trending Market Intelligence /marketintelligence/en/news-insights/trending/Q5SZd7j3PwGBn9sB2CTR-w2 content esgSubNav
In This List

House report backs up Pelosi's push to use foreign pricing for US medicines

Blog

A Pharmaceutical Company Capitalizes on M&A Activity with Brokerage Research

Blog

2021 Year in Review: Highlighting Key Investment Banking Trends

Blog

Insight Weekly: US stock performance; banks' M&A risk; COVID-19 vaccine makers' earnings

Blog

Global M&A By the Numbers: Q3 2021


House report backs up Pelosi's push to use foreign pricing for US medicines

A new congressional analysis backs up earlier reports that prescription medicines for diseases like cancer, diabetes and arthritis cost the U.S. considerably more than what other developed nations pay for those therapies.

A report by the U.S. House Ways and Means Committee found that American consumers pay on average nearly four times more for drugs than what is paid in other countries — and in some cases, 67 times more for the same medicine.

SNL ImageHouse Ways and Means Committee Chair Richard Neal and Rep. Tom Reed
Source: The Associated Press

The U.S. could save $49 billion annually on medicines covered by the government's Medicare Part D program by using average drug prices from comparator nations, Ways and Means Committee staff wrote in their Sept. 23 report.

The analysis comes as a legislative package from House Speaker Nancy Pelosi, D-Calif., and will have its first vetting before a congressional panel at the House Energy and Commerce Health Subcommittee on Sept. 25.

The House Ways and Means Committee has not yet set a hearing on the Pelosi bill. Rep. Richard Neal, D-Mass., the chairman of that committee and one of the sponsors of Pelosi's Lower Drug Costs Now Act (H.R. 3), told reporters Sept. 19 that Democrats "would like to jump‑start the mark up in October."

Pelosi's legislation would allow the federal government to set a maximum price on at least 25 medicines and up to 250 that lack competition in the U.S., with Medicare beneficiaries paying no more than $2,000 out of pocket each year for their drugs.

A key part of the bill relies on the prices set by foreign nations to gauge what the U.S. would pay for its medicines.

Pelosi's bill would set an upper limit for any price negotiations at no more than 1.2 times, or 120%, the average price paid in Australia, Canada, France, Germany, Japan and the U.K.

The Ways and Means report looked at prices in those six nations plus Denmark, Portugal, the Netherlands, Sweden and Switzerland.

The Trump administration has also been considering a foreign pricing model as a way to set prices of expensive injectable medicines covered by the Medicare Part B program.

The Trump plan was based on the administration's analysis that compared the prices of 27 different drugs in 16 foreign countries.

Findings

In its report, the Ways and Means Committee evaluated the prices of 79 medicines based on an analysis from researchers at Johns Hopkins University, which was published in May in the public policy journal Health Affairs.

Evercore ISI analyst Umer Raffat noted that the Ways and Means Committee report largely looked at medicines covered by the Medicare Part D program, while Trump's plan is focused strictly on the Part B injectable medicines.

To compare U.S. prices to those in foreign nations, the congressional analysts focused on seven drugmakers that represented multiple medicines: Biogen Inc., Boehringer Ingelheim GmbH, Eli Lilly and Co., Johnson & Johnson's Janssen Pharmaceutica, Merck & Co. Inc., Novartis AG and Sanofi.

They also conducted a comparative analysis along seven disease groups: arthritis, cancer, diabetes, hepatitis C, HIV, pulmonary hypertension and multiple sclerosis.

In addition, the congressional staff compared U.S. and German price differentials after rebates. Germany was used because it was the only foreign nation with a database that included net and list prices.

There was only one drug, Bristol-Myers' HIV medicine Reyataz, where the price in the U.S. was lower than the combined mean price of the other 11 countries — $7.93 versus $8.25, or a difference of about 3.9%.

The high prices of insulin in the U.S. have been the subject of a number of congressional hearings, where lawmakers have heard from patients unable to afford the drug, with family members of some patients testifying that they lost their loved ones because of the unaffordable cost.

SNL Image

The report noted that the price of insulin increased by 197% from 2002 to 2013.

In the U.S., insulin averaged $34.75 per dose, versus $10.58 in the other countries, or a 247% difference, the congressional analysts said.

They also found significant variation by drug. Sanofi's Lantus SoloStar in the U.S. was 170% of the average in other countries, while Lilly's HumaLOG Mix 75-25 KwikPen was priced at 620% of the non-U.S. price.

There were even greater differences in the prices of non-insulin diabetes medications when comparing the U.S. costs to the international average, the Ways and Means Committee staff reported. Those drugs and medicines for arthritis and multiple sclerosis exhibited the largest U.S.-international drug price differentials in the congressional report's dataset.

The MS medicines in the analysis were typically priced in the U.S. from 350% to 670% of the international average.

Biogen's Avonex and Avonex Pen had a U.S. list price of about $1,698, nearly 650% of the international average times the average international price.

The average U.S. list price for multiple sclerosis drugs was about $770 per dose, versus $134 per dose internationally — making them nearly six times more expensive in the U.S.

SNL Image