US Drug Price Push May Lead to Higher Costs in Israel

The United States government is pursuing policies aimed at lowering prescription drug prices, including negotiating prices within Medicare and Medicaid, facilitating direct purchasing, and reducing intermediary margins. Washington is also pressuring other countries to bear a larger share of drug development costs, potentially by linking US prices to those in other nations. In response, pharmaceutical companies are seeking higher payments in Europe, where branded patented drugs cost roughly a quarter of what they do in the US. The US leads OECD countries in drug spending as a percentage of GDP, at approximately 1.6%, compared to 1.5% in Germany and 0.6% in the UK.

European nations typically negotiate drug prices based on medical benefit, while the US system is more decentralized, influenced by Pharmacy Benefit Managers (PBMs) that add fees and keep official prices high. Germany is exploring measures to curb spending by increasing rebates from drug manufacturers, though this could reduce the incentive for launching new drugs. France is adopting a hybrid approach, allowing high initial prices for clinically significant drugs and lowering them later, while also incentivizing local research and production.

A report by Coface highlights that European countries have limited capacity to absorb higher drug costs due to significant budget deficits and aging populations. For instance, France faces a 5.1% deficit and 11.6% debt relative to its GDP. By 2045, the proportion of citizens aged 65 and over is projected to rise substantially in countries like Japan, Italy, Spain, Germany, and France.

The global investment landscape for pharmaceuticals is also shifting. AstraZeneca canceled a £450 million vaccine plant in the UK, opting instead for a $50 billion investment in the US. Johnson & Johnson and Roche have also announced major investments in the American market. Consequently, Western Europe's share of global clinical trials decreased from 33% in 2019 to 27% in 2025, while China's share increased from 11% to 17%.

Israel's drug prices, currently relatively controlled due to their linkage to lower European prices and the bargaining power of its health funds, may also be affected. Michael Nachmanovitch, CEO of Coface Israel, stated that while no immediate price hikes are evident, a shift in European pricing trends could eventually impact the Israeli market. He emphasized the long-term challenge of balancing price control with maintaining Israel's attractiveness for innovative drug launches, advising pharmaceutical companies to monitor global pricing and investment shifts to ensure stability.