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  • Economy

Prescription drugs

Why the same drugs cost more in the United States, what that money pays for, and whether government should set the price.

Last reviewed October 11, 2026

Know

Facts that are not in dispute. Guess first, then see the figure and where it comes from.

Drugs bought at pharmacies are about 9 of every 100 dollars spent on health care. Hospital and doctor prices are on the Healthcare costs page, and who pays is on the Health coverage page. Several figures here come from studies done for the federal government in 2021 to 2024, the most recent available.

  1. If a set of generic prescription drugs costs 100 dollars in other wealthy countries, about how much does it cost in the United States?

    Slide to make your guess

    Generic drugs that cost 100 dollars in other wealthy countries cost about 67 dollars in the United States.

    This compares prices in 2022 with 33 other high-income countries. Within the United States, generics fill 90% of prescriptions but account for only 8% of what is spent on prescription drugs.

    Source: RAND Corporation for the US Department of Health and Human Services, International Prescription Drug Price Comparisons

  2. If a set of brand-name prescription drugs costs 100 dollars in other wealthy countries, about how much does it cost in the United States at list price?

    Slide to make your guess

    Brand-name drugs that cost 100 dollars in other wealthy countries cost about 422 dollars in the United States at list price, and about 308 after rebates.

    The list price is not what is finally paid. Manufacturers pay rebates to insurers and to the companies that manage drug benefits. The study estimated those rebates at about 37%, which brings 422 down to about 308. Prices in the other countries were not adjusted in the same way, so the study says the real gap is probably somewhat wider than 308 suggests. These drugs are where the money goes. Within the United States, 87 of every 100 dollars spent on prescription drugs go to brand-name drugs, even though generics fill 9 of every 10 prescriptions. Taking generic and brand-name drugs together, a set that costs 100 dollars abroad costs 278 here.

    Source: RAND Corporation for the US Department of Health and Human Services, International Prescription Drug Price Comparisons

  3. Of every 100 dollars spent on health care in the United States, about how many go to prescription drugs bought at pharmacies?

    Slide to make your guess

    About 9 of every 100 health care dollars go to prescription drugs bought at pharmacies.

    Hospitals receive 31 and doctors and clinics 21. Drugs given in hospitals and clinics are counted under those headings. Total health spending was $5.3 trillion in 2024, or 18% of the economy.

    Source: Centers for Medicare & Medicaid Services, National Health Expenditures 2024 Highlights

  4. Of the new drugs launched worldwide from 2018 to 2022, what share were on sale in the United States?

    Slide to make your guess

    About 74% of new drugs launched worldwide from 2018 to 2022 were on sale in the United States, more than in any other country studied.

    That is 212 of 287 drugs. Germany was second with 52%. More than half of the drugs were sold first in the United States, and they reached other large wealthy countries about a year later on average.

    Source: RAND Corporation for the US Department of Health and Human Services, Comparing New Prescription Drug Availability and Launch Timing in the United States and Other OECD Countries

  5. Of every 100 dollars drug companies take in, about how many do they spend on developing new drugs, including the ones that fail?

    Slide to make your guess

    Drug companies spend about 25 of every 100 dollars they take in on developing new drugs, including the ones that fail.

    The industry spent $83 billion on research and development in 2019. Estimates of the cost of bringing one new drug to market run from $0.8 billion to $2.3 billion. The FDA approved an average of 38 new drugs a year from 2010 to 2019, and every drug approved from 2010 to 2016 drew in some way on research funded by the National Institutes of Health. By comparison, drug makers spend about $6 billion a year advertising prescription drugs to the public, two thirds of it on just 39 drugs. Medicare and its beneficiaries spent $324 billion over three years on the advertised drugs, more than half of their drug spending. The United States and New Zealand are the only two countries that allow such advertising.

    Source: Congressional Budget Office, Research and Development in the Pharmaceutical Industry; Government Accountability Office, Prescription Drugs: Medicare Spending on Drugs with Direct-to-Consumer Advertising (GAO-21-380); Gigafact, fact brief on which countries allow prescription drug advertising

  6. Medicare began negotiating drug prices in 2026, for ten drugs.

    A 2022 law allowed it for the first time. The negotiated prices were 38% to 79% below list prices. Medicare estimated they would have saved it about $6 billion, or 22%, on those drugs had they applied in 2023. Fifteen more drugs follow in 2027. Extending negotiation to more drugs, or to people with private insurance, would need a new act of Congress.

