Foreign Free-Riders and the American Patients First Approach to Lowering Prescription Drug Costs

Foreign Free-Riders and the American Patients First Approach to Lowering Prescription Drug Costs
CT Heltzel


Prescription drug costs in the United States continue to greatly exceed the average prices in other countries. The U.S. Department of Health and Human Services has proposed a system to try and lower drug prices in the U.S. by basing them on an international price index, with hopes that foreign payors will be forced to spend more and cover additional contributions to R&D expenditure. This policy presumes the validity of the “free-riders” concept that foreign countries are benefiting from U.S. pharmaceutical spending while not pulling their weight in R&D fiscal support or productivity. However, data on top developed countries spending on pharmaceutical research relative to their GDP and number innovative drugs developed demonstrates free-riding as a false narrative. In turn, policy attempting to punish the price negotiation of other countries holds the potential to create no positive or reasonable pharmaceutical cost changes and debilitate access to novel drugs worldwide.


The United States presidential administration under Donald Trump was elected into the executive office on a platform espousing reduction in American prescription drug costs. To initiate this promised effort, President Donald Trump unveiled his administration’s “American Patients First” plan in May 2018. This plan seeks to improve upon price negotiation, create greater competition, and incentive lower prices of prescription drugs for American consumers (1).

American Patients First: U.S. President Donald Trump’s plan to address American healthcare costs.

The Trump administration also identifies in this plan major challenges facing the American drug market that include “Foreign governments free-riding off of American investment in innovation”. The idea that other countries are acting as “free-riders” by paying lower prices for drugs and spending less on Research and Development (R&D) while Americans pay drastically more for the same prescriptions is not a new idea, and has been heavily inferred by the US government and pharmaceutical companies since the early 2000’s (2). However, many health and economic professionals have refuted the free-rider claim and that drug prices in other countries are not a primary contributor to extreme U.S. drug prices (3). To assess the value of targeting the pharmaceutical price gap between the U.S. and other countries, we will examine the validity of the free-rider claims, and if policy focused on having other governments pay more can benefit American payors.

Free-Riders and the American Pharmaceutical Price Gap

In 2015, retail pharmaceutical spending per capita in the U.S. exceeded $1,000, 30 percent higher than Switzerland, the next highest spender (4). Additionally, other developed countries spend about 41 percent of the U.S. price on the same drugs, on average (5). It is clear that the U.S. government and American consumers are at a steep disadvantage when paying for prescriptions. The truth is that the U.S. spends more on pharmaceuticals than any other country in the world and spends more on research and development. Knowing that other countries are spending less on drugs, it is commonly suggested that Americans are paying more to support the research costs on new products that the whole world benefits from. This is why the Trump administration has decided to address the American pricing issue by attempting to pressure other nations, creating policy that would create alignment in international prices. Essentially, American prices come down and foreign prices go up. But are international pharmaceutical developers actually not providing a fair contribution?

To determine if countries outside of America are truly acting as free-riders, it is important to look at spending on pharmaceutical R&D as a percentage of gross domestic product (GDP), and investment and productivity towards innovation. Many would see the U.S. total spending on R&D and percentage contributed to global R&D being the highest as an indicator that other countries have room for improvement in comparison. However, examining pharmaceutical industry expenditure on R&D as a proportion of GDP tells a different story. Between 2000-2015, countries such as Switzerland, Sweden, the UK, and Japan have all either committed more or similar amounts of spending to pharmaceutical R&D proportionally to GDP when compared to the U.S. (2) (6) (7). Observing such similar proportional spending across the board amongst top 20 economies demonstrates the idea of foreign spending on R&D not carrying its own weight is objectively false. As far as innovation goes, Europe is standing nearly toe-to-toe with the US in the number of new chemical or biological entities developed. Between 2012 and 2016, approximately 32 percent of new molecular entities were developed in Europe, and 38 percent in the U.S. (8). Weighted against total R&D expenditure, Europe actually produces more new, innovative drugs per dollar spent than the U.S. (8). The difference could be explained by European countries’ tendency to incentive spending towards “true innovation”, rather than developing drugs that are unlikely to provide novel uses versus currently marketed drugs.

