JAMA Study: Drug Prices Contribute to High US Healthcare Spending

A study published this week in the Journal of the American Medical Association reports that the United States spends more per capita on healthcare than any other nation, even other high-income nations, despite poor healthcare coverage and health outcomes, and that prices of pharmaceuticals are a driver of that outsized spending.

Using data primarily from 2013 to 2016, derived from the Organisation for Economic Co-operation and Development (OECD) and the Commonwealth Fund, a research team led by Irene Papanicolas, PhD, compared the United States’ performance with that of 10 other high-income countries (the United Kingdom, Canada, Germany, Australia, Japan, Sweden, France, Denmark, the Netherlands, and Switzerland) on key metrics related to healthcare spending.

The authors report that the United States spent 17.8% of its total national gross domestic product (GDP) on healthcare. By comparison, the next-highest spender is Switzerland, at 12.4% of its GDP. The lowest spender, Australia, expends just 9.6%. The US also has the highest mean per capita spending, at $9403, well ahead of Sweden’s $6808.

The United States also spent the most on pharmaceuticals, with an annual per capita spend of $1443. The next highest was Switzerland at $939, compared to a mean spend of $749 for all 11 countries. While the percentage of total pharmaceutical spending represented by retail spending in the United States (71%) is consistent with the group mean of 72%, retail spending was highest per capita in the US at $1026. For 4 drugs—Crestor, Lantus, Advair, and Humira—the United States had higher prices than did any other nation—even more than double the next highest price.

The United States had high generic penetration at 84% of the market, while Australia and the Netherlands had comparably low generic penetration (30% and 17%, respectively). The United States spent approximately the same on generic products as a percentage of its total drug spending as did the other nations, which the researchers suggest points to brand-name drugs as the driver of spending.

The United States also had higher private spending on pharmaceuticals than the other nations; while the mean private share was 8%, the United States had a 36% private share. US patients’ out-of-pocket spending comprised 30% of spending, compared with a mean of 36%, however.

The authors note that, “Although the United States’ high prices of pharmaceuticals are controversial, these prices have been viewed as critical to innovation, including US production of new chemical entities. Whether innovation justifies high levels of spending is not clear.”

Other areas in which the United States outpaced the other nations in spending included prices of physician and hospital services, diagnostic tests, administrative costs, and physician salaries. Interestingly, say the authors, “The data also suggest that some of the more common explanations about higher health care spending in the United States, such as underinvestment in social programs, the low primary care/specialist mix, the fee-for-service system encouraging high volumes of care, or defensive medicine leading to overutilization, did not appear to be major drivers of the substantially higher US [healthcare] spending compared with other high-income countries.”

Reference

Papanicolas I, Woskie LR, Jha AK. Health care spending in the United States and other high-income countries. JAMA. 2018;319(10):1024-1039. doi:10.1001/jama.2018.1150.