46brooklyn releases dashboard comparing drug prices in U.S. and Australia; identifies $38 billion in annual U.S. overspending

Today, 46brooklyn is excited to release the product of an intensive effort to connect and analyze disparate drug pricing databases in Australia and the United States.

Currently, the idea of international reference pricing is “all the rage,” promoted across the aisle as a direct way to lower U.S. drug prices. When we decided to delve into Australian drug prices, quantifying these benefits was not our original intention. To be honest, we were just stoked that international prices – from any country – were available in a format that we could work with (thank you Australia!). Many frustrating months later (trust us, this was some hard yakka; these databases don’t want to talk to each other), we were able to construct the new 46brooklyn Drug Pricing Down Under Dashboard shown below, which allows you to navigate U.S. and Australia drug prices for 1,258 drugs (both brand and generic).

Click on the image below to navigate to the interactive dashboard

Figure 1
Source: pbs.gov.au, Data.Medicaid.gov, Elsevier Gold Standard Drug Database, 46brooklyn Research

As you flip through the charts, we know the thought that will come to mind – the cost differences are simply too large to believe.

We know the feeling, as we felt it too … which is why this work took so long as we iterated again and again to ensure the matching process was done accurately. It’s also why we’e dedicated an entire section of our latest report to walking through an example of how to retrieve this data yourself. But we have reached the point of no return now, where we must turn it over to you to scrutinize. Because here is the point – if the cost differences are even in the same ZIP code as we found, the mess that is U.S drug pricing is way worse than we thought (and we already had really low expectations).

While the tool is helpful for drilling down, we knew we would inevitably be asked to size the “savings” if we repriced U.S. prescription volume using Australia’s negotiated prices. So we did that for the top drugs in both Medicare Part B and Part D. We found $10 billion in savings a year (68% discount) on just the top 10 drugs in Part B (which comprise 44% of the program). We also found $28 billion in savings a year (66% discount) on the top 50 drugs in Part D (which comprise 42% of the program), and that was after adjusting aggregate Part D spending for aggregate rebates. This totals $38 billion in savings a year on just 60 drugs – a completely unbelievable number, yet derived from Australian prices that quietly live in the public domain.

Clearly there are many details that we need to review, all of which we try to cover in our full research report. We encourage you to take a read, as we also spend ample time discussing the realities of achieving such savings. There are fundamental philosophical differences between Australia and the U.S. when it comes to drug coverage. Australia is has created a department that uses facts and data to choose which drugs add most value to its populace. In other words, they are willing to say yes to some drugs, and say no to others. The U.S. has no such department, instead predominantly operating what’s called an “open formulary” marketplace, where all drugs, no matter how overpriced and useless can wriggle their way in and steal market share from drugs that we better need. The U.S. then outsources policing of its formularies to pharmacy benefit managers (PBMs), who as we have written at length, have warped (and sometimes mismatched) economic incentives in performing this function.

Long story short, Australia is making trade-offs between two key variables: choice and cost. The U.S. doesn’t want to budge on choice, but wants the cost of those that do. Stated differently, the U.S. wants to buy a general admission ticket, but keep its VIP status.

Running the risk of stating the obvious, there could clear problems with this approach – several of which we detail in this report. Chief among these is the incentive this new system would send to drugmakers to shift development dollars from potentially helpful new molecular entities (NMEs) to low value-add line extensions. Such drugs are not only cheaper to develop, but owing to their relative uselessness, likely won’t have a comparable international price benchmark (assuming other countries continue to screen poor cost/benefit drugs out).

All told, we have a big problem – way bigger than we imagined it could be. If we should choose to go down this brute force approach to fixing it, we must do so with eyes open, knowing what problems could arise. Hopefully our analysis and discussion will assist here. So fasten your seat belts, return your tray tables to their full upright and locked position, and join us on our journey into drug prices Down Under.