Creating Greater Pressure on the Foreign Market

In 2018, President Trump announced a plan to reduce the United States’ extreme prescription drug prices, starting with a demonstrative initiative using Medicare part B. The President proposes to create an international pricing index (IPI) and using it to have Medicare pay for prescriptions based on the prices in other industrialized countries (9). This will hypothetically lower U.S. drug prices while forcing big pharma to raise prices internationally to cover R&D costs on the back-end. This policy concept attempts to punish international entities instead of directly regulating negotiation of pharmaceutical prices domestically. The primary reason pharmaceutical companies have been able to freely set prices in the U.S. is that the public and private payers are restricted from full and transparent bargaining of drug prices. Other governments typically have a means of limiting prices via regulated bargaining that allows the government to procure drugs at competitively set prices that compare favorably with drugs of similar types. The American plan hypothesizes that with American drug prices requiring to be set at average international costs, pharmaceutical companies will be pressured to raise prices internationally to continue to support R&D. Will such a strategy be able to effectively change costs in America, or abroad?

It is a common saying among pharmaceutical lobbyists that “if Europeans are made to spend more it would be fairer for global pharmaceutical R&D costs.” However, this does not inherently mean those in the U.S. would get to pay less. Of course, the proposed policy averages international prices to set the U.S. price, but there are potential workarounds and potential pitfalls. For example, the Centers for Medicare and Medicaid Services (CMS) may base drug rates on other countries’ prices, but companies could make deals to raise foreign drug prices to U.S. values and proceed to apply rebates that then reduce the costs internationally. If large groups of countries all worked similarly in their methods to reduce drugs costs in response, it would be difficult for the U.S. to do anything about it. On top of the potential of U.S. drug prices not being greatly affected, the policy could create international drug supply problems that will harm all countries. Companies could decide to wait longer to roll out new drugs in foreign markets, protecting their products from price changes demanded either by the U.S. international governments. Thus, all countries would suffer from a less open trade environment and less access to innovative therapies.


The price of drugs in the U.S. are certainly higher, on average, than any other country in the world. U.S. companies also benefit the rest of the world by spending more than anyone else on R&D, as well. The idea that other developed countries are not pulling their weight and depending too much on America’s goodwill fiscally is, however, a misguided perspective. On the grounds of both industry R&D spending proportional to national GDP and production of pharmaceutical innovation, developed countries do nearly as well, if not better, than the U.S. If the U.S. government decides to implement drug policy that attempts to affect European costs, it could create a climate where not only do drug prices go unchanged, but all nations may lose out on availability of novel medicines. Perhaps it is for the best if the U.S. continues to examine how they might be able to better negotiate their own prices, rather than demand change internationally.

List of abbreviations

CMS: Centers for Medicare and Medicaid Services
GDP: Gross Domestic Product
IPI: International Price Index
R&D: Research and Development

Availability of data and materials

The datasets analyzed in this article are available from

  • the OECD, [], []
  • the EFPIA, []


1. Department of Health and Human Services. American Patients First. Washington, D.C.:; 2018.
2. Light DW, Lexchin J. Foreign free riders and the high price of US medicines. BMJ. 2005 October.
3. Light DW, Caplan AL. Trump blames free riding foreign states for high US drug prices. BMJ. 2018 March.
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Inflammatory Bowel Disease: An Autoimmune Conundrum

Inflammatory Bowel Disease: An Autoimmune Conundrum
Assessing Traditional and Modern Treatment Paths, and How to Look Forward

by CT Heltzel


In Western society, people’s immune systems are becoming increasingly unstable, and their guts more sensitive. A major contributor to this is the rising number of people in the world who suffer from Inflammatory Bowel Disease (IBD). An estimated 1-1.3 million people in the US live with IBD, with as many as 70,000 new cases every year. IBD refers to a group of several autoimmune conditions that affect the colon or entire gastrointestinal tract. The two major classifications of IBD are Crohn’s Disease (CD) and Ulcerative Colitis (UC). Physicians diagnose a comparatively small portion of IBD patients with various types of “indeterminate” colitis. Both CD and UC present similar symptoms resulting from an overactive immune response in the GI tract, and commonly require similar medications for treatment. However, significant differences exist between the conditions that both physicians and patients must take into account when deciding upon treatment. Expressed symptoms specific to UC and CD create a need for alterations and selectivity to the types of inflammation ameliorating drugs patients decide to use. Modern medical treatments of IBD vary widely in approach to relieving inflammatory symptoms. Many of these treatments successfully relieve patients of their symptoms, often to the point of total remission. Despite this, nearly 70% of CD patients and 35% of UC patients will require major surgery after diagnosis1. Further, the medications required to treat IBD often cause dangerous side effects.

