Are drug prices higher or lower in the U.S.

The high price of prescription drugs in the U.S. has received a lot of press in recent years.  However, are drug prices really higher in the U.S. than other countries?  Tomas Philipson makes an interesting point regarding U.S. drug prices:

It is well known that free-market prices of branded drugs still on patent are higher in the US than in other rich countries with price-controlled prices. However, it is also true and often not highlighted that prices for generic drugs tend to be lower in the US than other countries. Prices of generics in the US tend to be lower due to more free-market competition and the more streamlined process at the FDA. Given that about 88 percent of prescriptions in the US in 2014 were for generics, the value of a more competitive generics market in the US deserves more praise.

This comment was made in response to a recent FDA policy change to allow easier market access for generic drugs.  The value of low priced generic drugs in the U.S. should not be underestimated.

Disclosure: Tomas Philipson is a Professor at the University of Chicago and my colleague at Precision Health Economics