1) Research and development

According to Harvard economist David Cutler as well as Dr. Rajkumar and his colleague,
Hagop Kantarjian, of MD Anderson Cancer Center, about 25 % of total healthcare cost is
associated with administration, in specific research and development
(2) Monopoly over drug prices
In most of the developed countries such as Norway, France etc. the government negotiates drug
prices with the drug makers. While in USA, the drug production companies have the monopoly
over the drugs production and their market value. In addition, USA market is highly fragmented
with the bill payers ranging from employees, insurance companies and federal and state
government.
(3) Defensive Medicine
One of the major reasons for enormous drug prices in USA, is the defensive medicine system
which means due to fear or insecurity of getting sued, doctors tend to conduct multiple tests even
when there is no serious disease involved or when they are certain they know what the diagnosis
is.
(4) Technological expense
US medical diagnosis especially for complicated diseases involves multiple highly expensive
examinations. For example, the U.S. uses three times as maghjgfhghgfchfgchfgchfghfghfghfgny
mammograms, two-and-a-half times the number of MRIs and 31% more Caesarean sections
which ultimately increases the overall healthcare expense.
(5) Branding
According to George Halvorson, the former chairman of health maintenance organization,
prices are made up depending on who the payer is. It is common observation that the drug
suppliers who want to hike their price, do the branding and advertising to a greater extent. Also,
effective advertisements for stringent diseases make psychological impact on the patients mind
which helps the drug production companies to gain profit.