Does Opaque Drug Pricing Affect Consumer Trust in Medicine?

By PokitDok Team,

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Anyone who has followed PokitDok knows we are advocates of price transparency, especially as it applies to prescription drugs.

A foundational principle of value-based healthcare is the patient's ability to price shop. However, when medication cost information is obscured by complex networks of suppliers, intermediaries, and payment structures, consumers cannot make value-based healthcare decisions.

That's why The Commonwealth Fund has called for regulations at various levels to impose transparency requirements on drug pricing.

But what are the consumer-level effects of opaque prescription drug pricing? Does withholding the cost of drugs from patients until the point of prescription fulfillment erode consumer faith in the American healthcare system at large?

And if so, how do the actors in this industry make things right?

The Business Case for Transparency

We should take stock of consumer sentiment in healthcare.

For one thing, we know consumers don't trust drug manufacturers all that much. The vast majority of American consumers believe pharma and biotech companies value profits over patient outcomes, Managed Healthcare Executive's Karen Appold reports. Most American consumers do, however, trust their doctors, their nurses, and their hospitals to put patients over money.

We also know that American consumers actively look for up-to-date health information. As Kantar Media points out, about 42 percent of adult Americans "conduct research to be better informed about their treatment options."

It's not a big leap to claim that healthcare customers would want to know the sticker prices for the drugs prescribed for them. Making that information more transparent would probably engender more trust and build goodwill.

But that's not the only reason companies -- drug manufacturers, especially -- should embrace transparent pricing.

They should embrace transparent pricing because it will help their companies grow. As Damiano de Felice at the Access to Medicine Foundation reports, emerging markets present the best opportunities for growth. "These markets are already responsible for about one-quarter of the revenues of several research-based pharma companies, and are expected to contribute 50% to 75% of the growth in global spending on pharmaceuticals in the next four years," he writes.

"In order to fully benefit from the growth of these countries, pharma companies should help reduce barriers to access to medicine and participate directly in the development of sustainable markets."

Gaining access to these markets also means shoring up reputations and behaving ethically. That's the easiest way around government fines, court settlements and "burdensome regulation," de Felice adds.

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When Consumers Lose Trust, the Market Shrinks

We know that when prices get too high for everyday items, many consumers will seek alternatives. When the price of gasoline goes up, for example, the people hardest hit will try to change their transportation habits.

Author Rick Newman writes that when gas prices spike many consumers will first try to simply drive less. As those high prices persist, longer-term trends will develop. Consumers might trade their vehicles for more economical models, or they might move to areas where commuting is less of a financial burden.

Of course, health isn't gasoline. People can't trade in their unhealthy, expensive bodies for healthier, cheaper models. As such, some skeptical consumers will turn to alternative (and dubious) sources of healthcare.

The Pull of Pseudoscience

Fad diets. Herbal remedies for serious illnesses. Fake news. The myth that vaccines cause autism.

Superstition and bad science have been around for millennia. But the misinformed skepticism and pseudoscience that pollute our news feeds today are a symptom of broken trust in certain institutions. By eroding consumer trust, certain actors in the healthcare industry have driven American consumers toward superstitious remedies for their ailments.

What bad timing.

If we have learned anything about social media over the last 20 years, it's that these platforms have an unprecedented capacity to help a lie outrun the truth. They allow fallacies, myths, and superstitions to echo around the world, and our brains have proven inept at parsing those echos from truths.

Vox's Brian Resnick explains why: Since the 1970s, researchers have been exploring what's known as the illusory truth effect, a cognitive bug that makes us think information repeated over and over again is actually true. No matter how absurd the lie, once you hear it enough, one researcher told Resnick, "you'll have this gut-level feeling that maybe it's true."

Worse still, Northwestern University researcher Adam Waytz has demonstrated in multiple studies that firmly held beliefs, no matter how outlandish or objectively false, seldom give way to factual, reasoned counterarguments. If someone wholeheartedly believes that oil pulling will cure oral cancer, no amount of evidence to the contrary from clinical studies will change their mind.

And as more and more superstitious health memes spread, the market of consumers willing to pay for science-based healthcare treatments will get smaller.

That's how an anti-competitive industry cannibalizes itself.

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The Role of Legislation in Bolstering Consumer Confidence

State governments have taken a leading role in pushing for transparency in prescription drug prices.

Vermont, for example, must disclose each year up to 15 prescription drugs on which the state spends its funds, and which of those drugs' wholesale prices have gone up significantly, Zachary Brennan at the Regulatory Affairs Professionals Society writes. (Drug manufacturers have pushed back on this law, Brennan says, because they argue that wholesale acquisition costs don't reflect the discounts and rebates available.)

Roni Shye, also known as The GoodRx Pharmacist, has a few more examples:

  • Nevada's legislature is pushing for price transparency in diabetes medications.
  • Ohio tried but failed to pass a law known as the Drug Price Act, which would have mandated that state agencies receive the same 24 percent discount from pharmaceutical companies that the U.S. Department of Affairs receives.
  • In California, a drug transparency bill known as SB-17 was signed into law in late 2017. This law will require that drug companies give the state 60 days notice when they plan to raise the price of a drug by 16 percent or more over the course of two years.

Market Solutions That Drive a Value-Based Healthcare Model

Support at the legislative level is important, but for value-based healthcare to thrive, it needs a robust foundation of technologies and business models to meet consumer demands for healthcare information.

We know this demand exists, and we are doing our part by making drug prices transparent through the use of APIs. Elsewhere, companies like Accolade are building platforms to help consumers navigate challenging patient experiences.

Research so far indicates that pharmaceutical companies are struggling to keep pace with a healthcare model in which patients "assume greater control over their own health, including the therapeutics they take," McKinsey says, but the path is clear:

Put patients and consumers first, re-gain their trust, then bring those improved business models to fast-growing markets around the world.

Images by: phongphan/©123RF Stock Photo, sarymsakov/©123RF Stock Photo, fergregory/©123RF Stock Photo

The opinions expressed in this blog are of the authors and not of PokitDok's. The posts on this blog are for information only, and are not intended to substitute for a doctor-patient or other healthcare professional-patient relationship nor do they constitute medical or healthcare advice.

  Tags: Consumer, Healthcare consumerism, Price Transparency