French credit insurer Coface highlighted three reasons why medicines in the United States are more expensive.

Coface indicated that brand-name drugs in the United States cost between three and four times more than in other developed countries, mainly due to the absence of a central negotiator, opaque pricing systems, and profit-focused strategies by the pharmaceutical industry. 

Why are medicines in the United States more expensive

According to a Coface report, best-selling treatments such as Keytruda and Eliquis account for 90% of spending, despite constituting less than 10% of prescriptions, as generics dominate the market. 

To address this disparity, President Donald Trump is taking action. In addition to recent high tariffs on the sector, he reactivated, through an executive order (May 2025), the Most Favored Nation (MFN) drug pricing policy. 

This policy seeks to reduce drug prices by linking them to the lowest prices paid by other rich countries, adjusted for GDP per capita.

However, the Coface report states that the legal future of this policy remains uncertain, as it was blocked by the courts in 2020 and this pressure is leading pharmaceutical companies to reconsider some of their prices. 

However, lower drug prices in the United States could lead to revenue losses for brand-name pharmaceutical companies. 

To counteract these effects, it will be necessary to redistribute the burden globally. This could drive up prices in Europe, a market that has long been protected from high pharmaceutical costs. 

These are the three reasons given by Coface as to why drugs in the United States are more expensive, according to Coface:

Free market

Drug prices in the United States are high because the system prioritizes free market over centralized regulation. Unlike countries such as France or the United Kingdom, where a single regulatory body sets maximum prices based on the clinical added value and cost-effectiveness of the drug, US manufacturers can set list prices with virtually no restrictions. This results in initial prices that are often several times higher than in Europe.

This starting point fuels a complex network of intermediaries, including pharmacy benefit managers (PBMs), insurers, and distributors, whose discount negotiations and formulary decisions generate opaque “net prices” that remain hidden from patients and employers. Market concentration amplifies this trend, with three PBMs controlling more than 80% of the market and a small group of distributors dominating distribution. 

Brand-name drugs

For large pharmaceutical companies, the United States remains the most profitable market, supporting their substantial capital expenditures and R&D investments. Americans spend approximately $450 billion annually on prescription drugs (about half of the OECD total in 2023). 

Ninety percent of that spending goes to brand-name drugs. These profits are essential to the industry’s innovation cycle: each new treatment requires significant R&D funding and carries high risk, as approximately nine out of ten drug development projects fail. The United States also accounts for more than half of global spending on biopharmaceutical research, enabling advances in oncology, immunology, and advanced therapies. 

In addition, US revenues are becoming indispensable as the industry approaches imminent patent expirations. Between 2025 and 2030, several blockbuster drugs will lose their exclusivity, putting up to $200 billion in annual sales at risk. This increased vulnerability makes maintaining pricing power in the United States critical to sustaining innovation and offsetting expected revenue losses.

Regulation

Drug prices in the United States have improved slightly, but there has been no radical reform. While new initiatives seek to reduce costs for patients, prices remain much higher than in similar countries. 

Legal future 

The Inflation Reduction Act of 2022 marked an important milestone by giving Medicare (which covers 20% of Americans) the power to negotiate prices for certain high-cost drugs starting in 2026. It also limits annual price increases to inflation. The recently revived NMF pricing model goes further by linking US prices to the lowest prices in comparable countries. While unlikely to be implemented across the entire market, the model signals a more aggressive pricing stance. However, its legal future remains uncertain. 

Sales platforms

Direct-to-consumer sales platforms are transforming pricing dynamics. These platforms allow drug manufacturers to sell directly to patients, without intermediaries or insurance coverage. Since they absorb the margins of intermediaries, they can offer discounts (compared to original list prices). TrumpRx is the most recent example of this type of platform. It is expected to launch in 2026, and prices will be negotiated at the federal level. Pfizer was the first company to agree to include high-cost drugs on this platform. In return, it received tariff exemptions. 

In addition, companies could take advantage of these platforms by offering drugs whose patents are about to expire. This could help them retain patient loyalty (before generics enter the market). One example is Eliquis, a highly successful anticoagulant whose patent is expiring soon. It will now be offered at a discount through Pfizer and BMS’s direct-to-consumer (DTC) platform.

Political support

Increase Medicaid discounts to generate political support. Pharmaceutical companies such as Pfizer offer higher discounts on best-selling drugs through Medicaid, under the most-favored-nation (MFN) principle. While Medicaid accounts for less than 10% of revenue, these measures help maintain sales volume and generate political support.