Prescription drug prices in the United States are among the highest in the world, both in total spending and per capita costs. In 2023, the U.S. spent over $600 billion on prescription medications—more than any other country on a per-person basis.
Despite this high level of spending, affordability remains a major issue: nearly one in four Americans report difficulty affording their medications, and about 30% say they have skipped or rationed doses due to cost.IQVIA Institute. (2024). The Global Use of Medicines 2024: Outlook to 2028. https://www.iqvia.com/insights/the-iqvia-institute/reports-and-publications/reports/the-global-use-of-medicines-2024-outlook-to-2028Kaiser Family Foundation (KFF). (2023). Public Opinion on Prescription Drugs and Their Prices. https://www.kff.org/health-costs/poll-finding/public-opinion-on-prescription-drugs-and-their-prices/ These outcomes reflect complex factors including patent protections, lack of price negotiation for public insurance programs, limited generic competition, and opaque pricing practices throughout the supply chain.
Unlike many peer nations, the U.S. does not impose direct price controls or rely on centralized bargaining for most drugs. Instead, prices are set through negotiations between drug manufacturers and private insurers or pharmacy benefit managers (PBMs), often resulting in significant price variation and limited transparency.Duggan, M., & Scott Morton, F. M. (2010). The Effect of Medicare Part D on Pharmaceutical Prices and Utilization. American Economic Review, 100(1), 590–607. https://www.aeaweb.org/articles?id=10.1257/aer.100.1.590
Critics argue that high drug prices are not only an economic burden but also a public health threat—particularly for patients with chronic conditions like diabetes or cancer. In response, recent policy developments such as the Inflation Reduction Act of 2022 have introduced limited federal drug price negotiation, and other proposals like external reference pricing and patent reform continue to be debated.Congressional Budget Office. (2022). Estimated Budgetary Effects of the Inflation Reduction Act of 2022. https://www.cbo.gov/publication/58366Sood, N., Shih, T., Van Nuys, K., & Goldman, D. (2017). Prescription Drug Pricing. Health Affairs Policy Brief. https://www.healthaffairs.org/do/10.1377/hpb20171409.000178/full/healthpolicybrief_178.pdf
History Pharmaceutical drugs are the only major health care service in which the producer is able to set prices with little constraint, according to Peter Bach from the Health Outcomes Research Group, Memorial Sloan Kettering Cancer Center, and Steven Pearson from the Institute for Clinical and Economic Review, Boston. , prices of brand name drugs were significantly higher in the United States than in Canada, India, the UK and other countries, nearly all of which have price controls, while prices for generic drugs tended to be higher in Canada.
In 2003, a Republican-majority Congress created Medicare Part D with the Medicare Prescription Drug, Improvement, and Modernization Act, which prevented Medicare, the country's largest single-payer health care system, from negotiating drug prices. In effect, drug manufacturers in the US were allowed to set their own prices resulting in the unregulated pricing variation for prescription drugs. However, the government does employ drug pricing strategies for other smaller government health programs like the Veterans Health Administration, the Department of Defense, the 340B Drug Pricing Program (1992), and Medicaid.
In 2005, the Government Accountability Office (GAO) examined the change in US drug retail prices from January 2000 through December 2004 and found the average usual and customary (U&C) prices for a 30-day supply of 96 drugs frequently used by people enrolled in BlueCross BlueShield Federal Employee Programs had increased 24.5%. The average U&C prices for brand prescription drugs increased three times as much as the average for generic drug.US Government Accountability Office (GAO) Prescription Drugs: Price Trends for Frequently Used Brand and Generic Drugs from 2000 through 2004. Report to Congressional Requesters. GAO-05-779. August 15, 2005.
In 2007, the AARP published a series of studies showing that prescription drug prices have been rising significantly faster than general inflation. The American Enterprise Institute, a conservative think tank, criticized the methodology as overstating drug price inflation.Joseph Antos and Thomas F. Wildsmith, "Inflated Claims about Drug Prices" , American Enterprise Institute, July 8, 2005
In 2010, the Patient Protection and Affordable Care Act, commonly known as Obamacare or the Affordable Care Act, was passed with a goal to increase the number of people who had health insurance and reduce the impact that individual healthcare spending had on households, especially since many Americans had lost their health insurance coverage in the Great Recession. Of its many provisions, two aim to reduce the burden of prescription drugs, both relating to the Medicare Part D coverage gap. Under 2016 Medicare coverage, people paid the deductible until they reached the limit of $3,310. They then entered the coverage gap where they paid about half the total cost for the drug. Once the yearly out-of-pocket expenses reached $4,850, catastrophic coverage phase begins and the person only pays a very small amount for continued medication. In 2010, the first provision, enacted immediately, was a one-year, $250 rebate to those people in the coverage gap to help pay for their medication. The second provision, enacted in January 2011, created a 50% discount on brand-name prescription drugs for seniors within the coverage gap. Subsidies were to be provided until 2020, when the coverage gap was closed as of January 1, 2020.
