The Problem. The United States accounts for 67 percent of global sales of new brand-name drugs approved since 2018. By contrast, drug manufacturers collected only 15.8 percent of their sales revenue in Europe’s five largest economies The Brookings Institution estimates that American consumers accounted for up to 78 percent of global profits for drug manufacturers in 2016. Manufacturers generated only 22 percent of their profits outside of the United States.
To put this in perspective, the average American household paid drug manufacturers $616, which was subsequently invested in R&D in 2021. By contrast, the average household in Canada paid drug manufacturers just $59.
Most-Favored Nation Pricing. One option is to align the prices drug manufacturers charge Americans with the prices they charge in other wealthy countries. The MFN Model would limit how much Medicare and Medicaid spend on certain high-cost drugs based on the drug’s lowest price in other wealthy countries. The countries selected to calculate the MFN price would be countries within the OECD with a GDP per capita that is at least 60 percent of America’s GDP per capita.
Source: America First Policy Institute
Drug pricing does seem to be an area where a “doc fix” might not be applicable.