Pharmaceutical Prices across Different Countries: A Real-World Comparison

Why does the same pill cost $500 in the U.S. but $50 in Japan? It’s not because one country is richer or the drug is better made. It’s because of how governments decide what drugs cost - and who gets to negotiate.

The U.S. Isn’t Just Expensive - It’s a Different System

If you’ve ever stared at a pharmacy receipt for a brand-name drug like Ozempic or Eliquis, you’ve felt the shock. The U.S. pays more for these medicines than almost any other country. According to the U.S. Department of Health and Human Services, brand-name drug prices in the U.S. are 422% higher than in other developed nations. But here’s the twist: that number only tells half the story.

The U.S. also has the cheapest generic drugs in the world. About 90% of prescriptions filled here are for generics, and they cost, on average, 67% less than in other countries. That’s because the U.S. market is flooded with competing manufacturers who drive prices down through competition. So while your insulin might cost $300, your amoxicillin might be $4 at Walmart.

This creates a dual system: sky-high prices for new branded drugs, and rock-bottom prices for old ones. Other countries don’t have this split. They use price controls to keep everything - new and old - affordable.

Who Pays Less? Japan, France, and Australia

Japan and France consistently rank as the cheapest countries for brand-name drugs. For example, Jardiance - a diabetes medication - costs about $52 in Japan. In the U.S., Medicare just negotiated a price of $204. That’s nearly four times higher. Australia has the lowest price for Eliquis and Xarelto. Germany and Canada are often second-highest after the U.S., but still far below American list prices.

Why? These countries use something called external reference pricing. They look at what other countries pay and set their own prices below the average. Japan’s government negotiates directly with drugmakers. France uses a similar system, and if a company won’t agree to the price, the drug doesn’t get covered by public insurance. No sales, no profit.

In contrast, the U.S. didn’t have a federal price negotiation system until 2022. The Inflation Reduction Act let Medicare negotiate prices for 10 high-cost drugs starting in 2025. The first 10 drugs include Ozempic, Jardiance, Enbrel, and Eliquis. Even after negotiation, Medicare’s prices are still 2.8 times higher than the average in 11 other OECD countries.

How Do We Even Measure This?

Not all price comparisons are created equal. Some studies look at list prices - what the drugmaker charges before discounts. Others look at net prices - what’s actually paid after rebates and discounts. That’s where the confusion starts.

For example, a 2024 University of Chicago analysis found that when you include rebates and generics, U.S. net prices are actually 18% lower than in Canada, Germany, and the UK. But that’s because generics make up most of the volume. If you look only at the 7% of prescriptions that are for brand-name drugs, U.S. prices explode.

Researchers use different tools to compare prices fairly. The Laspeyres index, used in a 2024 JAMA study of 549 essential medicines across 72 countries, showed huge gaps. Lebanon’s drug prices were just 18% of Germany’s. Argentina’s were nearly six times higher. The U.S. ranked near the top in the Americas region, with prices 65% higher than the global median.

It’s not just about money - it’s about access. In some countries, especially in the Eastern Mediterranean, essential medicines are often out of stock. In the U.S., the drugs are usually available, but many people can’t afford them without insurance.

Why Do Drug Prices Differ So Much?

It’s not about production costs. A pill made in the U.S. costs about the same as one made in India. The difference comes from policy.

Europe and Japan: Governments set prices. They use reference pricing - comparing to what other countries pay - and force companies to lower prices or lose market access. They also cap profits.

The U.S.: Until recently, drugmakers set their own prices. Insurance companies and pharmacy benefit managers (PBMs) negotiated discounts behind closed doors. The result? List prices went up to make room for rebates, but patients still paid the full sticker price unless they had good insurance.

Canada: The Patented Medicine Prices Review Board sets maximum prices based on what’s paid in other countries. It’s not perfect, but it keeps prices from skyrocketing.

China and India use aggressive price negotiations and domestic manufacturing to bring down costs. China’s national drug negotiations have cut prices for some cancer drugs by over 80%.

The Trade-Off: Innovation vs. Affordability

Drug companies argue that high U.S. prices fund innovation. They say if prices were lower everywhere, they wouldn’t develop new drugs. But data doesn’t fully back that up.

The U.S. accounts for about 40% of global pharmaceutical revenue but only 20% of global drug development. Countries like Germany and Japan have strong innovation ecosystems too - without paying three times more.

Experts like Professor Tomas Philipson from the University of Chicago argue the U.S. model is efficient: high prices for new drugs pay for R&D, while low generic prices keep everyday meds affordable. But critics say the system rewards price hikes over real innovation. Many new drugs are slight variations of old ones - “me-too” drugs - priced at premium levels.

Meanwhile, patients are caught in the middle. One in four Americans skip doses or cut pills in half because they can’t afford them. That’s not innovation - that’s a failure of access.

What’s Changing in 2025?

The Inflation Reduction Act is the biggest shift in U.S. drug pricing in decades. By February 1, 2025, Medicare will announce the next 10 drugs for negotiation. That list will likely include more diabetes, heart, and autoimmune drugs.

So far, the negotiated prices are still higher than other countries - but they’re a start. In 2026, the number of negotiable drugs will jump to 15, then 20 by 2029. That could bring down costs for millions.

Drugmakers are fighting back. They’ve filed lawsuits, and some have raised prices before negotiations begin. But public pressure is growing. A 2024 survey showed 72% of Americans support Medicare negotiating drug prices - even if it means slower new drug launches.

What This Means for You

If you’re in the U.S. and pay out-of-pocket for brand-name drugs, you’re paying more than almost anyone else. But if you use generics, you’re paying less.

Here’s what you can do:

• Ask if a generic version is available - it’s often the same drug, just cheaper.
• Use pharmacy discount programs like GoodRx - they can cut prices by 50% or more.
• If you’re on Medicare, check if your drug is on the negotiation list. Prices could drop in 2025 or 2026.
• Consider mail-order pharmacies - they often have lower prices for long-term meds.

Don’t assume your price is normal. It’s not. You’re paying what the system allows - not what the drug costs to make.

Global Patterns in a Nutshell

Here’s how prices stack up across key countries for brand-name drugs (lowest to highest):

Notice: The U.S. isn’t just high - it’s an outlier. No other country comes close.