The US continues to have higher drug prices than Europe, driven by fundamental differences in pricing structures and payer negotiation power. While the US allows free pricing with individual negotiations across multiple payers, European countries like France and Germany use centralized negotiations and additional strict price controls to manage medicine budgets. The Inflation Reduction Act (IRA) introduced Medicare-led price negotiations, marking a shift toward greater pricing regulation in the US. This blog explores how US-EU price differentials have evolved over the past decade, the impact of the first round of IRA negotiations on closing the gap, and what the second round of negotiations could mean for future price differentials.
The US and EU: Two Distinct Mechanisms for Drug Pricing
For decades, the US and EU have maintained fundamentally different approaches to regulating drug list prices, resulting in persistent list price disparities. The US follows a free pricing model, where manufacturers set list prices independently and negotiate with a wide range of private and public payers. This decentralized system fosters competition among payers, but it also leads to intra-country pricing variability and weaker bargaining power for individual purchasers.
In contrast, European markets regulate list prices through centralized negotiations, where public payers leverage greater bargaining power to achieve lower prices. Many major European markets, such as France and Germany, employ therapeutic reference pricing (TRP) and international reference pricing (IRP), benchmarking drug list prices against those of comparable therapies or prices in other countries to contain costs. Additionally, relative clinical effectiveness assessments and cost-effectiveness evaluations (CE) are used to determine whether a drug provides sufficient value at a given price.
These mechanisms also drive list price reductions over time through mandatory post-launch price reviews, real-world evidence assessments, and systematic renegotiations. In many EU countries, list prices are re-evaluated based on new clinical data, availability of alternative treatments, and budget impact, if a an indication expansion increases the size of the eligible patient population, leading to gradual price decreases. Manufacturers in some markets negotiate an initial price but must renegotiate after a fixed period, often aligning with updated cost-effectiveness criteria. These ongoing assessments often lead to list price erosion post-launch, in contrast to the US system, where list prices often increase over time. One contributing factor is the role of pharmacy benefit managers (PBMs), which negotiate rebates from manufacturers in exchange for preferred formulary placement. Because PBM fees and rebates are often tied to a percentage of the list price, this creates an incentive for manufacturers to set higher list prices to offer larger rebates.
This difference in pricing regulations has resulted in the US consistently having higher list prices at launch compared to France and Germany.
US list prices, on average, have been ~x2.5 higher than in France and Germany between 2014 and 2023
A recent analysis by RAND found that drug prices in the US are, on average, x2.78 higher than those in other high-income countries, with brand-name originator drugs costing x4.22 more than international benchmarks.
Inbeeo’s analysis of 180 products that received an EU marketing authorisation between  (2014–2023) corroborated findings from the RAND report. We examined price relativities between the US, France, and Germany, finding that the median price relativity was 254%, at launch meaning that US list prices were, on average, x2.5 higher than prices in France and Germany between 2014 and 2023.
Between 2014 and 2023, US drug prices ranged from approximately 1.8 to 4.6 times those in France and Germany (Figure 1). While year-on-year price differentials fluctuated, the overall trend over the past decade shows an increase in price relativities, reflecting persistent growth in US- France/Germany price gaps.
Figure 1: Median price relativities of 180 products (excluding biosimilars) that received a European marketing authorization between 2014-2024.Â
Ophthalmology has the starkest difference in prices, with US prices ~x8.4 higher than in France/Germany, with the smallest differences observed in haematology, where US prices were ~x1.9 those in France/Germany
Interestingly, price relativities varied across therapeutic areas (Figure 2). US list prices were furthest from France and Germany levels in ophthalmology (x8.4 France/German prices), while the smallest differences were observed in haematology (x1.9 France/German prices). This trend suggests that high-value products—such as those used in haemophilia treatment, which often fall under haematology, orphan drug, and ATMP categories—exhibit smaller pricing differentials between the US and major European markets. One possible reason is that these products are often subject to similar HTA evaluations and price negotiations across markets due to their high clinical value, limited therapeutic alternatives, and strong demand. Additionally, payer willingness to reimburse these treatments at higher price points may be more aligned across regions, especially for life-saving therapies with no direct competition.
Figure 2: Median price relativities by therapeutic indication.Â
Orphan drugs and ATMPs have the smallest US-France/Germany price differentials, while small molecules exhibit the largest gap
When considering orphan drug designation (ODD), US list prices for ODD products were x1.6 in France/Germany, whereas non-orphan drugs exhibited a larger price differential at x3.0 France/German prices (Figure 3). This suggests that price relativities for orphan drugs may be lower due to regulatory incentives or reduced pricing pressures for rare disease treatments.
