for everything else this hub examines. Articles that follow cover the insulin crisis as a concrete case study, the role of PBMs in detail, what other countries do differently, and what reform proposals are currently on the table.
This hub does not start from a conclusion about which reforms are correct. The pricing structure is a fact. What to do about it is a question for the deliberative process this hub is designed to support. If you or someone you know has direct experience with drug costs — rationing medication, navigating prior authorization, choosing between prescriptions and other necessities — that experience is what the Sentiment stage of this hub is designed to surface. The forum is where that work takes place.
This article was researched and drafted with AI assistance under human review. See our full AI and editorial practices.