‘Global freeloading’ drives up drug prices for Americans, analysis says

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More Americans are suffering from more chronic diseases, but “global freeloading” is clogging the research and development pipeline for new prescription medicines to treat them, according to a new analysis.

On the world stage, the United States is subsidizing vast amounts of medical research. But the international playing field is unfair and stacked against American patients due to other countries’ drug research, pricing and availability. That needs to change, said “Put Americans First by Ending Global Freeloading,” an issue brief published by the America First Policy Institute and its Center for a Healthy America.

Charlie Katebi
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If patients in other nations paid more for prescription drugs, pharmaceutical manufacturers would have more money for research, creating options that would drive competition and thus bring down prices for American patients, said analyst Charlie Katebi, author of the issue brief.

Other developed nations “freeload off American innovation when they institute price controls that reduce global drug sales revenue,” Katebi wrote. “These price controls stifle the development of critical pharmaceutical breakthroughs needed to treat and save sick patients.”

The issue brief was published by AFPI, a nonprofit, nonpartisan research organization that “exists to advance policies that put the American people first.” AFPI is led by economist Larry Kudlow, former director of the National Economic Council under President Donald J. Trump. In this administration, the president has taken early aim at health care price transparency, and it has spoken out about financial imbalances between the United States and other nations on issues such as national defense.

Lots of diseases, lots of drugs

It’s no surprise that Americans are confronting the growth of chronic diseases including cancer, diabetes and heart disease. They are “long-lasting conditions that impair a person’s daily activities and require ongoing medical care,” Katebi wrote. Those ailments account for eight of the 10 leading causes of death in the nation, and for nine of every $10 spent on health care, he said, citing various studies.

The number of Americans with three or more chronic disease is expected to grow — possibly to 83 million by 2030, at a cost of $2.8 trillion in health care spending and lost productivity from 2016 to 2030.

High-quality, widely available drugs can help. Much of the research for them starts with the U.S. National Institutes of Health, which contributed study toward 354 of 356 drugs approved by the U.S. Food and Drug Administration from 2010 to 2019, Katebi wrote.

It’s also no surprise that Americans pay far more for prescription drugs. Katebi cited a RAND Corp. study that found list prices of brand-name drugs cost an average of 4.22 times more than in other wealthy nations.

“This phenomenon, known as global freeloading, allows other wealthy countries to have their cake and eat it too — to get lifesaving drugs for their citizens without paying the necessary costs to develop them,” Katebi said. “As a result, these countries are failing to adequately fund the development of new prescription drugs that are crucial for treating sick patients, especially those with chronic conditions.”

Other countries have policies that keep drug prices artificially low. If they paid more, drug manufacturers could generate more revenues abroad to invest in the research and development needed to bring new medicines to market, or lower prices for American patients, Katebi said.

Possible solutions

Policymakers have at least seven viable options to change the situation, Katebi wrote.

• Establish a most-favored nation pricing in government health program. That would bring drug prices in America with prices in other countries. In 2020, the Trump administration tried this through a program in the Center for Medicare and Medicaid Innovation under the U.S. Centers for Medicare & Medicaid Services.
• Establish a most-favored nation pricing program under the Inflation Reduction Act, which allows for negotiation of drug prices.
• Focus a most-favored nation pricing program on new drugs, not existing ones on the market.
• Apply a most-favored nation model to commercial health plans to prohibit drug manufacturers from charging list prices greater than the same drug in Canada, France, the United Kingdom, Japan or Germany.
• Establish an international pricing model that limits Medicare and Medicaid spending on prescription drugs to an average price in other wealthy nations.
• Prohibit global discounts as a condition of Medicare coverage, to leverage Medicare’s drug price negotiating power.
• Use American trade authority to end freeloading. That power could come through the Office of the U.S. Trade Representative, with potential tariffs or restrictions against countries with policies that “burden or restrict” American commerce.