Americans pay far higher prices for prescription drugs than do people in other wealthy countries. The reason that other countries spend so much less on drugs is that their governments negotiate prices with the pharmaceutical industry. The United States government could adopt the same approach with the Medicare drug program and use its market leverage to negotiate the same, or even lower, prices as are paid by other wealthy nations.

According to a new issue brief from Center for Economic Policy and Research, such a system would save Washington state between $500 million and $1.2 billion over 10 years. The potential savings to all states would be enormous, cumulatively between $31 billion and $73 billion over 10 years.

Every state individually could expect significant savings. California leads the way, with potential savings between $3.3 and $7.8 billion. The next six top-saving states are Florida, New York, Texas, Pennsylvania, Ohio and Illinois, all with projected savings of at least $1 billion per year. Even those states with the least potential savings, such as Wyoming, North Dakota and Vermont, would still save tens of millions of dollars over a decade.

Get state by state data and more from CEPR here »