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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insights INSIGHT
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.
insights INSIGHT
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.
insights INSIGHT
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.
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On Monday, President Donald Trump signed an executive order telling drugmakers to slash the prices of their medicines. Once again, the president showed an amazing nose for interesting questions. Statistically, the U.S. accounts for 4 percent of the world’s population but nearly 50 percent of global pharmaceutical spending. Americans spend three to five times more on new branded drugs than people in Europe.
Why? And what's the matter with fixing this problem by just telling pharmaceutical companies that their prices are too damn high?
Today’s guest is Jason Abaluck, a health economist at Yale University. We talk about why Americans pay so much for new drugs but, ironically, pay so little for old drugs. We unpack trade-offs between low prices and innovation. And finally, we consider several ways we can have our cake and eat it too: more miracle drugs and more affordability. Because, after all, what is this whole conversation about besides the obvious: How do we design a world in which imperfect people working at imperfect companies nonetheless collaborate to build therapies that save and extend our lives with products we can actually afford?
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Plain English with Derek Thompson 
