Hidden rebates mask true prices of pharmaceutical drugs in the market

Washington

COMPETITION can work in the pharmaceutical industry in counter-intuitive ways: New drugs typically enter the market with higher price tags than existing medications, and then all the prices rise. In the case of Gleevec, a breakthrough cancer drug approved in 2001, the advent of pricier and more potent competitors seemed to speed up the older drug's list price increases.

What remains frustratingly opaque, however, is precisely what the prices are. The drug industry commonly points out that list prices are essentially fiction; a drug's real price is a secret number that pharmaceutical companies develop in negotiations with the firms that provide prescription drug benefits. List prices are a proxy, a starting point against which rebates are applied - but drug companies refuse to disclose the rebates and discounts, leaving the exact, "real" price basically mysterious.