America is Not an Outlier in Key Drug Spending Metric

The U.S. spends more on healthcare than any other nation, but that doesn’t mean it overspends on medicine.

According to the new IQVIA Drug Expenditure Dynamics 2000 - 2022 report, 15% of America’s overall healthcare spending is allocated to drug expenditures. That percentage was also the average among the 12 developed countries IQVIA studied.

This means the U.S., when accounting for its overall healthcare spending, is not an outlier in how much it spends on drugs. By comparison, IQVIA found that Japan (20%), South Korea (19%) Spain (17%), Italy (17%) and Australia (16%) commit a greater share of healthcare spending to drugs.

This context is essential for shaping efforts to lower healthcare costs by reducing the prevalence and burden of chronic disease in America. For example, reducing people's access to treatment may lower costs in the short-term, but increases the burden of disease and long-term costs. Chronic conditions, which include heart disease, cancer, and diabetes, are the leading cause of death in the U.S. and account for 90% of overall healthcare spending. Improving population health is therefore one of the most effective long-term strategies for lowering healthcare costs.

It is true that the U.S, despite affordable generics, spends more on drugs than any other country in terms of absolute spending. But we also spend more overall and on specific healthcare services.

U.S. Drug Spending: Growth with Value

While total pharmaceutical expenditures continue to rise in absolute dollars, much of that growth reflects medical advances, not price inflation.

The U.S. prescription drug market reached roughly $487 billion in net spending in 2024, a 11.4% increase from 2023 amid new therapies for obesity, diabetes and oncology. Yet medicine price growth has remained flat or declined slightly, meaning utilization and innovation, not higher prices, are driving spending.​ 

When viewed in this context, medicines are a comparatively stable component of the system. Over the past decade, total U.S. drug spending has averaged only 2% annual growth when accounting for rebates and generics entering the market.

Despite that landscape, efforts to enact foreign-reference drug pricing in the U.S. are on the rise. The approach seeks to mandate that manufacturers provide American patients the same prices available in peer nations. While well-intentioned, the approach misdiagnoses the root cause of healthcare cost growth.​

Medicine prices are just one piece of the puzzle, and they’re not the fastest-growing piece. Hospital care, administrative overhead, and the burdening prevalence of chronic disease spending drive far more cost. Policies that focus narrowly on capping drug list prices risk limiting patient access to existing treatments and losing out on innovation for new treatments, especially for therapies that prevent complications and reduce hospitalizations over time.​

Other nations with lower drug prices accept trade-offs, including slower access to new therapies and fewer treatment options. Importing their pricing systems into the U.S. won’t guarantee lower costs for consumers. Significant rebates and discounts taken by pharmacy benefit managers, for example, never reach patients at the pharmacy counter.

A Smarter Way Forward

If the goal is meaningful cost reduction, the solution isn’t blunt price-setting.

It’s smarter spending and lowering the need for avoidable healthcare services by preventing and reducing the burden of chronic diseases.

That means building value-based frameworks where payment reflects results, not volume. Medicines often prevent costlier hospital interventions, reduce ER visits, and save lives. Policies should seek to expand access to medicines to achieve system savings, not undermine them.