Regulatory Focus™ > News Articles > GAO Blasts 'Lack of Price Transparency' for Implantable Medical Devices

GAO Blasts 'Lack of Price Transparency' for Implantable Medical Devices

Posted 06 February 2012 | By

A study  conducted by the US Government Accountability Office (GAO) on 3 February highlights price obfuscation that has ultimately increased prices for consumers receiving implantable medical devices (IMDs).

The GAO study found that hospital expenditures for IMDs increased an average of 4.3% each year, which was effectively in line with the rates of increase for other hospital procedures. Orthopedic procedures represented the fastest growing area in this device class, accounting "for the majority of changes in expenditures for IMD procedures during this period."

However, GAO experienced difficulties in obtaining pricing data. Some hospitals indicated that their pricing information did not account for all discounts and rebates obtained, such as those for volume discounts. Several respondents also indicated that their contracts included confidentiality clauses that prevented them from revealing their pricing data.

"Specifically, all of the five manufacturers, five GPOs, three hospital systems, and one of the two small hospitals we interviewed reported that all or almost all of their contracts included language that restricted information disclosure to some extent," wrote GAO. "For example, some confidentiality clauses allow hospitals to share pricing information with other hospitals that are part of their system, and others do not."

The "substantial variation" in prices paid by hospitals for IMDs indicates that a lack of transparency may affect a hospital's bargaining power and ability to extract "more favorable prices" from manufacturers, wrote GAO.

While transparency won't solve all pricing disparities-GAO notes that some physicians exhibit strong preferences that preclude price substitution-it would go a long way towards reducing unnecessary costs to public and private insurers, wrote GAO.

While GAO did not make any specific recommendations aside noting that increasing transparency would be good on balance, it did solicit feedback from industry groups including AdvaMed and the American Hospital Association (AHA). AdvaMed indicated that "there are many other factors […] that influence IMD prices," and that confidentiality clauses are not unique to IMDs or the medical device industry.

AHA agreed with GAO that "much of [the] device price is driven by negotiations," and that a lack of transparency places purchasing hospitals at an inherent disadvantage.

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