WASHINGTON – Americans’ outrage about prescription drug prices is odd, in a way. Drugs account for less than 10% of the nation’s overall health care spending, and while the price of some medicines has spiked, overall spending on prescription drugs has grown more slowly than broader health care expenditures. In 2017, the increase didn’t even keep up with inflation.
Yet polls show that pharmaceutical companies are one of the most hated private sector industries, below the rest of the health care industry and below even lawyers. That’s why it has been such fertile territory for Democratic presidential candidate Sen. Bernie Sanders, I-Vt., who in April introduced a bill to control prescription-drug prices and recently tweeted that, once in the White House, he would “lower the outrageously high price of prescription drugs.” The idea has proven so popular that even Republicans, including Sen. Rick Scott of Florida, are getting into the act.
Which isn’t really surprising at all. Drugs may be a small part of our health care spending, but it’s the cost we’re most directly exposed to month after month. Moreover, it’s easy to directly compare U.S. prices with the much lower prices in, say, Canada. Americans think the difference is unfair, because it is.
And yet Americans arguably get a pretty good deal from all this overspending: new drugs. The oversize profits that pharmaceutical companies collect in the United States encourage them to do lots of research and development in the hope of earning more of those sweet, sweet returns. The rest of the world essentially free-rides on Americans’ willingness to pay more.