Lowering Drug Costs


Drug costs can vary widely. Anyone on prescription medications knows this unfortunate truth. What can be done about this?

Like many Americans over the age of 50, I take a statin for high cholesterol. These drugs have proliferated greatly in the last ten years as research has shown that lowering your cholesterol levels can slow, and even reverse, cholesterol deposits in your coronary arteries.

My doctor prescribes two medications for me, simvastatin and ezetimibe, to get the best results. Simvastatin is an inexpensive medication that can be purchased for as little as $3, (sometimes nothing!) for a 90-day supply with my drug insurance plan. Ezetimibe, however, will cost me $500 for the same 90-day supply unless I find a discount.

This wide disparity in the cost of medications has led many Americans to order their medications from other countries like Canada and India. To counter these rising drug prices, several online companies have been created including GoodRx, HomePage and BlinkHealth.

These companies have made significant progress in lowering the cost of drugs by working with pharmacies to bring more transparency and competition into the marketplace. What else can be done to lower drug prices?

Robert Laszewski, insurance industry analyst, offers some suggestions on his blog, Health Care Policy and Marketplace Review. He has looked at drug pricing in other countries and discusses a system called reference-based pricing. This system uses the market to set a reference price for each prescription drug that also takes clinical results into consideration. This varies somewhat from country to country:

  • Italy – the lowest price from a range of alternative drugs in a class
  • Germany – an average of all of the drugs in a class
  • Spain – an average of a group of the lowest priced players


The health care system then pays no more than the reference price for a drug in the class, no matter which pharmaceutical company the consumer and their physician uses.

He says such a competitive bidding process lowers prices and drug outcome results are competitive and transparent. If a patient and their doctor wants to pay more for an alternative drug, they know all of the prices and comparative clinical outcomes upfront. If a drug company is truly able to innovate for an existing class of drug, that drug could be placed in a new class – innovation is still rewarded.

There is no doubt that the status quo benefits the pharmaceutical industry at the expense of the consumer. Yes, there is a high cost of investing in research and development that is necessary to find new and better drugs. But competition and transparency will always produce better products at lower costs in a free marketplace.

It’s time the American consumer stopped subsidizing the cost of new drugs for the rest of the world. By allowing drug companies to compete based on both price and clinical outcomes, we can lower drug prices for Americans and achieve that goal.


(For more on ways to lower drug prices, see Lowering Drug Prices.)

No comments yet. You should be kind and add one!