Lower prescription drug prices in other countries, including Canada, generally mirror lower income levels in those nations, according to an analysis in Health Affairs that was financed by the drug industry.
The study, released Wednesday, concedes that setting prices at income levels is usually "inappropriate" but argues that since pharmaceuticals must finance the huge costs of research and development, markups based on ability to pay are a way to "maximize social welfare."
"The U.S. has higher prices, but it also has higher income," concludes the lead author of the study, Patricia Danzon, a health economist at the University of Pennsylvania's Wharton School.
The study, financed by Merck & Co., a drugmaker based in White House Station, N.J., compared U.S drug prices with those in Canada, Chile, France, Germany, Italy, Japan, Mexico and the United Kingdom.
It finds that average prices were highest in Japan, while prices in other countries were between 6% and 33% less than those in the United States, with Canada's prices the lowest.
In Japan, France, Germany, Italy, Britain, Canada and the United States, the price differences generally reflected variations in per capita income, the study finds.
Factoring in income levels virtually erased price differences with Japan and lowered the difference between Canadian and U.S. prices from 33% to 14%, the study finds.
On the other hand, prices relative to income in Chile and Mexico came out higher than in the United States.