Foreign Governments ‘Free-Riding’ on U.S. Drug Research, White House Says

The U.S. is bearing the brunt of pharmaceutical research costs because of “free-riding” by foreign countries in the past 15 years, the White House Council of Economic Advisers (CEA) claimed in a report.

The CEA noted that foreign governments have implemented price controls and “nonmarket-based pricing practices” that keep drug prices below their true value. For example, it found that European prices for top-selling drugs were 32 percent of what U.S. consumers were paying in 2017, down from 51 percent in 2003.

Most developed countries do not adequately contribute to funding medical innovation, leaving the U.S. to bear a “highly disproportionate part of that burden” as Americans pay higher prices for drugs and help provide “the incentives needed to entice investors to develop new therapies,” the report said.

The CEA estimated that revenues for non-U.S. drugmakers would have been $194 billion higher in 2017 if foreign drug prices reflected the countries’ Gross Domestic Product. For example, Canada paid 35 percent of U.S. prices even though the country’s GDP per capita was 78 percent that of the U.S.