When you walk into a pharmacy in the U.S. and see a $6 copay for your generic blood pressure pill, itâs easy to think the system works. But if youâve ever traveled abroad and bought the same pill for $2-or seen a friend in Canada pay $10 for a brand-name drug that costs $400 here-you know somethingâs off. The truth about drug prices isnât simple. The U.S. pays more for brand-name drugs than any other country. But when it comes to generic drugs, the story flips. Americans often pay less for generics than people in Germany, Japan, or France.
Generics Are Cheaper in the U.S.-Hereâs Why
Over 90% of all prescriptions filled in the U.S. are for generic drugs. Thatâs not a coincidence. Itâs the result of aggressive competition, fast FDA approvals, and powerful negotiating power from Medicare and large pharmacy benefit managers. When a brand-name drugâs patent expires, multiple companies rush to make the same pill. As soon as two or three generics hit the market, the price drops to about 35% of the original. By the time five or six companies are making it, the price falls to just 15-20%.
Thatâs why the average generic copay in the U.S. is $6.16, according to the FDAâs 2023 Savings Report. Compare that to the average brand-name copay of $56.12-nearly nine times higher. In fact, 93% of generic prescriptions in the U.S. cost under $20. Thatâs not true in most other countries. In the UK, France, and Japan, even after government price controls, generic drugs often cost 30-50% more than in the U.S.
But Brand-Name Drugs? The U.S. Pays the Most
Hereâs where things get expensive. The U.S. pays 308% more than other OECD countries for brand-name drugs. For some drugs, the difference is extreme. Take Jardiance, a diabetes medication. Medicareâs negotiated price in 2025 was $204 per month. In Japan, the same drug costs $52. In Australia, itâs $48. Thatâs more than four times the price here.
Why? Because the U.S. doesnât have a central agency that negotiates drug prices for everyone. Instead, private insurers, Medicare, and pharmacies negotiate separately. That means drugmakers can set high list prices and still make money through rebates and discounts. The list price you see on a drugâs sticker? Thatâs not what most people pay. But for uninsured patients or those in high-deductible plans, that list price is what theyâre stuck with.
France and Japan keep brand-name prices low by setting strict price caps. Germany and the UK use value-based pricing-they pay what they think the drug is worth, not what the company demands. The U.S. doesnât do that. As a result, originator drugs (the first version made by the original company) cost 422% more here than elsewhere.
The Net Price Paradox: Why Some Studies Say the U.S. Pays Less
You might read a headline saying, âU.S. drug prices are lower than Europeâs.â That sounds wrong. But itâs not false-itâs incomplete. A 2024 study from the University of Chicago looked at net prices-what the government and insurers actually pay after rebates, discounts, and secret deals. They found that for public programs like Medicare Part D, the U.S. pays 18% less on average than Canada, Germany, and the UK.
How? Because U.S. insurers are better at squeezing rebates. Drugmakers give discounts to get their drugs on insurance formularies. The more patients a drug reaches, the bigger the discount. Since the U.S. has such a huge market, companies offer steep deals to get on Medicare and big insurer lists. That drives down the final price. But that savings doesnât reach everyone. Uninsured patients? They pay full list price. People on high-deductible plans? They pay full price until they hit their deductible.
How Generic Competition Drives Prices Down
The FDA tracks how many companies make each generic drug. Their data shows a clear pattern: more competitors = lower prices. When only one company makes a generic, it costs about 60% of the brand. Add a second, and it drops to 40%. With three or more, it falls to 15-20%. Thatâs why some generics-like metformin for diabetes or lisinopril for blood pressure-cost less than $5 for a 30-day supply.
But hereâs the catch: sometimes, too much competition kills the market. If prices drop too low, manufacturers stop making the drug because itâs not profitable. That happened with some antibiotics and older heart medications. Then, only one company is left-and they raise the price. Thatâs why some âgenericâ drugs suddenly become expensive. Itâs not a glitch. Itâs a market failure.
Whatâs Happening Now? Medicare Negotiation and Global Pressure
In 2025, Medicare started negotiating prices for 10 high-cost brand-name drugs. The results? Every single negotiated price was higher than what other countries pay. In 9 out of 10 cases, Japan, Australia, and Germany paid less. The only exception? Stelara, a psoriasis drug. Germanyâs price was slightly higher than Medicareâs.
Thatâs a wake-up call. Even with negotiation, the U.S. still pays more. And now, the government is preparing to negotiate more drugs. The next round will include drugs for Alzheimerâs, cancer, and autoimmune diseases. If those prices still stay above global levels, pressure will grow to change the system.
