Patricia Danzon Sheds Light on Drug Spending
As the nation considers proposals to rein in the price of prescription drugs, we recall a series of seminal papers in the past decade by Patricia Danzon that examined drug spending in the US and compared it with other developed nations. She and co-author Michael Furukawa found that drug spending differences reflected availability and use, not just prices, and that generics were actually cheaper in the US than abroad. The papers changed the nature and depth of the debate we are having today.
One notable paper in Health Affairs compared per capita drug spending in 12 countries in 2005, and found that, as expected, spending was higher in the US. Internationally, prices were 20%-40% lower than US manufacturer prices, but only 10%-30% lower than US public prices (which include wholesaler and retail pharmacy margins and any value-added taxes). Price differentials were roughly in line with differences in per capita income, with the exception of Latin American countries, particularly Mexico. Further, the paper showed that spending differences reflected differences in formulations, product mix, and use of generics; the US had relatively high use of new drugs and high-strength formulations, while other countries used more of older drugs and weaker formulations. Greater US use of new drugs reflected earlier launch and relatively rapid diffusion. These insights inspired researchers to dig deeper to understand the drivers of drug spending, and the paper has been cited more than 130 times to date.