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Americans Pay About Same Share of Income as Others for Drugs

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WASHINGTON _ Americans pay roughly the same share of their income for prescription drugs as citizens of other industrialized countries, according to a study released Tuesday.

Americans do pay high retail prices for newer medications that are replacing older, lower-priced drugs, said Patricia M. Danzon, a professor at the Wharton School at the University of Pennsylvania. But they also use a higher percentage of lower-cost generic drugs than many people living abroad, Danzon said at a news conference.

Her study, being published in Wednesday's edition of the peer-reviewed journal Health Affairs, comes as Congress considers relaxing the ban on importing drugs from foreign countries _ primarily Canada _ as part of a Medicare prescription drug benefit.

Danzon studied the comparative costs of pharmaceuticals in the United States and eight other countries. She looked at the costs charged by drug manufacturers to wholesalers and did not include mark-ups or discounts passed on by wholesalers and retail pharmacists.

When the manufacturers' prices are related to per-capita income _ $33,038 in the United States in 1999 _ "the U.S. prices are not out of line relative to these other countries," Danzon said. "The U.S. has higher drug prices, but we also have higher income."

Although the study was financed by New Jersey-based Merck & Co., one of the world's largest drug manufacturers, Danzon said her analysis was independent and she was free to publish whatever results she reached. Danzon also previously worked as a consultant to the Pharmaceutical Research and Manufacturers of America (PhRMA), the trade organization for the nation's drug makers.

The study examined Britain, Canada, Chile, France, Germany, Italy, Japan and Mexico. Drug prices in those countries ranged from 33 percent less than the United States in Canada to 27 percent higher in Japan, the only country where prices were higher than the United States.

However, when compared to the income level in each country, only the French paid relatively less than the Americans. The Canadian ratio of prices to income was 104 percent of that in the United States, while it was 118 percent in Japan, 125 percent in Britain and 141 percent in Italy.

In Chile and Mexico, where average drug prices are about 80 percent what they are in the United States but incomes are much lower, citizens paid an income-adjusted price more than five times higher than in the United States.

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Trends in exchange rates also accounted for much of the difference in drug prices between the United States and other countries, Danzon said. For example, the low value of the Canadian currency accounts for 19 percentage points of the 33 percent difference between U.S. and Canadian drug prices, she said.

The study found that newer brand-name drugs, which cost more, are more readily available and used in the United States than in other countries. However, the study also found that when generic drugs become available, they generally are used to a greater extent in the United States than elsewhere.

Generic drug prices are less in the United States than in all the other studied countries except Canada, where prices were 6 percent less. Generic drug prices in Mexico were 30 percent higher than the United States.

One reason for the lower U.S. generic drug prices is that American pharmacists have a greater incentive to replace brand name drugs with generic drugs, Danzon said.

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