US Accounts for Forty-Five Percent of Worldwide Pharmaceutical Spending

Thursday, November 20, 2008 by: Herb Newborg
Tags: Big Pharma, health news, Natural News

(NewsTarget) A recently released study of per capita spending on pharmaceuticals reveals that the US spends more than any other major industrialized nation, nearly twice the average amount of the 30 countries included in the assessment. In addition, we spend an average of 30% more for the same drugs.

The report from the Organization for Economic Cooperation and Development (OECD) finds that the average OECD country spent $401 per person on drugs in 2005, and half of OECD countries had per capita spending within 20 percent of the average. The US had the highest level of per capita expenditure, at $792 and Mexico the lowest, at $144 just 18 percent of the US amount.

Pharmaceutical expenditures - in common with health care spending overall - continue to outstrip the average growth of OECD economies, according to the OECD's Pharmaceutical Pricing Policy report. The pharmaceutical sector accounts for about one-fifth of health spending, on average, in OECD countries, and just nine OECD countries account for more than 80 percent of global sales of the pharmaceutical industry.
The US alone accounts for 45 percent of total worldwide expenditures for drugs, although the US makes up less than 5 percent of the worldwide population.

France and Spain had the greatest volume of consumption per person in 2005, followed by the US and Australia. All of these countries had below-average retail price levels in 2005, except the US, which had retail prices about 30 percent above the OECD average.

It should be noted that the pricing data used in the above comparison reflects "ex-manufacturer" prices which underestimate total expenditures. Retail prices (prices charged by pharmacies) to cash paying customers are roughly 25 to 30 percent higher than ex-manufacturer prices (prices charged by manufacturers) to federal customers.

Despite the fact that the U.S. spends more on health care per person than any other nation in the world and spends twice the average of other major industrialized countries on drugs, the World Health Organization (WHO) ranks the U.S. health care system 37th in overall performance and 72nd by overall level of health (among 191 member nations included in their study).

President elect Barrack Obama has said he will "take on the drug and insurance companies and hold them accountable for the prices they charge and the harm they cause". Giving Medicare the authority to negotiate drug prices - a provision that currently doesn't exist - would cause drugmakers to lose $10 billion to $30 billion in annual revenues, according to a report released last month by the Boston Consulting Group.

The pharmaceutical industry's trade group is preparing a multimillion-dollar public relations campaign to tout the importance of "free-market health care" and undercut the expected push by the Obama administration for negotiated pricing of prescription drugs, according to The Washington Times.
The effort, which will include a national TV commercial scheduled to begin airing next week, is the first salvo in what likely will be a huge battle over health care reform during the Obama presidency. Obama, you may recall, attacked drugmakers repeatedly during his election campaign.

"There's no question that next year will be a challenging year," Ken Johnson, senior VP at PhRMA, which is organizing the campaign, told the paper. The ads will feature TV talk show host and PhRMA spokesman Montel Williams, but the ads won't criticize the Obama team or its health care proposals.

"We're going to do an ad campaign that is designed to make people aware of the importance of preserving your free-market health care system," Johnson says.

This "free market" system Johnson refers to was analyzed by Families USA, a national nonprofit, non-partisan organization dedicated to the achievement of high-quality, affordable health care for all Americans in a 2007 report titled "No Bargain: Medicare Drug Plans Deliver HighPrices."

The report compared the lowest prices for drugs offered by Medicare Part D plans (which cannot be negotiated) to the lowest prices obtained by the Department of Veterans Affairs (where prices are negotiated with drug makers). They found that for the 20 drugs most commonly prescribed to seniors, the top five Part D insurers charged prices that were substantially higher than those obtained by the VA. The costs billed to Medicare were from 34 percent to 1,066 percent higher. The median price difference was an astounding 58 percent.

The report rightfully concluded that the Medicare program needs to be allowed to bargain directly with drug companies for better prices.

About the author

Herb Newborg is president at Chiropractic America. Chiropractic America and Ogilvy PR Worldwide firm, Feinstein Kean Healthcare (FKH), have developed www.YourSpine.com along with a national marketing communications program to educate patients about the importance of spinal health and better align the chiropractic profession with consumer healthcare and wellness issues. FKH is a nationally-recognized leader in healthcare communications and public relations. Chiropractic America leverages FKH’s extensive healthcare experience to elevate public awareness and perception of chiropractic and ultimately drive informed and motivated patients to chiropractors nationwide.
Our mission is to educate consumers about the important role their spine plays in their overall health. We communicate the role chiropractors play in maintaining health by maintaining the integrity of the spine and nerve system. Well-educated, informed patients are equipped with the knowledge to take control of their health.