NCPA - National Center for Policy Analysis

U.S. Spending On Prescription Drugs

September 5, 2000

Al Gore says drug prices are too high and drug industry profits too big, and he wants a massive new program to subsidize drugs for seniors. But experience in foreign countries suggests there is downside risk to that approach.

First, it is worth noting total outlays for drugs in the U.S. are not out of line with other countries. Most major countries actually spend more than we do.

  • According to a new study from the Organization for Economic Cooperation and Development, Americans spend 1.2 percent of the gross domestic product (GDP) on drug purchases, including both private and public expenditures.
  • France spends 1.6 percent of GDP on drugs, Japan spends 1.5 percent, Italy spends 1.4 percent and Germany spends 1.3 percent.
  • Canadians spend exactly the same amount we do and only the British spend less at 1.1 percent of GDP.

Looking at drug expenses as a share of total health care outlays reveals a similar picture:

  • In 1996, Americans spent 9.4 percent of total health expenditures on drugs, which is down from 12 percent in 1970.
  • Every other major country spent considerably more, with Japan being the highest at 21.2 percent.
  • The Italians spent 17.9 percent, the French 16.8 percent, the British 16.1 percent, the Canadians 13.6 percent, and the Germans 12.3 percent.

Historically, when other nations have seen drug benefit costs get out of control, they have instituted price controls. Many of the newest cancer drugs are simply unavailable in Europe because of government cost-cutting. While 99.9 percent of Americans with breast cancer are treated with the latest drugs, the figure is only 48 percent for breast cancer patients in the Netherlands and just 25 percent in Britain.

Source: Bruce Bartlett, senior fellow, National Center for Policy Analysis, September 4, 2000.


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