U.S. prescription drug prices have long held the top spot in rankings among industrialized nations. In 2002, with similar findings in 2008, Canada’s Patented Medicine Prices Review Board estimated a 67% premium for drugs sold in the U.S. compared to prices in other countries (Patented Medicine Prices Review Board, 2002 Annual Report, p. 23.), and President Obama cited the 2002 findings during his campaign for health care reform.
But recent research from Panos Kanavos and Sotiri Vandoros of the London School of Economics now says that U.S. prices are “comparable” with those of other countries. Why the change? The answer relates to fundamental concerns with all empirical research – the nature of the underlying data and the scope of interpretation.
It turns out, comparing two prices isn’t enough. We need to compare two identical prices – meaning molecularly-identical drugs at the same point in the supply chain with the same mix of customers. According to Kanavos and Vandoros (and other researchers), inconsistent price measures may explain the perception that U.S. prescription drug prices exceed prices in other industrialized nations. That’s not to say that an alternative sample of drugs won’t again find large price differences, but hopefully the researchers will be careful to understand the intricacies of the prescription drug market, explicitly define their measure of price, and interpret the results within the scope of what is allowed by the data.