People with the condition are often on long term regimens of steroids and immunosuppressive biologics. In accordance with this, medical costs skyrocket and biologics have shot up to the top of the drug market. This is indicative of the impact autoimmunity is having on the US population. Millions of people pay extreme amounts to manage symptoms, but are never truly healthy. IBD is an emergent disease that is increasingly more threatening to population health in the US and other highly developed nations by forcing large groups of people to live immunocompromised and chronically ill. Fully understanding the current state of IBD research and treatments requires thorough investigation of several key subjects. Immune pathways and pathogenesis of the disease, modern treatments, and current research should be analyzed.

Pathobiology and Immunological Mechanisms

Among the many issues associated with IBD diagnosis and treatment is the lack of a primary source of known pathogenesis. Like many autoimmune conditions, IBD is described as a multifactorial disease, having several potential contributing actors and no easily recognized, common origin. These factors are broadly categorized as genetic predisposition, environmental triggers, and immune system disruption. Population studies demonstrate many common characteristics between people who have IBD, but they are not consistent as people may have one or a combination of many of these factors while maintaining similar or differentially severe pathogenicity as other patients. Examples of these factors include intestinal microbiome compositions, genetic mutations, lifestyle choices like smoking, or disease triggered after infection or injury.

Patients with active IBD show greater infiltration and activation of innate (e.g., macrophages) and adaptive (i.e., B and T cells) immune cells in the intestinal mucosa. The intestinal mucosa consists of the top epithelial layer of cells, or intestinal epithelial cells (IEC), in the gastrointestinal tract. Hyperactivity of immune cells causes heightened production and recruitment of more inflammatory agents in the mucosa. Proteins that signal immune cells to react in various ways, referred to as cytokines, represent the most relevant agents causing inflammatory proliferation. Specific cytokines of interest include tumor necrosis factor alpha (TNF-α), interferon-γ (IFN-γ), and cytokines associated with the interleukin-23—Th17 pathway2. These cytokines and cytokine receptors associate with T-cells via secretion or expression on the cell membrane. IBD research and treatment focus primarily on modulation of CD4+ T-cells, or helper T-cells (Th). Cytokine receptors can bind to various biological subunits and activate the differentiation of naïve (unactivated) CD4+ T-cells into several sub-types of helper T-cells. Differentiation into specific Th cells depends n activation by respectively associated interleukins (IL), cytokines that foster growth and differentiation of T-cells. Dysregulation of CD4+ T-cell differentiation into Th1, Th2 and Th17 holds a heavy implication in the pathogenesis of IBD3. Current research and treatment focuses heavily on the function of these immune cells as a potential route for therapeutic target discovery.

Modern medical treatments for IBD vary widely in mechanisms of action and biological targets. In essence, certain medications perform more effectively for ther CD or UC and for different severities and locations of disease symptoms. 5-Aminosalicylates (5-ASA), for example, provide greater symptom amelioration for UC since the medication mostly effects the colon. 5-ASA binds and activates the anti-inflammatory receptor Peroxisome proliferator-activated receptor-γ (PPARγ) in colon-based IECs4. Figure 1 highlights the differences between the diseases relevant to treatment.

The main types of drugs used to reduce IBD symptoms in current treatments fall under a few specific categories. From least to most extreme, physicians and researchers commonly group treatments as 5-aminosalicylates (5-ASA), corticosteroids, immunomodulators, or biologics. Physicians regularly prescribe all of these medications, sometimes in a combination treatment including more than one. However, physicians must balance medication effectiveness with harmful side effects. The balance between the two fuels a controversial argument in the scientific community: which treatment path best leads to long-term remission with the lowest potential for negative side-effects? The treatment paths in question for IBD generally fall under two schemes known as “Step-up” and “Top-down”5.

The former represents the traditional approach in which treatment uses weaker medications followed by harsher medication in accordance with increasing symptom severity. Top-down involves first utilizing the most powerful immunosuppressive drugs, such as biologics and immunomodulators, to eliminate symptoms quickly. Subsequently, physicians treat with weaker medicines as the patient moves towards remission6. The top-down approach becomes increasingly popular as more patients see positive results from use of biologics. However, many physicians and scientists are not supportive of such an approach, seeing the dangers of immune system suppression as an unethical first-line of defense. The most common immunosuppressive biologics commercially available include anti-TNFα antibodies, such as infliximab (Remicade®) or adalimumab (Humira®). These antibodies locate and bind to the TNFα cytokine and inhibit its activity7. This approach provides effective amelioration of IBD symptoms since TNFα is greatly overexpressed. However, lowering function of this cytokine lowers overall immune function and T-cell development which can be unhealthy and leads to potential infections.

