Why transparency in drug pricing is more complicated than it seems 

Transparency has become a prominent subject in health care discussions, especially as far as pharmaceutical policy is concerned. There is a loud call for transparent prices, and indeed for greater transparency in the expenses of research and development, patents and clinical trials, and to state how much government financing has gone into the development of drugs.

It sounds reasonable, unquestionable and evident to call for transparency. Shedding light promises clarity, good governance, and better comprehension, and hopefully all-round improvements. But it can also cause damage as much as the sun’s light is useful for our health.

Clear pricing

Some contend that transparency of net prices would decrease drug costs. Knowing what prices have been paid elsewhere underpins the pharmaceutical pricing strategy known as internal reference pricing (ERP)–that is, setting prices in a specified nation by referring to prices in other nations and ensuring that prices do not exceed those in other nations.

Why does this matter? Studies have shown that Germany pays more than Greece for the same medicine. If ERP leads to a standardized cost, so-called differential pricing is undermined-where higher-income nations pay more while lower-income nations pay less-because they refer to low-income countries. While the present scheme — undisclosed net rates and list prices accessible to the public — may have mitigated these ERP side effects, net cost transparency will not. It may even encourage ERP, as not paying more than one’s neighbor is ordinary financial behavior.

Does transparency of prices ultimately undermine fair prices? It varies. In other fields of everyday life, differential pricing exists: for instance, learners and the elderly can purchase a cinema ticket for less than a regular visitor to the cinema-and this is made transparent at the ticket counter. Families in restaurants can get unique discount, and this is stated on the menu card-and so on. Despite transparency, this sort of differential pricing operates because there is some consensus-a’ social contract,’ even-among people that this sort of discrimination is reasonable, and everyone – including non-students, known-seniors, and non-families-accepts these laws.

Price confidentiality

Is the confidentiality of prices any better? It varies. First, it is not a full secret to confidential prices. Both sides of the negotiation, the payer and the manufacturer are familiar with them.