Similarly, price differentials across ATMPs tend to be smaller compared to other drug types. US list prices for ATMPs were x1.2 in France/Germany, indicating the smallest price differential (Figure 3). In contrast, biologics were x2.1, while small molecules showed the largest gap at x3.2. These trends suggest that ATMPs maintain closer price alignment between the US and France/Germany, potentially due to high manufacturing costs and limited competition, whereas small molecules exhibit the largest price gap, reflecting broader market dynamics and pricing negotiations.
Figure 3: Median price relativities by ODD status and drug class
IRA impact: US drug prices remained higher than in France/Germany, but the gap has narrowed
The Inflation Reduction Act (IRA) introduced the first-ever direct price negotiations for Medicare, aiming to reduce costs for high-expenditure drugs. The first round of negotiations included 10 products, spanning small molecules and biologics across multiple therapeutic areas. Across the 10 IRA-negotiated drugs, the pre-negotiation US list prices were x9.4 higher than those in France and Germany (Table 1). When accounting for existing Medicare rebates, US list prices were x5.6 France/German levels. Following IRA negotiations, the gap decreased further to x3.2 France/German prices, reflecting a reduction in the US – France/German price gap.
While these cuts narrowed the difference, US prices remained higher than those in Europe, even after negotiation.
Table 1: IRA Impact: Price relativities of N=10 products renegotiated under the IRA
Cardiovascular disease and immunology saw the largest reductions in US-EU price differentials post-IRA, while endocrinology maintained the widest gap
The effect of IRA negotiations on US-EU price relativities was not uniform across therapeutic areas (Figure 4). Some categories saw larger reductions in price differentials, while others maintained a substantial gap despite the negotiated price cuts.
- Endocrinology (N=4): Before negotiations, US list prices were ~x13 France/German prices, dropping to x7 after rebates, which aligned with broader France/Germany endocrinology trends in prices (x6 for endocrinology drugs approved between 2014–2023). Post-IRA, the gap closed further to x4 France/German levels
- Cardiovascular Diseases (N=3): Before IRA negotiations, US list prices were x7 France/German levels, which fell to x4 after rebates, already aligning with broader France/Germany cardiovascular disease trends (x4.4 for 2014–2023 approvals). Post-IRA, the gap closed further to x2.9, bringing prices below the broader France/Germany cardiovascular disease price trends
- Immunology (N=2): US list prices were x6.4 France/German prices before negotiations, dropping to x4.4 after rebates, close to broader France/Germany immunology trends (x4.6 for 2014–2023 approvals). Post-IRA, the gap closed further to x2.3, meaning IRA negotiations pushed immunology prices below broader France/Germany trends
- Oncology (N=1): Before negotiations, US list price was x3.3 France/German levels, dropping to x2.3 after rebates, below the broader France/Germany oncology trends (x3.3 for 2014–2023 approvals). Post-IRA, price closed slightly further to x2.2, reinforcing the smaller US-France/Germany price gap in oncology compared to other therapeutic areas
Figure 4: IRA Impact: Price relativity pre-IRA negotiations, pre-IRA after estimated rebates, and after IRA negotiations for N=4 Endocrinology, N=3 Cardiovascular, N=2 Immunology, and N=1 Oncology products is shown in solid bars; and the average price relativity (as of March 2025) of N=12 Endocrinology, N=6 Cardiovascular, N=20 Immunology, and N=64 Oncology products approved by the EMA between 2014-2023 with available prices in the US, France, and Germany is shown by the dotted bar; USD: EUR Exchange rate 0.9744Â
What Do These Findings Mean for Market Access and Future Pricing Policy?
The IRA’s first round of price negotiations successfully narrowed the US-France/Germany price gap, but IRA impact was highly variable across therapeutic areas. In cardiovascular and immunology, the negotiated reductions brought US prices below broader US-France/Germany historical relativities, demonstrating that Medicare’s pricing leverage may have been particularly effective in these categories. In contrast, endocrinology maintained the widest gap, with post-IRA prices still significantly above broader France/German levels.
From an access perspective, these findings highlight several key trends:
- Price regulation is now a growing factor in the US market, with the IRA impact demonstrating that direct negotiations can meaningfully reduce price differentials, at least in some therapeutic areas
- The role of pre-existing rebates must be considered when assessing price reductions—in some cases, rebates had already moved prices closer to FRA/GER levels before IRA negotiations took place
- As the IRA expands to more drugs, including a greater focus on oncology, it will be interesting to see whether negotiated reductions meaningfully shift US-EU price differentials in this category
Looking ahead, manufacturers should anticipate a more regulated US pricing environment. The second wave of IRA negotiations will be particularly telling, as it includes a higher proportion of oncology products—a category where US-EU price gaps were already lower before negotiations. Whether these reductions further align US pricing with EU benchmarks or highlight ongoing structural differences will be critical for long-term market access strategies.
This post on IRA impact is based on our pricing panel and poster presented at the World EPA Congress 2025. If you’d like to discuss these insights further or explore how shifting US-EU dynamics could impact your market access strategy, please reach out to our team.