Pharmaceutical Pricing Fairness

Understanding and Assessing Fairness in the Branded Prescription Drug Market

Lead Investigator:  Antonio Trujillo

Many specialty prescription drugs have entered the market with list prices between $50,000 and $750,000 and many manufacturers have recently announced substantial price increases for existing drugs. These prices and price increases have caught the attention of both the public and policymakers. Economic principles indicate that the market, or the laws of supply and demand, set the price. However, in the context of healthcare where the public’s health is at risk, there is a growing concern that the price the market settles on is often not “fair.” While fairness has been studied in other sectors of the economy, few have tried to study this in healthcare or particularly prescription drugs. The field of behavioral economics has developed the dual entitlement theory that provides a framework for thinking about fairness in the healthcare context. In this project, we use this theory as a motivating framework to study what factors determine the price, fair or unfair, of a branded prescription drug, why prices are perceived as unfair, and what policies might have the greatest impact on reducing drug prices. We have surveyed medical students and economists thus far and although their perspectives may vary, there is a consensus that policies making prescription drugs more affordable for patients is a key component of “fairness” in this market. In future work, we aim to study these questions around fairness in a broader audience.