Malcolm Gladwell writes about the cost of prescription drugs in The New Yorker.
The perception that the drug industry is profiteering at the expense of the American consumer has given pharmaceutical firms a reputation on a par with that of cigarette manufacturers.
In fact, the complaint is only half true. The “intolerable” prices that Angell writes about are confined to the brand-name sector of the American drug marketplace. As the economists Patricia Danzon and Michael Furukawa recently pointed out in the journal Health Affairs, drugs still under patent protection are anywhere from twenty-five to forty per cent more expensive in the United States than in places like England, France, and Canada. Generic drugs are another story. Because there are so many companies in the United States that step in to make drugs once their patents expire, and because the price competition among those firms is so fierce, generic drugs here are among the cheapest in the world. And, according to Danzon and Furukawa’s analysis, when prescription drugs are converted to over-the-counter status no other country even comes close to having prices as low as the United States.
…In fact, drug expenditures are rising rapidly in the United States not so much because we’re being charged more for prescription drugs but because more people are taking more medications in more expensive combinations. It’s not price that matters; it’s volume.
An important and informative article.