NCPA Study Debunks 10 Myths Of Prescription Drug Costs

Dallas (Oct. 25, 1999) - Why can't American's buy prescription drugs at the same price as people in Mexico? Are drug prices inflated? Should the government control the price of drugs?

A new study released by the National Center for Policy Analysis (NCPA) answers these questions and counters what it calls the top 10 myths of prescription drug costs.

"If people think that we are going to reduce health care costs with price controls, they're wrong," said Robert Goldberg, the study's author. "Price controls have a consistent history: they don't work."

According to the study, many complaints about drug prices are based on a misunderstanding of how the prescription drugs market actually works. Among the myths the study rebuts:

  • Myth: Americans pay higher prices for drugs than citizens of other developed countries including Canada and most of Europe.
  • Reality: Although the prices of some drugs are lower in Canada (inducing near border residents to buy their drugs there), on the average drug prices in Canada, Germany, Switzerland and Sweden are higher than prices in the United States.
  • Myth: Americans could reduce their drug costs if they paid the same prices as people in such less-developed countries as Mexico.
  • Reality: Prices for the same drugs do differ in different countries, but Americans cannot get the newest drugs at Mexican prices. The research and development required to develop a drug can cost millions of dollars and take many years, while the cost of actually manufacturing a drug can be small. Because manufacturers have discretion about pricing, the price may be close to production costs in poorer countries, which could not otherwise afford the drug, and higher in wealthier countries - more accurately reflecting the drug's value to patients. If patients in every country paid the lower price, there would be no money for research and development and no new drugs.
  • Myth: Drug costs are rising because of price increases.
  • Reality: The average price of drugs has increased modestly - only 3.2 percent in 1998, for example. Overall spending on drugs is increasing primarily due to non-price factors - people are buying more drugs and more newer, expensive drugs.