Why Prescription Drug Prices Are So High in the United States

For millions of Americans, filling a prescription isn’t just a routine errand-it’s a financial gamble. A single month’s supply of insulin can cost $300. A life-saving cancer drug might run over $10,000. And for some rare disease treatments, the annual bill hits six figures. Meanwhile, people in Canada, Germany, or the UK pay a fraction of that for the exact same pill, made in the same factory. Why does this happen? Why are prescription drug prices in the United States so much higher than everywhere else?

The System Was Built to Protect Profits, Not Patients

The U.S. is the only developed country where drugmakers can set prices without government oversight. In most other nations, the government negotiates directly with pharmaceutical companies to keep costs down. In the U.S., that power was taken away in 2003 when Congress passed the Medicare Modernization Act. The law explicitly banned Medicare from negotiating drug prices for its 65 million beneficiaries. At the time, the pharmaceutical industry lobbied hard for this exemption, arguing they needed high prices to fund innovation. But 20 years later, the data tells a different story.

While the U.S. makes up less than 5% of the world’s population, it accounts for nearly 75% of global pharmaceutical profits. That’s not because Americans use more drugs-it’s because they pay far more. According to the White House, Americans pay more than three times what other OECD countries pay for the same brand-name medications. Even after discounts, the gap remains enormous. Take Galzin, a drug used to treat Wilson’s disease: it costs $88,800 a year in the U.S., but only $1,400 in the U.K. That’s not innovation-it’s exploitation.

Who’s Really in Charge? The Hidden Middlemen

You might think your pharmacy or doctor sets the price. But the real power lies with Pharmacy Benefit Managers, or PBMs. These companies were originally created to help insurers get discounts on drugs. Today, they’re massive, vertically integrated corporations that control everything from which drugs get covered to how much pharmacies get paid. And their business model is broken.

PBMs make money by negotiating rebates with drugmakers-but those rebates are tied to the drug’s list price. The higher the list price, the bigger the rebate. That means PBMs have a financial incentive to push expensive drugs, even if cheaper alternatives exist. They don’t pass those savings on to you. Instead, they pocket the difference. A 2025 analysis by Morgan Lewis found that PBMs now control over 80% of the prescription drug market. Their influence has turned a simple transaction into a maze of hidden fees and inflated prices.

Specialty Drugs Are Breaking the Bank

The biggest driver of rising drug costs isn’t aspirin or antibiotics-it’s specialty drugs. These are high-tech treatments for cancer, diabetes, rare diseases, and obesity. Drugs like Ozempic and Wegovy, once considered niche, are now prescribed to millions. Their list prices have skyrocketed. In 2024, net drug prices in the U.S. jumped 11.4%, the fastest growth in years, led by these new medications.

These drugs cost hundreds of thousands to develop. But once they’re approved, the marginal cost to produce each pill is tiny. Yet manufacturers charge as if every dose must cover the entire R&D bill-plus profit. In 2025, the White House announced deals to lower the price of Ozempic from $1,000 to $350 a month and Wegovy from $1,350 to $350. That’s a win-but it’s also proof that those prices were never based on cost. They were based on what the market would bear.

Government Efforts Are Too Little, Too Late

The Inflation Reduction Act of 2022 was supposed to change things. For the first time, Medicare could negotiate prices for a small number of drugs. In 2026, ten drugs will be eligible. The savings? Around $1.5 billion a year. Sounds good-until you realize that Americans spend over $600 billion on prescription drugs annually. That’s less than 0.3% of total spending.

Worse, the 2025 budget reconciliation bill weakened the law. According to KFF, Medicare spending on these drugs will now be at least $5 billion higher than expected. Meanwhile, the rebate system meant to punish price hikes faster than inflation has only saved money on 64 drugs so far. And while the White House claims progress, Senator Bernie Sanders’ 2025 report documented 688 drugs that got more expensive since 2017-even as presidents promised to fix the system.

The Human Cost Is Real

Behind every price tag is a person. One in four Americans skips doses or cuts pills in half to save money. Over 1.5 million Medicare beneficiaries face out-of-pocket costs so high they risk bankruptcy. The new $2,000 annual cap on Medicare drug spending is life-changing-for those who qualify. But it doesn’t help the 18.5 million people who might be hit harder under Project 2025’s proposed changes.

People are rationing insulin. They’re choosing between their medication and rent. They’re calling their doctors begging for samples. This isn’t a policy debate-it’s a public health crisis. And it’s not getting better. IQVIA projects prescription drug spending will rise 9-11% in 2025. Hospitals and clinics are already feeling the strain. Patients are paying the price.

Why Other Countries Don’t Have This Problem

Germany, Canada, France, and the U.K. all use some version of price negotiation or reference pricing. They look at what other countries pay and set their own prices accordingly. If a drug costs $500 in Germany, they won’t let it cost $3,000 at home. The U.S. could do the same. The White House even tried with a 2025 executive order to align U.S. prices with those in other wealthy nations. But enforcement is weak, and the industry fights back with lawsuits and lobbying.

There’s no technical reason the U.S. can’t do this. No scientific barrier. It’s a political choice. And that choice is costing lives.

What’s Next?

The system won’t fix itself. Drugmakers won’t lower prices unless forced to. PBMs won’t change their model unless regulators step in. And Medicare won’t negotiate effectively unless Congress removes the ban.

Real change means:

• Allowing Medicare to negotiate prices for all drugs, not just ten
• Regulating PBMs to stop them from inflating list prices for profit
• Adopting international reference pricing so U.S. prices match those in other developed nations
• Ending patent abuse that keeps generics off the market for years
• Requiring full transparency in pricing at every level-from manufacturer to pharmacy

Some of these steps are already being proposed. The Prescription Drug Price Relief Act, introduced in May 2025, would cap U.S. drug prices at the average of what other major countries pay. It’s simple. It’s fair. And it’s been ignored.

For now, Americans keep paying more-while the rest of the world pays less for the same medicine. That’s not a market failure. It’s a design flaw. And until we fix the system, not the symptoms, nothing will change.