Think Tank Paper Puts Pharmaceutical ‘Global Freeloading’ Back in Spotlight

The America First Policy Institute, a think tank founded by former advisers to President Donald Trump, recently released a paper that blamed foreign countries for pharmaceutical “global freeloading” and outlined several policy options to end it. Options included most-favored nation pricing and international reference pricing — two proposals raised during Trump’s first term.

The paper argued that this pharmaceutical freeloading occurs when other wealthy countries implement price controls that allow them to “have their cake and eat it too — to get lifesaving drugs for their citizens without paying the necessary costs to develop them.” It deprives drug manufacturers of billions of dollars and comes at the cost of new treatments for patients in the U.S. and abroad, the paper said.

List prices of brand drugs in the U.S. were on average, more than four times higher than in other wealthy countries in 2022, according to a study conducted by RAND Health Care and sponsored by HHS. (The study was published during Joe Biden’s presidency.)

The researchers analyzed data for all prescription drugs available in the U.S. and 33 Organization for Economic Co-operation and Development (OECD) countries. They found that while most new drugs were available first in the U.S. before being launched in other countries, the U.S. spends a higher, and growing, share of its total drug spending on new drugs compared to other countries.

In 2022, U.S. prices across all categories of drugs — both brands and generics — were nearly three times as high as prices in other countries. Meanwhile, U.S. prices for nonbranded generics were lower than prices in comparison countries. Nonbranded generics made up 90% of U.S. prescription volume, compared with 41% in the other countries.

During Trump’s first term, the president campaigned on cracking down on “global freeloading.” In 2018, CMS unveiled International Pricing Index Model for Medicare Part B drugs, linking Part B payments to international prices. And in 2020, CMS proposed to identify 50 Part B single-source drugs and biologics and tie the reimbursement price to an average paid by other countries overseas — known as the Most Favored Nation Model. Neither of the proposals was implemented.

As part of the Inflation Reduction Act of 2022, the Biden administration initiated a drug-pricing reform in which Medicare would negotiate prices directly with pharmaceutical companies. But even those new Medicare-negotiated drug prices were 2.8 times the average of drug prices in 11 OECD countries, according to a KFF analysis.

For each of the first 10 Part D drugs selected for negotiation, the new maximum fair prices (MFPs) were lower than the medicines’ list prices and prices negotiated by the Dept. of Veterans Affairs. Yet in comparable countries, all but one drug (Stelara in Germany) had lower prices than the Medicare-negotiated MFPs. For nearly half of the 10 drugs, Medicare’s negotiated prices were more than three times the prices in other nations.

This infographic was reprinted from AIS Health’s biweekly publication Radar on Drug Benefits.