Biological Target and Drug Efficacy

The uncertainty towards a superior therapeutic treatment method within the scientific community suggests significant room for innovation in the realm of IBD medications. Deciding on what constitutes a high efficacy biological target forms the first major hurdle in the research process. Measurability of the target in question can make pursuing research either plausible or unlikely very early on. Time and expenses limit the necessary devices and techniques at a laboratory’s disposal to measure a potential target, as well as the feasibility of measuring it based on biological and chemical characteristics. Beyond financial and experimental obstacles, the most important criteria relate to biological function. Specificity of a target to the disease process probably counts as a main feature of significance towards efficacy. Preferably, the target is unique to the condition’s mode of action and has a potent effect on symptoms without unwanted inhibition of other physiological processes. A target proximal to symptom initiation holds a similar importance to specificity. Proximity refers to closeness to disease related symptom initiation. Affecting the target hopefully does not affect other, possibly unrelated, processes prior to symptom initiation in the inflammatory cascade. Another scenario for good proximity involves prevention of symptoms, rather than clearing the aftermath. For the purposes of IBD treatment, a target that has high systemic expression instead of local expression to one part of the GI tract can be of great interest to researchers. Some targets fail to be useful, as they do not have great presence in all possible areas of inflammation.

The types of compounds composing drugs used to treat inflammation are also relevant to the quality of a treatment. The difference between a small molecule and large molecule drug can make a great difference in the comfort of a patient. Currently, anti-TNF-α biologics represent the most potent drugs on the market. These antibody-based medications are large molecules and patients apply them via injection/infusion. Small molecule drugs commonly utilize oral delivery, a preferable method for most patients. For the sake of easy application to the patient, a small molecule with potent effects on inflammation makes for a desirable compound to research. Most importantly, a drug should have low toxicity. Additional short or long-term side effects from therapy essentially defeat the purpose of researching a new IBD drug. The negative side effects researchers observe in preclinical trials root out potential drugs early on.

Current IBD Treatments

As described previously, physicians prescribe several types of medications to treat IBD. Each classification differs greatly in biochemical mechanism and there are many drugs on the market within these classifications for physicians to utilize. A patient with severe IBD symptoms commonly begins treatment with corticosteroids. A typical beginning of treatment shared by many IBD patients involves use of the drug Prednisone. Corticosteroids such as Prednisone bind to glucocorticoid receptors and proceed to downregulate gene transcription for various inflammatory agents8. This corticosteroid has uses in many conditions outside IBD and thus has the negative attribute of many side effects unrelated to inflammatory relief. Physicians avoid use of prednisone and other steroids as a long-term solution. Once patients achieve short-term symptom relief by use of steroids, physicians attempt design a new treatment regimen for long-term stability.

Physicians commonly prescribe 5-ASA as a next step after steroids, or possibly before if symptoms start out mild. This progression falls in line with the top-down treatment path. As stated earlier, 5-ASA acts as a ligand, binding to PPARγ and activating its anti-inflammatory effects in IECs. 5-ASA drugs commonly prescribed by physicians include Asacol and Pentasa. These drugs act locally in the gut, which make them very effective for UC and mild-moderate cases of CD. The local predominance allows for minimal systemic side effects, leaving the most common ones related to digestive organs. Such side effects could include diarrhea, flatulence, or cramping. Despite minimal side effects, the inability of 5-ASA to cause potent anti-inflammatory effects outside colonic IECs makes these drugs ineffective in severe cases of CD. A preemptive colonoscopy allows physicians to find areas of inflammation local to the colon. Observing severe inflammation outside the colon may cause a physician to bypass 5-ASA treatment.

Chemical immunomodulators cause potent immunosuppressant effects to reduce inflammation, often in relief of or in conjunction with 5-ASA usage. Thiopurines such as mercaptopurine (6-MP) and azathioprine (AZA) act as small molecule immunomodulators that suppress the immune system much like biologics. They are used for more moderate IBD symptoms and have less potent effects9. 6-MP functions as a competitive antagonist of GTP, binding to a small GTPase protein, Rac1. Binding to Rac1 suppresses activation of the protein in gut CD4+ T-cells, and causes cell apoptosis10. This reduction of CD4+ T-cell activity creates significant anti-inflammatory effects throughout the GI tract. However, thiopurines have many faults outside of immunosuppression that make them ineffective as a final treatment for many patients. Not all sever cases of IBD appear to associate with Rac1 based T-cell proliferation, often causing patients to use biologics as a powerful alternative.

