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Analysis: U.S. Pays Substantially More than Australia for the Same Prescription Drugs

If the U.S. had access to the same discounted rate on drugs that Australia has negotiated, U.S. taxpayers could save at least $37 billion every year in drug spending, according to a new report by 46Brooklyn. The study appears amid renewed attention in a “most-favored nation” policy that would link U.S. drug prices to international rates.

“If President Trump does not implement a proposal to lower the list prices of prescription drugs, he will leave Americans continuing to pay the highest prices in the world.”
Ben Wakana, executive director of Patients For Affordable Drugs Now

Australians pay a fraction of what Americans pay for some of the exact same prescription drugs, and the discounts down under are so dramatic that — in some instances — it would be cheaper to fly across the world to buy needed medications rather than pick them up from a local pharmacy, according to a new analysis comparing drug prices in the two countries.

In a report released today, researchers at 46Brooklyn analyzed the prices paid in Australia for prescription drugs and compared 1,250 of them against their equivalents in the United States, then plotted out their findings in a database searchable by drug.

VISUALIZATION: Drug Pricing Down Under Dashboard

It’s common knowledge that other developed countries pay far less for medicines than what Americans pay — a disparity that has sparked fresh interest in a policy often referred to as the international pricing index, which links U.S. drug prices to the cheaper rates paid overseas.

However, the 46Brooklyn analysis underscores just how significant the gap is for various drugs, and it provides a rough estimate for how much savings U.S. taxpayers could reap if drugs were priced as cheaply as they are in Australia.

The analysis comes amid renewed attention on the prices that other countries pay for drugs. President Trump has touted using international reference pricing in Medicare Part B – he has referred to it as a “most-favored nation” policy – and announced an executive order in July tying payments for physician-administered drugs to the prices paid by other countries. International reference pricing has also been contemplated in proposed drug pricing legislation, including H.R. 3, which was passed last year by House Democrats but has not gained any attention in the Senate. The policy has also been championed in a bill introduced last year by Sens. R. Scott (R-FL) and Hawley (R-MO).

Take the brand-name blood thinner Eliquis, for example. A 5 milligram tablet has a list price of $230.72 in the United States — the same drug is 78 percent cheaper, or $51.47, in Australia. At that rate, a year’s supply of Eliquis is $2,768 in the United States — which means an American could book a round-trip international flight to Australia at $1,500 per ticket, buy a year’s supply of Eliquis at $617, return home, and still save roughly $650. This is the price a person without health insurance would pay. When the researchers compared the prices in Medicare, they found that Australian drugs were still much less expensive.

$14B

Spending per year in Medicare Part B on just 10 drugs that drive 44% of the program’s drug spending.

According to the analysis, the United States spends about $14 billion per year in Medicare Part B on just 10 drugs that drive nearly half (44 percent) of the program’s drug spending. Medicare Part B covers drugs administered by health care providers. The researchers calculated spending for those same 10 drugs at Australia’s negotiated prices and discovered that those rates would yield 68 percent in savings, or about $10 billion per year.

It’s more challenging to strike comparisons between Australian prices and the rates paid by other federal health programs, such as Medicare Part D, because of the complexities and outdated design of that program. However, the 46Brooklyn analysis of the top 50 drugs that comprise 42 percent of the program’s total drug spend revealed that the U.S. pays a substantially higher price than Australia for the same products, resulting in increased costs for American taxpayers.

To accurately examine Part D spending, researchers removed 11 drugs that were available in the U.S. but not listed on Australia’s formulary, applied a 32 percent rebate rate to gross spending on brand-name drugs in Part D to reflect the program’s rebate system, and then priced the remaining drugs at Australia’s negotiated rate. Once again, they discovered that using Australia’s prices would have resulted in savings of 66 percent, or about $27.9 billion per year in net spending.

$37B

The combined possible savings for Medicare Part B and Part D if Australia's drug prices were used here, enough for an $11,000 pay raise for every public school teacher in the U.S.

To get a sense of the scale of the combined savings from Medicare Part B and Part D, $37 billion is enough to pay for an $11,000 pay raise for every public school teacher in the United States, the researchers find.

President Trump has said he signed a most favored nation executive order for Medicare Part B drugs, but the order has not been published or made public and details remain unknown. The President provided an opportunity for drug makers to offer an alternative to the policy and set an Aug. 24 deadline. The pharmaceutical industry refused to meet with President Trump after the announcement of the executive order and the policy has been maligned by the industry. The deadline came and went with no firm deal and no further action or information from the Trump Administration. Some media outlets have reported that pharma has delivered a counteroffer to the White House, but the proposal has not been made public by pharma or the Trump Administration.

Amid the void of information and the confusion around the status of the executive order, those who have been advocating for drug pricing reform are encouraging President Trump and Congress to move forward with the proposal.

“Abandoning the most-favored nation proposal at the 11th hour would be a capitulation to drug corporations,” Ben Wakana, the Executive Director of Patients For Affordable Drugs Now, said in a statement. “If President Trump does not implement a proposal to lower the list prices of prescription drugs, he will leave Americans continuing to pay the highest prices in the world.”