Why Prescription Drug Prices Are So High in the United States

Americans pay three times more for the same prescription drugs than people in Canada, Germany, or the UK. It doesn’t matter if the pill was made in the same factory, using the same ingredients, or shipped from the same warehouse. You still pay far more. Why?

The System Was Built to Let Drug Companies Set Any Price

In most countries, the government steps in to negotiate drug prices. In the U.S., that’s not allowed - at least not for most drugs. The Medicare Modernization Act of 2003 made it illegal for Medicare to negotiate prices directly with pharmaceutical companies. That rule stayed in place for over 20 years. It meant that when a new drug came out - say, a $100,000-a-year treatment for a rare disease - Medicare had no power to say, "No, that’s too much. We’ll pay $20,000." That’s not the case anywhere else in the developed world. Countries like the UK, France, and Australia use reference pricing. They look at what other nations pay and set their own prices accordingly. The U.S. doesn’t. Instead, drugmakers set their own prices, and the market - fragmented and confusing - tries to catch up.

Who’s Really in Charge? The Middlemen

You might think the price you pay at the pharmacy is set by the drug company. It’s not. The list price you see is just the starting point. Behind the scenes, Pharmacy Benefit Managers (PBMs) - giant middlemen that handle drug benefits for insurers - negotiate rebates with manufacturers. But here’s the twist: PBMs often get paid more when the list price is higher. Why? Because their rebates are a percentage of that list price.

So if a drug costs $1,000 a month, the PBM might get a 20% rebate - $200. If the company hikes the price to $1,500, the PBM gets $300. The patient still pays the same copay, maybe $30. The insurer pays more. The PBM pockets more. The drugmaker gets more. And the patient? They’re stuck with the same out-of-pocket cost, even as the real cost of the drug soars.

This isn’t a bug. It’s the design. PBMs were supposed to save money. Instead, they’ve become profit centers that benefit from higher prices. A 2025 analysis by Morgan Lewis found that PBMs now control nearly 80% of the U.S. pharmacy market. That kind of power means they can demand higher rebates - and manufacturers respond by raising list prices to keep up.

Specialty Drugs Are Breaking the Bank

Not all drugs are created equal. The most expensive ones aren’t your daily blood pressure pill. They’re the new treatments for diabetes, obesity, cancer, and rare diseases. These are called specialty drugs. They’re complex to make, often biologics, and sometimes the only option for patients.

Take Ozempic or Wegovy - drugs that help manage weight and blood sugar. In 2025, the list price was over $1,000 a month. After a White House deal, it dropped to $350. That sounds like progress. But here’s the catch: that $350 is still 25 times what it costs in Germany. And that’s only for the 10 drugs Medicare is now allowed to negotiate. There are thousands more.

IQVIA reported in 2025 that specialty drugs drove 90% of the 11.4% increase in U.S. drug spending. These drugs aren’t just expensive - they’re growing fast. More patients are using them. More insurers are covering them. And manufacturers keep raising prices because they can.

Why the U.S. Pays 75% of Global Drug Profits

The U.S. has less than 5% of the world’s population. Yet, according to the White House, Americans pay for 75% of the global profits made by pharmaceutical companies. That’s not because we use more drugs. It’s because we pay more for them.

A single pill for Wilson’s disease, called Galzin, costs $88,800 a year in the U.S. In the UK, it’s $1,400. In Germany, $2,800. That’s not inflation. That’s not research costs. That’s pricing power. The same pill. Same factory. Same chemistry. Different price tag.

Drugmakers argue they need high prices to fund research. But the data doesn’t support that as the main reason. In 2024, the top 10 U.S. drug companies spent $68 billion on marketing and advertising - more than they spent on research and development. They spent $100 billion on stock buybacks and dividends - money that went to shareholders, not labs.

The Inflation Reduction Act - Real Change or Just a Band-Aid?

In 2022, Congress passed the Inflation Reduction Act. It was the first real attempt in decades to rein in drug prices. Starting in 2026, Medicare can negotiate prices for 10 drugs. In 2025, it began requiring drugmakers to pay rebates if they raise prices faster than inflation.

That’s led to savings. For 64 drugs, Medicare beneficiaries paid less in early 2025. The annual out-of-pocket cap for Medicare Part D dropped to $2,000 - a life-changing shift for people who were rationing insulin or skipping doses to save money.

But here’s the problem: the 2025 budget bill weakened the program. It delayed negotiations. It limited the number of drugs that can be negotiated. And it didn’t touch the private insurance market. So while Medicare patients got some relief, millions of others - those with private plans or no insurance - saw no change.

And the drug companies? They didn’t stop raising prices. Senator Bernie Sanders’ September 2025 report found that 688 drugs went up in price after President Trump promised to lower costs. Even after the White House announced deals on Ozempic and Wegovy, 87 other drugs jumped in price by an average of 8%.

What’s Next? The Fight Over Project 2025

The real battle is coming. Project 2025 - a conservative policy blueprint - proposes dismantling the Inflation Reduction Act’s drug pricing rules. It would eliminate Medicare negotiation entirely. It would roll back inflation rebates. And it would let PBMs keep their current rebate structure.

The Center for American Progress warns that if Project 2025 passes, as many as 18.5 million seniors and people with disabilities could face higher drug costs. That’s not speculation. It’s based on the math of how the current system works - and how it would change.

Meanwhile, the White House claims progress. They point to the five drug deals signed since September 2025. But those deals cover a tiny fraction of the market. And they’re voluntary. Drugmakers could walk away tomorrow.

The Bottom Line: It’s Not About Cost - It’s About Control

The U.S. doesn’t have high drug prices because it’s inefficient. It has them because it’s designed this way. The system gives drugmakers total control over pricing. It lets middlemen profit from high list prices. It blocks government from negotiating. And it lets patients pay the price.

Other countries don’t have this problem because they decided, decades ago, that healthcare shouldn’t be a profit game. They set limits. They negotiated. They protected people.

In the U.S., we’re still arguing about whether to fix the system - or just make it slightly less painful.