    Source: Centers for Medicare & Medicaid Services, announcement of the first negotiated drug prices; American Hospital Association, CMS announces latest negotiated prices for 15 drugs to begin in 2027

What 100 dollars of drugs abroad costs in the United States, 2022

US price, in dollars, of drugs that cost 100 dollars in 33 other high-income countries.

  • Brand-name drugs at list price 422
  • Brand-name drugs after rebates 308
  • All drugs together 278
  • Generic drugs 67

Source: RAND Corporation for the US Department of Health and Human Services, International Prescription Drug Price Comparisons

Charts appear here once you have answered or skipped the questions above.

Debate

Questions the facts cannot settle, with the strongest case for each side.

Should government set or negotiate the prices of prescription drugs?

Yes, negotiate more prices

The same drugs cost far more here. A basket that costs 100 dollars in 33 other wealthy countries costs 278 dollars in the United States, and 422 dollars for brand-name drugs. Where government has negotiated, prices fell. Medicare's first ten negotiated prices came in 38% to 79% below list, and would have saved it about $6 billion in a single year. Taxpayers have also paid once already. Every drug approved from 2010 to 2016 drew on research funded by the National Institutes of Health. Other countries pay less for the same medicines because their governments bargain, and patients in the United States make up the difference (the effect on new drugs is disputed).

No, leave prices to the market

High prices here pay for new medicines everywhere. Drug companies spend about a quarter of their revenue on research, $83 billion in 2019, and one new drug costs $0.8 billion to $2.3 billion to develop. The Congressional Budget Office finds that research spending follows expected revenue. It estimated that one price-setting bill would mean 8 fewer new drugs in its first decade and 30 fewer in the next (the size of the effect is disputed). Patients here also get new drugs first. Of 287 launched from 2018 to 2022, 74% were on sale in the United States against 52% in Germany. Generic drugs, which fill 90% of prescriptions, already cost a third less here.

Underneath is a disagreement about how to weigh lower prices for patients today against more new treatments later, and about whether the United States should keep paying a larger share of the world's drug research than other wealthy countries do.

Should advertising prescription drugs to the public be banned?

Yes, ban it

The United States and New Zealand are the only two countries that allow it. Drug makers spend about $6 billion a year on these advertisements, and two thirds of the money promotes just 39 drugs. Medicare and its beneficiaries spent $324 billion over three years on advertised drugs, more than half of their drug spending. Supporters of a ban argue that advertising steers patients toward the newest and most expensive brands when older or generic drugs would serve as well, that a thirty-second commercial cannot convey risks a doctor would weigh, and that the cost of the advertising is recovered in the price (the effect of ads is disputed).

No, keep it legal

An advertisement cannot write a prescription. A doctor still has to agree the drug is right for the patient. Opponents of a ban argue that advertising tells people about conditions and treatments they did not know of and prompts visits that catch untreated illness. The $6 billion spent each year is small beside the $83 billion the industry spends on research. The figures on Medicare spending show that advertised drugs are widely used, not that advertising caused the use. They add that a ban would restrict truthful speech about a legal product, so it would need an act of Congress and would face a challenge under the First Amendment (the effect of ads is disputed).

Underneath is a disagreement about whether patients are better served by more information from sellers or by leaving the choice of medicine to doctors, and about how far government may restrict commercial speech.

Wording

Terms that frame the argument before it starts. Who uses each one, and what can be checked.

Uncertain

Questions that have a factual answer in principle, where the evidence is still contested.
How many new drugs would lower prices cost?
The Congressional Budget Office estimated that one bill to set prices for many drugs would mean about 8 fewer new drugs in its first decade and about 30 fewer in the next, against roughly 38 approvals a year. Drug makers argue the loss would be larger. Supporters of negotiation argue it would be smaller. The estimate depends on how companies respond to lower expected revenue, which cannot be observed in advance. Sources: Congressional Budget Office, Research and Development in the Pharmaceutical Industry
Does drug advertising raise spending or improve care?
More than half of Medicare's drug spending from 2016 to 2018 went to drugs that were advertised to the public. That shows the two go together and does not show which causes which, since companies advertise the drugs they expect to sell most. Supporters of a ban argue that advertising increases demand for expensive drugs. Opponents argue that it brings patients with untreated conditions to a doctor. Sources: Government Accountability Office, Prescription Drugs: Medicare Spending on Drugs with Direct-to-Consumer Advertising (GAO-21-380)

Sources