Author: Christina Smith & PHIYEN NGUYEN
Policymakers and advocates often promote drug price transparency to reduce costs and improve equity. While transparency is an important first step toward accountability and informed public budgeting, it does no Guarantee affordable prices or equitable access to medicines.
Transparency has some benefits
Drug price transparency helps show how and why drugs cost as they move along the supply chain (i.e., from manufacturer to pharmacy), making it easier to identify where costs can be reduced or regulated better. By making this information public, transparency enables patients, payers and policymakers to make more informed decisions and encourages manufacturers to price drugs more fairly. Ultimately, it supports a more equitable system that allows patients to better afford and access the treatments they need, improving access to care.
States with drug transparency laws
Despite the lack of federal policy to increase price transparency, states have taken action to provide greater clarity for patients and payers. Vermont was the first state in the United States to enact a drug price transparency law in 2016. Many other states have since followed suit. At least 14 states have passed some version of transparency legislation, although the details and enforcement of these laws vary widely.
For example, only Vermont and Maine require drug companies or insurance companies to disclose the actual price paid after discounts (called the “net price”). Separately, Oregon and Nevada require drug manufacturers to publicly report their profits to state agencies. Connecticut, Louisiana and Nevada require pharmacy benefit managers (PBMs) to report the total amount of rebates they receive, but not the amount for each specific drug. Despite these efforts, no country has yet achieved full transparency across the board. all Pharmaceutical supply chain.
Not enough transparency
Even with clear pricing, Americans still pay about 2.6 times more for prescription drugs than people in other rich countries. Early evidence suggests these laws have done little to curb drug prices. So far, only four states — California, Maine, Minnesota and Oregon — have published analyzes of their own laws. The reports share common concerns: the difficulty of tracking pricing across the supply chain and uncertainty about whether state agencies have the authority (or willingness) to take action when data is incomplete or unreliable.
Most transparency laws do not require detailed cost or profit data, but instead focus on broad price trends. Therefore, the narrow scope makes it difficult to identify the exact drivers of high drug prices. Even if transparency prevents manufacturers from raising prices, these policies do not directly control pricing or define what constitutes an “unreasonable” price increase. Manufacturers can adjust simply by setting higher launch prices or implementing smaller, more frequent increases to stay below reporting thresholds. Still, the result is a system in which drug costs for the same 30-day prescription can vary by $719, even if prices are publicly listed.
What else can be done?
Creating a consistent national framework could replace the current patchwork of state laws and improve oversight of how drugs are priced. For example, drug price transparency in Medicaid (HR 2450) It can do this: It will standardize reporting requirements and reveal how drug prices are set, discounted and reimbursed. But transparency alone doesn’t reduce costs—it only exposes problems.
For transparency to be meaningful, policymakers must address the underlying contracts and incentives that drive high prices.
Hidden rebate deals and opaque pricing structures between PBMs and drugmakers often drive up costs and limit patient savings. Transparency legislation should also be coupled with value-based pricing that links payments to clinical benefits. Federal programs like the Medicare Drug Negotiation Program provide additional leverage, but require broader reforms to reach the commercial marketplace (i.e., where most Americans get prescription drugs but still face high prices).
Nonetheless, transparency can also have negative consequences, especially on a global scale. Full disclosure of drug prices could prompt companies to stop offering lower prices in low- and middle-income countries. To avoid cross-country comparisons, they could raise prices across the board, making the drugs that are needed most less affordable. To make transparency more equitable, policymakers should combine disclosure with safeguards to maintain global affordability.
in conclusion
In short, transparency is necessary but an incomplete solution for the U.S. drug pricing system. Simply articulating how prices are set is not enough. Policymakers need to combine this with other reforms, such as eliminating incentives that encourage high prices, holding pharmacy benefit managers and manufacturers accountable, extending bargaining power beyond Medicare, and protecting access to prescription drugs domestically and abroad. Without these other steps, transparency laws risk highlighting inequities without actually improving them.
PhiYen Nguyen, MPP and Christina Smith, MSW Both are senior policy analysts at the Evidence-Based Policy Resource Center, a partnership with the Boston University School of Public Health. (Christina’s last name in previous THCB appearances was Carvalho)
