Generics and Biosimilars: The Missing Piece in US Drug Price Negotiations

The US government’s negotiation of prescription drug prices under the Biden Administration’s Inflation Reduction Act has resulted in new maximum prices for Medicare that, according to a Reuters review, remain significantly higher than those in other high-income countries. Despite the newly negotiated rates, the costs are still on average more than double, and in some cases five times, what drug manufacturers have agreed to in countries like Australia, Japan, Canada, and Sweden.

Medicare, which provides health coverage to over 67 million Americans, recently disclosed the first-ever negotiated prices for ten high-cost drugs. These prices, effective in 2026, are projected to save the U.S. government $6 billion in the first year alone. This marks the first time that Medicare has revealed actual drug prices, breaking from the usual secrecy surrounding pharmaceutical costs in the U.S., often obfuscated by a complex system of rebates and discounts.

However, a Reuters examination of the newly released prices highlights a stark contrast with those in other nations. For instance, a 30-day supply of nine out of the ten drugs will cost Medicare $17,581 in 2026, whereas the same medications cost only $6,725 in Sweden this year. A similar comparison for the tenth drug, Novo Nordisk’s insulin Novolog, was unavailable.

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The discrepancy underscores the U.S.’s longstanding issue of paying substantially more for pharmaceuticals than other countries. Stacie Dusetzina, a health policy professor at Vanderbilt University, noted that the U.S. has traditionally accepted its role as a high-paying customer, which has, in some cases, ensured early access to critical treatments, such as COVID-19 vaccines.

In contrast to the U.S., many other nations with universal prescription drug coverage can negotiate lower prices through centralized bargaining with manufacturers. Until recently, U.S. law prohibited Medicare, the nation’s largest government health program, from engaging in such negotiations. This new pricing framework represents a significant shift in policy, but the results indicate that the U.S. still faces challenges in bringing drug costs in line with global standards.

The pharmaceutical industry has defended the price differences. Bristol Myers stated that pricing is highly country-specific, taking into account national health systems and regulatory policies. Merck argued that comparing U.S. prices to those of overseas generics is not valid. Meanwhile, Amgen declined to comment, and other drugmakers did not respond to Reuters’ inquiries.

The situation is further complicated by the lack of biosimilar competition in the U.S. for some of the most expensive drugs on the list. For example, Amgen’s Enbrel, used to treat rheumatoid arthritis, remains without a U.S. biosimilar competitor due to upheld patents that will prevent competition until 2029. In Sweden, however, a 30-day supply of an Enbrel biosimilar costs $709, compared to Medicare’s newly negotiated price of $2,355.

Experts like Mariana Socal of Johns Hopkins Bloomberg School of Public Health highlight that the longer a drug remains on the U.S. market, the higher its price tends to climb, in contrast to other countries where drug prices generally decrease over time. A Brookings Institution analysis found that Medicare’s negotiations had the most impact on drugs with limited market competition, with Enbrel, Bristol Myers’ blood thinner Eliquis, and Johnson & Johnson’s Crohn’s disease drug Stelara expected to deliver over half of the projected $6 billion savings.

Despite these efforts, the U.S. remains an outlier in drug pricing, even for medicines without generic competition abroad, where other governments have successfully secured lower prices. The challenge moving forward will be for Medicare to leverage its newfound negotiating power to bring U.S. drug prices more in line with international norms.

Source: Reuters