Plain English with Derek Thompson Why Do Americans Pay So Much for Drugs?
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May 13, 2025 
Jason Abaluck, a health economist at Yale, dives into America's perplexing drug pricing crisis. He reveals that while the U.S. makes up just 4% of the global population, it accounts for nearly 50% of pharmaceutical spending. The discussion centers on why Americans pay exorbitantly for new drugs and the irony of cheaper prices for older ones. Abaluck also explores the delicate balance between innovation funding and affordability, proposing creative solutions to ensure life-saving treatments are accessible without stifling research.
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Why New Drugs Cost More in US
- Americans pay much more for new branded drugs due to fragmented private insurance negotiations.
- Governments in Europe centrally negotiate lower prices, giving them stronger bargaining power.
US Drug Market's Two Extremes
- Americans pay three to four times more for new drugs but a third less for generics than Europeans.
- This contrast highlights US market's lack of price ceilings and intense generic competition.
How Americans Feel Drug Costs
- High drug prices are mostly felt indirectly through insurance premiums and taxes.
- Consumers often don't pay full drug prices out of pocket but bear costs via premiums or government taxation.
