Why Do Drugs Cost So Much In America?

Why Do Drugs Cost So Much In America?

Donald Trump gave a speech last week addressing the high price of pharmaceuticals in the United States. Trump’s critics say his explanation for drugs cost was off the mark. According to Thomas J. Bollyky, a former United States Trade negotiator, the president’s speech was an improper diagnosis on why drug costs are so high in the United States.

For the most part, the prices of products in Europe and in the United States have a similar price tag. But, Americans are paying around double the amount that everyone else is.

For that reason, a lot of Americans are pissed about it. It’s become a customary thing for patients to drive to Mexico or Canada to pick up drug prescriptions.

According to the New York Times, Trump blamed other countries for the high costs in the United States. He said Americans “are paying too much because other countries pay too little,” as if the average US citizen is basically subsidizing the right for other people around the world to pay half of the price.

And his intention is to get other countries to raise their drug prices: a supposedly incorrect diagnosis.

The typical Republican or conservative explanation of the prices for a product is that in a free market the prices of an item reflect its true value. And while that may be the right answer in a lot of cases, it isn’t here.

The Real Reason Why Drugs Cost So Much

Patents and grants exist in the United States, which enable the manufacturers of drugs to exclude other competitors, that way they dominate the market and can charge super high prices. The reasoning for this is that they can pay back what it cost for the research and development process.

The real reason for high prices in the United States is a result of companies dominating the market. Essentially, they have the ability to strong-arm other competitors out of the game, so they can charge whatever they want.

It’s similar to the way the three big phone companies in Canada control the market. In Canada, they have Rogers, Telus, and Bell, and these three companies dominate the market and exclude all other competitors, ensuring that they control how much we pay.

Some like to claim that Americans pay so much for their drugs because they’re lacking a central organization that negotiates prices for products sold in bulk.

However, other nations throughout the world lack a central organization as well and don’t pay as much.

Where the United States is unique, is that these big companies have very strong drug patents and protections which stop public and private organizations from introducing new drugs at a lower cost. They dominate the industry.