Physicians prescribe biologics such as Remicade (infliximab), Humira (adalimumab), and Cimzia (certolizumab) in cases of severe CD, often when all other medications fail to relieve symptoms. All the biologic medicines above consist of monoclonal antibodies that work as TNFα antagonists. The antibodies bind TNFα and inhibit its ability to signal, lowering development and recruitment of various inflammatory agents. With the FDA approval of Humira as a CD medication in 2007 and for UC in 2012, biologics will continue to rise to the top of the IBD drug market11. Negative side effects such as risk of infections due to high immunosuppression and the possibility of increased lymphoma occurrence (uncommon in short term use) present significant issues with anti-TNFα biologics12. Despite this, the usual high remission rates using these medications often outweigh any negatives for IBD patients. Non-TNF based biologics such as ustekinumab (Stelara) and vedolizumab (Entyvio) have hit the market in recent years, as well, and provide potential alternatives in the realm of powerful large molecule drugs. Stelara binds to the p-40 subunit shared by the IL-12 and IL-23 cytokines. This keeps p-40 from binding to these cytokines, making it unable to send a signal for T-cells to differentiate into inflammation promoting Th17 cells13. Entyvio blocks lymphocyte trafficking and adhesion in the gut through its recognition and blocking of the α4-β7 integrin glycoprotein on B and T-cells14. This does not appear to cause systemic immune suppression in the rest of the body, making the drug a potential safe alternative to anti-TNFα antibodies. Still, immunosuppression in general is an unhealthy practice, leaving significant room for innovation in future IBD treatments.

Because of the aforementioned success of biologics in diminishing the symptoms of people with IBD, as well as millions of others suffering from autoimmunity, these drugs are more and more likely to be prescribed and have risen to top grossing positions in the pharmaceutical market15. With this comes the implication that millions of people are also being critically immunocompromised over significant periods of time, causing dysregulation of the body’s innate bio-molecular mechanisms. Such blanket treatments could be viewed as unethical on that large of a scale without looking forward to new methods. But what could be done to better regulate this system of treatment? How can we better meet patient’s needs? One answer is using precision medicine as a path towards pinpointing disease pathogenesis on a person by person basis. The concept of precision medicine utilizes multiple avenues of modern clinical research tools to personalize the treatment path for patients. This method seeks to combine pharmaceuticals, nutraceuticals, bioinformatics/genomics, and microbiology to understand and approach the driving force behind a patient’s condition16. IBD is one of the most practical areas to start using precision medicine because of its multifactorial nature. Computational models of the intestinal immune response can be developed that use patient data on microbiome and immune cells and molecules as a baseline and are calibrated to an individual using their specific bacteria, mutations and disease pathology as input parameters. The outputs of such a model would inform clinicians on the best types and amounts of therapy needed to return someone to a healthy immunological baseline. In order to do this, however, massive epidemiological studies must continue to be conducted on willing patients through public health initiatives that involve numerous practitioners, hospitals, and testing sites. Using the collected data, researchers will be more capable of creating refined and accurate models of disease that can be turned into a reliable clinical tool17.  This data will also be critical in determining what initiatives must be put forward to focus on preventive measures. Big epidemiological data can lead to pathological origin trails that may inform what needs to be regulated or removed from typical human consumption. It is likely this will involve limitations on regulations on human exposures to antibiotics, food pesticides, preservatives, and other chemicals that we come into contact with on a daily basis that could be brought to light via connections made in the computational model of disease. If bioinformatics continues to progress as quickly as computational systems typically do in modern times, there may yet be hope for a world unburdened by chronic inflammatory bowel disease in the near future.

Autoimmune conditions like IBD remain difficult to control because of the high complexity of human immunity. Diagnosis rates for the condition grow yearly, and more individual must learn to manage crippling intestinal damage or depleted immune systems. Current medicines provide effectiveness relief for many patients, but have the potential to be much safer. For this reason, it is important that research on new therapeutic targets and treatment paths for IBD treatment continue to develop.

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Introducing: Drugs, in Review

Hello friends and Crohnies!

I would like to introduce the new weekly section of GUTS, Drugs, in Review:

This section is a weekly feature about a pharmaceutical or nutraceutical currently in use by practitioners or being researched for treating IBD and other autoimmune condtions. Each article will go over the specifics on the drug, how it helps people, how it might not be so helpful, and other insights about the state of the drug in today’s market.

This week’s post will be about Imuran (aka Azathioprine) and its sister drug, 6-MP

Do you take Imuran/6-MP? Sound off in the comments and look out for the post in Drugs, in Review on GUTS this week.

Best to you and yours,