The Paradox of Opaque Drug Prices: Why Governments Do the Opposite of What They Say | Health

The countries of the Organization for Economic Co-operation and Development (OECD) – an organization that brings together 38 of the world's most economically developed countries – say they are in favor of greater transparency at the international level when it comes to contracts for the purchase of innovative medicines. These national governments even admit that the current lack of transparency and the proliferation of confidentiality clauses “undermines the accountability” of authorities. This undermines the sustainability of health systems and “weakens” the position of states in negotiations with large pharmaceutical companies.

However, according to a recent report published by the OECD, when the worst comes to the worst, it is governments themselves who opt for such obscure agreements. This paradox is well illustrated by the following data: All countries want more transparency and the majority want to know what prices other governments pay, but “only seven countries express interest in sharing prices.” There are several reasons for this reluctance , but the main reason is that signing the secret clauses demanded by pharmaceutical companies allows governments to “get cheaper prices.”

Miquel Serra – a researcher specializing in health economics at the University of Zurich – explains: “[The OECD report] is a good qualitative work that highlights the contradictions that exist in drug purchasing guidelines. It can be used as an example of the so-called “tragedy of the commonwealth, where all actors end up harmed because they put their particular interests above a common approach that would allow them to achieve better results overall.”

The report is based on two central and seemingly contradictory ideas. The first is that “pharmaceutical markets are increasingly characterized by price opacity.” While buying generics is much more transparent, there are actually two prices for innovative drugs: one that is usually publicly disclosed – the “official” or “list price” – and another, the actual or “net” price Nationally, the governments pay, and what is almost always kept secret. The report warns that “actual transaction prices paid by buyers are increasingly diverging from official list prices.”

The second starting point is that “transparency has become increasingly important in pharmaceutical policy in recent years.” In response to public pressure to improve international price transparency, “the 72nd World Health Assembly adopted a resolution in 2019.” This resolution “calls on countries to share information on prices.”

However, through this study and other previous work, the OECD has seen how countries' desire to do so faces almost insurmountable obstacles. First, there are numerous restrictions in national legislation to restrict public information that is considered confidential. Added to this is a lack of consensus about how far transparency should go – what kind of data it would cover, whether it should be made fully public or only available to other governments – and a lack of knowledge (or even fear) about what it entails associated consequences This step would have an impact on transaction prices.

In fact, the report itself highlights that there are already “more than 30 initiatives to exchange some kind of information” between OECD countries, including the European Medicines Prices Database (EURIPID). However, the authors point out that in all cases these projects exclude the most sensitive information – the prices shared are usually the official ones and not the real ones – and “the confidentiality of net drug prices remains the norm internationally”.

Survey in 43 countries

Given this reality, the aim of the OECD report is to “advance the policy debate” and also analyze the “feasibility” of implementing information sharing systems. To this end, the authors sent a survey to 43 countries – OECD members as well as EU members that are not part of the organization – 34 of which responded in whole or in part to the survey.

The most notable results show that while “20 countries are required [by their national legislation] In order to publish list prices, they often face legal and contractual restrictions that prevent them from sharing net price information.” Spain is an example of a high-income country that publishes these prices through the decisions of the Interministerial Commission on Medicines Prices, although due to does not report the prices actually paid due to confidentiality clauses agreed with pharmaceutical companies.

All countries surveyed were “interested in receiving information about the prices paid by their partners.” Specifically, 24 state that this interest relates to net prices, but only seven are willing to share this information.

“Countries have different views on the likely consequences of disclosing net price information, whether publicly or in a closed network,” the paper continues. A majority believes that “sharing net prices would increase or leave unchanged the bargaining power of national governments.” Still, there is major disagreement over how this would affect prices. Of the 24 countries that responded to this question, seven (the document does not specify which countries) believe that they would “decrease somewhat”, while eight believe that they would not change. Another seven believe they would “increase somewhat” and two more believe prices would “increase significantly.”

There is still disagreement about whether greater transparency could delay a given country's access to new treatments. Eight countries believe that publishing net prices would significantly or slightly delay their access to these prices. Eight assume that there will be no change and seven, on the contrary, assume that publishing the prices would shorten the time frame. Finally, the report states: “18 countries are interested in participating in a pilot mechanism to exchange net price information with other countries.”

José María Gimeno – Professor of Administrative Law at the University of Zaragoza in Spain – believes that the study highlights the uniqueness of the market for innovative medicines: “There are many medicines that have no competition due to patents.” The possibility of improving prices , is therefore limited and the priority of governments is to ensure that their populations have access to them at affordable prices. And for this purpose, a certain level of confidentiality can be beneficial.” According to this expert, Spain is a good example of this since “the opacity of the contracts allows this [the federal government] to achieve better prices than in northern European countries.”

For Juan Oliva – professor of health economics at the University of Castile-La Mancha, a Spanish public institution – the problem with this situation is that no one (except the pharmaceutical companies themselves) can be sure what each country is paying. “It is often said that Spain benefits from this system, that these types of secret negotiations allow it to claim that it is a large country with a good network of hospitals and research in order to obtain cheaper prices.” But we know it doesn't really, as none of this information is published. And the few studies conducted by independent bodies have actually observed a convergence between the real prices that countries pay,” he says.

Most experts surveyed largely agree that there are four problems in the market for innovative medicines. The first is efficiency. “Economic theory suggests that markets with multiple buyers and sellers – where everyone has access to the relevant information – are more efficient. However, in this case there is only one seller due to the monopoly granted by patents. And [this seller] is the only one who knows how much each country pays. The result is a very inefficient market,” complains Miquel Serra.

Regarding this first point, the study and the experts interviewed point to a second question: the sustainability of health systems. In an inefficient market, it is common for resources not to be allocated where they could deliver better patient health outcomes. In the long term, this can endanger the future of those in need of treatment.

The third drawback is democratic quality or “accountability,” as the report puts it. This point was already addressed in the 2019 WHO resolution, which advocated greater transparency and was supported by virtually all countries in the OECD. “Citizens have the fundamental right to know the final use of the resources they support with their taxes,” argues Jesús Lizcano, professor of financial economics and accounting at the Autonomous University of Madrid and former president of Transparency International Spain.

Finally, some voices warn that a lack of transparency could also harm the health and safety of patients. “The opacity is not just limited to pricing, but also affects clinical trials and real-world efficacy and safety data. “Ultimately, we are not sure whether we have all the information or the most up-to-date information – which only pharmaceutical companies have – about what the best treatments might be for a given patient,” concludes Adrián Alonso, head of research and policy advocacy at the Right to Health Foundation.

This Madrid-based civil society organization has long submitted requests for information to the Spanish Ministry of Health on the prices of four prescription drugs: Kymriah, Veklury, Zolgensma and Takhzyro. All cases resulted in lengthy legal proceedings due to opposition from pharmaceutical companies and the ministry itself. They don't want the prices of the drugs to be published.

Sign in Our weekly newsletter for more English-language coverage from EL PAÍS USA Edition