The paradox of non-transparent drug prices: Why governments do the opposite of what they say 

The countries that belong to the Organization for Economic Co-operation and Development (OECD) — an organization that brings together 38 of the most economically developed countries in the world — claim to be in favor of greater transparency at the international level when it comes to contracts regarding the purchase of innovative medicines. These national governments even admit that the current lack of transparency and the proliferation of confidential clauses “erode the accountability” of public authorities. This undermines the sustainability of healthcare systems and “weakens” the position of states when they negotiate with large pharmaceutical companies.

However, according to a report recently published by the OECD, when push comes to shove, it is the governments themselves that opt for these types of obscure agreements. This paradox is well-illustrated by the following data: all countries want greater transparency and the majority want to know the prices paid by other governments, but “only seven countries voice interest in wanting to share prices.” There are several reasons for this reluctance, yet the main one is that, by signing the secret clauses required by pharmaceutical companies, governments are allowed “to obtain cheaper prices.”

Miquel Serra — a researcher at the University of Zurich specializing in Health Economics — explains: “[The OECD report] is a good qualitative work that shows the contradictions that exist in the policies for purchasing medicines. It can be used as an example of the so-called ‘tragedy of the commons,’ in which all the actors end up being harmed by putting their particular interests before a shared approach that would allow them to obtain better overall results.”

The report is based on two key and apparently contradictory ideas. The first is that “pharmaceutical markets are increasingly characterized by price opacity.” While the purchase of generics is much more transparent, innovative medicines actually have two prices: one that’s usually made public — the “official” or “list” price — and another that’s the real or “net” price, which is the one that national governments end up paying, and which is almost always kept secret. The report warns that “actual transaction prices paid by purchasers increasingly diverge from official list prices.”

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

Through this study and other previous works, however, the OECD has seen how countries’ desire to do this is met with almost insurmountable obstacles. Firstly, there are numerous limitations existing in national legislation to restrict public information that’s considered sensitive. Added to this is a lack of consensus on how far transparency should go — what type of data it would affect, whether to make it fully public or only accessible to other governments — and a lack of knowledge (even fear) about the consequences that taking this step would have on transaction prices.

In fact, the report itself highlights that there are already “more than 30 initiatives to share some type of information” among OECD countries, including the European Database on Drug Prices (EURIPID). The authors, however, 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 “confidentiality of net medicine prices remains the norm internationally.”

Survey of 43 countries

Faced with this reality, the objective of the OECD report is to be helpful “to advance the policy debate” and also to analyze the “feasibility” of implementing systems to share more information. To do this, the authors sent a survey to 43 countries — the OECD members, as well as EU members that are not part of the organization — of which 34 responded totally or partially to the survey.

The most notable results show that even though “20 countries are required [by their national legislation] to publish list prices, they often face legal and contractual constraints that prevent them from sharing net price information.” Spain is an example of a high-income country that publishes these prices through the resolutions of the Interministerial Commission on Drug Prices, although it also doesn’t report the prices actually paid, due to confidentiality clauses agreed upon with pharmaceutical companies.

All the countries consulted are “interested in gaining information on prices paid by their counterparts.” Specifically, 24 declare that this interest refers to net prices, yet only seven are willing to share this information.

“Countries have different views on the likely consequences of disclosing net price information, either publicly or in a closed network,” the paper continues. A majority considers that “sharing of net prices would increase or leave unchanged” the bargaining power of national governments. Still, there’s much division when assessing how this would affect prices. Of the 24 countries that responded to this question, seven (the document does not specify which ones) believe that these would “fall a little,” while eight opine that they wouldn’t change. Another seven think that they would “rise a little” and two more believe that prices would “increase significantly.”

There’s still a division when it comes to assessing whether greater transparency could delay a particular country’s access to new therapies. Eight countries believe that publishing net prices would significantly or slightly delay their access to them. Eight think there would be no change and seven estimate, on the contrary, that publicizing prices would shorten the timeframe. Finally, the report states: “18 countries are interested in participating in a pilot mechanism for sharing 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 drugs that have no competition, because of patents. The ability to improve prices is therefore limited, and the priority of governments is to ensure that their populations have access to them at prices they can afford. And, to this end, a certain amount of confidentiality can be beneficial.” According to this expert, Spain is a good example of this, since “the opacity of the contracts allows [the federal government] to obtain better prices than Northern European countries.”

For Juan Oliva — professor of Health Economics at the University of Castilla-La Mancha, a public Spanish institution — the problem with this situation is that no one (except the pharmaceutical companies themselves) can be sure of what each country is paying. “It’s often said that Spain benefits from this system, that this type of secret negotiations allows it to assert that it’s a large country, with a good network of hospitals and research, so as to attain cheaper prices. But we don’t really know, because none of this information is made public. And the few studies carried out by independent entities have actually observed a convergence between the real prices that countries pay,” he says.

Most of the experts consulted largely agree in pointing out four problems in the market for innovative medicines. The first is efficiency. “Economic theory says that markets with several buyers and sellers — in which everyone has access to the relevant information — are more efficient. In this case, however, there’s 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,” Miquel Serra laments.

In relation to this first point, the study and the consulted experts point to a second issue: the sustainability of healthcare systems. In an inefficient market, it’s common that resources are not allocated where they could offer better results, in terms of patient health. In the long-term, this can put the future of those requiring treatment at risk.

The third drawback is democratic quality, or “accountability,” in the words of the report. This point was already addressed by the WHO resolution of 2019, which advocated for greater transparency and was supported by practically all the countries that make up the OECD. “Citizens have the fundamental right to know the final destination of the resources they support with their taxes,” argues Jesús Lizcano, a professor of Financial Economics and Accounting at the Autonomous University of Madrid and former president of Transparency International Spain.

Finally, some voices warn that the lack of transparency can also be detrimental to the health and safety of patients. “Opacity isn’t only limited to prices, but also surrounds clinical trials, data on efficacy and safety in the real world. In the end, we’re not sure that we have all the information or the most up-to-date information — which only pharmaceutical companies have — on what the best treatments for a specific patient may be,” concludes Adrián Alonso, head of Research and Political Advocacy at the Right to Health Foundation.

This Madrid-based civil society entity has long been filing access-to-information requests with the Spanish Ministry of Health regarding the prices of four prescription medicines: Kymriah, Veklury, Zolgensma and Takhzyro. All cases have resulted in lengthy legal proceedings, due to the opposition put up by the pharmaceutical companies, as well as by the ministry itself. They don’t want the prices of the medicines to be made public.

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