By KRISTINA SMITH and 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 not No ensure affordable prices or fair access to medicines.
Transparency has some benefits
Transparency in drug prices helps show how and why drugs cost what they do throughout the supply chain (i.e., from manufacturer to pharmacy), making it easier to identify where costs can be reduced or better regulated. By making this information public, transparency allows patients, payers, and policymakers to make more informed decisions and encourages manufacturers to price drugs more fairly. Ultimately, it supports a fairer system where patients can better pay for and get the treatments they need, improving access to care.
States with drug transparency laws
While federal policy to improve price transparency is lacking, states have taken steps to make things clearer for patients and payers. Vermont was the first One US state will enact a drug price transparency law in 2016. Since then, many others have followed suit. At least 14 States have passed some version of transparency legislation, although the details and implementation differ widely.
For example, only Vermont and Maine require pharmaceutical companies or insurance companies to disclose the actual prices paid after discounts (called “net price“).Alternatively, Oregon and Nevada require drug makers to publicly report their profits to state government agencies. And Connecticut, Louisiana and Nevada mandate pharmacy benefit managers (PBM) for report the total reimbursements they receive, but not the amounts for each specific drug. Despite these efforts, No The State has still achieved total transparency throughout the complete medicine supply chain.
Transparency is not enough
Even with clear pricing, Americans still pay around 2.6 times more for prescription drugs than people in other rich countries. Early evidence suggests that these laws have made little to curb drug prices. To date, only four states – California, Maine, Minnesotaand Oregon – have published analyzes of their own laws. These reports share common points concerns: Difficulty tracking prices throughout the supply chain and uncertainty about whether state agencies have the authority (or the will) to act when data is incomplete or unreliable.
Most transparency laws do not require detailed data on costs or profits, approach instead, in general price trends. As a result, this limited scope makes it difficult to identify the exact factors driving high drug prices. Even when transparency deters manufacturers from raising prices, these policies do not directly control prices or define what constitutes an “unjustified” price increase. Manufacturers can simply adjust configuration higher introductory prices or implementing smaller, more frequent increases to stay below reporting thresholds. Still, the result is a system in which drug costs can vary up to $719 for the same 30-day prescription, even when prices are listed publicly.
What can be done too?
Creating a coherent national framework could replace the current patchwork of state laws and improve oversight of how drug prices are set. For example, the Medicaid Drug Price Transparency Act (HR 2450) could do just that: It would standardize reporting requirements and reveal how drug prices are set, reimbursed, and reimbursed. But transparency alone cannot reduce costs: it only shows the problem.
For transparency to be meaningful, policymakers must ADDRESS the underlying contracts and incentives that drive high prices.
Hidden cashback offers and opaque pricing structures between PBMs and drug manufacturers often inflate costs and limit patients from seeing savings. Transparency legislation should also be accompanied by value-based pricing that links payments to clinical benefits. Federal programs such as Medicare Drug Negotiation Program provide additional leverage, but broader reforms are needed to achieve commercial market (i.e., where most Americans get their prescriptions and still face high prices).
Still, transparency can have disadvantagesespecially globally. Fully public drug prices could force companies to stop offering lower prices in low- and middle-income countries. To avoid comparisons between countries, they could raise prices across the board, making medicines less affordable where they are needed most. To make transparency more equitable, policymakers should combine disclosure with protections that preserve affordability around the world.
Conclusion
In short, transparency is necessary, but it is an incomplete solution to the drug pricing system in the United States. It is not enough to shed light on how prices are set. Policymakers must be accompanied by other reforms, such as eliminating incentives that encourage high prices, holding PBMs and manufacturers accountable, extending bargaining power beyond Medicare, and protecting access to prescription drugs both at home and abroad. Without these other steps, transparency laws risk highlighting injustice without actually improving it.
PhiYen Nguyen, MPP and Kristina Smith Both are senior policy analysts at the Associated Evidence-Based Policy Resource Center, a partnership with the Boston University School of Public Health.. (Kristina’s last name was Carvalho in her previous appearance on THCB)