Meanwhile, the U.S. is being accused of âfree riding.â Other countries pay less because they rely on American-funded research. Drug companies spend billions in the U.S. to develop new drugs, then sell them cheaply overseas. Some experts argue that if other countries paid more, innovation would keep going. Others say thatâs a myth-most breakthroughs come from public research, not private profit.
What This Means for You
If you take mostly generics, youâre getting a deal. Your $6 pill is cheaper than in most of the world. But if you need a brand-name drug-like insulin, biologics, or cancer treatments-youâre paying more than anyone else. Thereâs no magic fix. But you can take action:
- Ask your doctor if a generic is available-even for newer drugs, biosimilars are starting to appear.
- Use GoodRx or SingleCare to compare prices at local pharmacies. Sometimes, the cash price is lower than your insurance copay.
- If youâre on Medicare, check if your drug is in the negotiation list. If it is, your price may drop next year.
- Donât assume your insurance is saving you money. Ask for the net price after rebates. You might be surprised.
The system is broken, but not hopeless. The U.S. has the most competitive generic market in the world. Thatâs a win. But for the 10% of prescriptions that are brand-name, weâre paying a global premium. Until that changes, the gap will stay wide.
Why Other Countries Can Keep Prices Low
Itâs not magic. Itâs policy. Countries like Japan and France set price caps before a drug even hits the market. They look at how much it costs to make, how effective it is, and what other countries pay. Then they say, âThis is what weâll pay.â If the company doesnât agree, they donât sell it there.
In the U.S., no one sets a cap. Companies can charge what they want. And because Americans are willing to pay-through insurance, out-of-pocket, or government programs-they do. Itâs not that other countries are smarter. Itâs that theyâre willing to say no.
The Future of Generic Drug Prices
By 2030, the FDA expects over 1,000 new generic drugs to hit the market. That could save the U.S. over $100 billion in the next five years. But it depends on one thing: keeping competition alive. If big companies buy up small generic makers to limit supply, prices will rise. If regulators keep approving new competitors, prices will keep falling.
The biggest threat isnât lack of innovation. Itâs lack of competition. And thatâs something we can fix-with the right policies, and the right pressure on drugmakers.
Are generic drugs in the U.S. really cheaper than in other countries?
Yes, for most common generics like metformin, lisinopril, or atorvastatin, U.S. prices are 30-50% lower than in countries like Canada, Germany, and the UK. This is because the U.S. has more generic manufacturers competing, faster FDA approvals, and strong negotiation power from large insurers and Medicare. The FDA confirms that with three or more generic makers, prices drop to 15-20% of the brand-name cost.
Why do U.S. brand-name drugs cost so much more?
The U.S. doesnât regulate drug prices. Drugmakers set high list prices and rely on rebates to private insurers to stay profitable. Other countries negotiate prices upfront or cap them by law. In Japan and France, the government decides what a drug is worth before itâs sold. In the U.S., thereâs no such limit. Thatâs why originator drugs cost 422% more here than elsewhere.
Does Medicare negotiation lower drug prices to global levels?
No. Even after Medicare negotiates prices for the first 10 drugs in 2025, every negotiated price was higher than what other countries pay. For example, Medicare pays $204 for Jardiance, while Japan pays $52. The negotiation program helps reduce costs, but it doesnât close the gap with global prices. The U.S. still pays more for nearly all brand-name drugs.
Can I buy cheaper drugs from other countries?
Legally, importing prescription drugs from other countries is not allowed by the FDA for personal use, with very few exceptions. But many Americans still do it through online pharmacies. While some offer real savings, others sell counterfeit or expired drugs. The safest way to save is to use U.S.-based discount programs like GoodRx or ask your pharmacist about cash prices-sometimes theyâre lower than insurance copays.
Why do some generic drugs suddenly become expensive?
When too many companies make a generic, profits get too thin. Some manufacturers quit the market. If only one or two remain, they can raise prices. This happened with drugs like doxycycline and albuterol. The FDA calls this a âmarket failure.â Itâs rare, but itâs real. More competition usually means lower prices-but only if enough companies stay in the game.
Whatâs the difference between list price and net price?
List price is the sticker price drugmakers charge pharmacies. Net price is what insurers and government programs actually pay after rebates and discounts. In the U.S., the net price for public programs is often lower than in other countries because of aggressive rebate deals. But uninsured patients pay the full list price-which is why drug costs feel so high for them.
Saket Modi
December 2, 2025 AT 19:50