A December 2015 New York Times editorial opined that "drug prices have been pushed to astronomical heights for no reason other than the desire of drug makers to maximize profits", pointing in particular to strategies by Turing Pharmaceuticals and Valeant Pharmaceuticals for rights to make and sell generic drugs which had administrative exclusivity and then raise the prices dramatically, which were widely condemned in- and outside the pharmaceutical industry. In response, the Department of Health and Human Services and both houses of Congress held a public meeting and hearings respectively to investigate price gouging.US Senate Special Committee on Aging. Collins, McCaskill open Senate investigation into Rx drug pricing, announce intention to hold hearings. November 4, 2015. Accessed 4 January 2016. In April 2017, Maryland attempted to become the first state to grant the state attorney general the authority to sue drug companies for dramatically increasing drug prices. In April 2018, a divided panel of the United States Court of Appeals for the Fourth Circuit found that the Maryland law violated the Dormant Commerce Clause of the United States Constitution.
Examples of affected medications include epinephrine auto-injectors and insulin. Between 2011 and 2016, Mylan was the only vendor on the market and raised the price of EpiPen by almost 400%, and consumers who were forced to pay the cash prices paid reported amounts of $600 or more for a two-pack of EpiPen auto-injectors. Due to public outcry and demand, Mylan and Teva Pharmaceuticals later announced their releases of generics for EpiPen. However, prices are still high for patients who need to pay cash price. The cash price of generic epinephrine still averages around $350 for a two-pack of auto-injectors, and if a patient's insurance does not cover generic epinephrine, they may need their primary physician to submit an appeal letter to their insurance on their behalf.
A February 2019 poll found 86% of Americans in favor of allowing Medicare to negotiate drug prices. A similar survey published in June 2021 found support at 81%, including 67% of Republicans and 97% of Democrats.
Twice, a Democrat-controlled House of Representatives passed a repeal of the negotiation ban, but the bill was killed in a Republican-controlled Senate: the Medicare Prescription Drug Price Negotiation Act of 2007, and the 2019 Elijah Cummings Lower Drug Costs Now Act. The Elijah Cummings Lower Drug Costs Now Act was reintroduced in 2021, with Democrats in control of the House, Senate, and Presidency. President Biden supports a repeal of the negotiation ban, but did not include it in his American Families Plan, leading other Democrats to push for it to be added.
In July 2020, President Donald Trump signed four executive orders designed to reduce drug costs. One order permitted certain medications be imported in from Canada and another order changed the way how discounts for prescription drugs can be negotiated for Medicare patients. The most radical order mandated Medicare to sell certain medications at the same price in foreign countries. However, this order did not go into effect. Health policy experts claimed that they will have little or no impact on easing prescription drug costs for patients as they require implementation from the Department of Health and Human Services and that is very likely that lawsuits would be filed to stop the order.
The Inflation Reduction Act of 2022 allows the United States Department of Health and Human Services to negotiate the prices of select prescription drugs offered through Medicare Part D beginning in 2026 and Medicare Part B beginning in 2028. In August 2024, the prices of the first ten drugs negotiated under the provisions of the act and offered through Medicare Part D were announced.
President Joe Biden signed executive orders mandating a maximum price of life-saving pharmaceutical drugs like insulin and offering subsidies on the price of drugs. These price caps were reversed by Donald Trump in 2025. The prices set by the pharmaceutical industry in the US are still partially regulated by the Inflation Reduction Act.
On May 12, 2025, Trump signed an Executive Order titled "Delivering Most-Favored-Nation Prescription Drug Pricing to American Patients". He stated that the policy would reduce prescription drug prices significantly and end the U.S. "subsidizing the health care of foreign countries." He claimed prices could fall by 30% to 80% or even more. The order directs the Department of Health and Human Services to communicate price targets to pharmaceutical manufacturers and, if necessary, pursue rulemaking to impose MFN pricing across the U.S. healthcare system, including commercial markets, Medicare, and Medicaid. It also instructs the Department of Commerce, along with the U.S. Trade Representative, to take action against other nations that Trump claims are pursuing unfair practices to keep down drug prices. A different EO, which Trump signed in April 2025, directed the Food and Drug Administration to open up a re-importation process to bring drugs from Canada to the United States. This new EO directs the FDA to expand the reimportation program to other nations.
Drug expenditures Spending on pharmaceuticals includes expenses on prescription medicines and over-the-counter products, excluding drugs consumed in hospitals.Pharmaceutical spending (indicator). OECD Data, Health resources. 2013 doi: 10.1787/998febf6-en, accessed November 27, 2015 While often discussed alongside drug prices, pharmaceutical spending is a distinct measure.
In 1960, pharmaceutical spending made up 11.5% of U.S. healthcare costs, dropped to 5.5% by 1980, and then rose back to about 10.4% in 2000. Between 2000 and 2013, it generally ranged from 10% to 12%.
In 2010, prescription drugs accounted for 10% of the $2.6 trillion U.S. healthcare spending, making it the third largest expense after hospital and physician services.