Feb 4, 2019

Transparency alone won't solve drug prices

Health and Human Services Secretary Alex Azar at the National Academy of Sciences last year. Photo: Alex Wong/Getty Images

More transparency about the cost of prescription drugs is unlikely to directly lower their price, experts say, poking a hole in a buzzy Washington talking point.

Why it matters: "Transparency" comes up often in discussions about how to lower drug prices. And though more information is undoubtedly important, something has to be done with that information to actually get costs down.

The big picture: We usually don't know how much insurance plans end up paying for most drugs, and we also don't know how much of a cut the system's middlemen keep for themselves. Transparency efforts often focus either on illuminating how money moves through the drug supply chain, or requiring drugmakers to justify hikes in their list prices.

  • This information may have a shaming effect, but drug companies would still be free to charge what they want. And consumers often have limited or no ability to choose a cheaper drug.
  • There are exceptions — like the new ban that on "gag clauses" that prevented patients from knowing when paying cash would be cheaper than using their insurance. But so far those circumstances have been relatively limited.

Yes, but: Transparency measures still matters, because “it’s hard to come up with really reasonable solutions if you’re really working in the dark," said Vanderbilt's Stacie Dusetzina.

  • It could help employers and insurance plans “understand where they could do a better job squeezing out some of this excess profit," she said, but ultimately "it’s necessary but not sufficient for reducing drug prices.”

Details: A handful of states have already passed laws requiring drug companies to report the rationale behind their price spikes, but most don't do anything to actually block or prevent those spikes.

  • Maryland passed penalties for "price gouging," but the law has been found unconstitutional. The state has asked the Supreme Court to hear the case.
  • A Health Affairs analysis of California's transparency law found that it is unlikely to have much of an impact on drug spending unless it's paired with additional incentives for consumers to use lower-priced drugs.

The bottom line: "Transparency can help the public and policy makers make more informed decisions about what to do about high drug prices - who to target, what policies to put in place, etc," said Walid Gellad, a professor at the University of Pittsburgh. "Just the transparency alone is unlikely to lower prices."

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