For at least 20 years, private and public health insurers in the United States have been confidentially negotiating price discounts for prescription drugs provided in outpatient settings. The negotiated prices are kept a secret so that other customers cannot demand similar deals. It is a practice common in other high-income countries and can apply to hospitals and other inpatient settings as well. With support from the Commonwealth Fund, Steven Morgan of the University of British Columbia School of Population and Public Health surveyed authorities representing public or social health insurance systems in 11 developed countries about their experiences with, and opinions on, this practice.

What the Study Found

The authors looked at public health systems in Australia, Austria, Canada, England, Germany, New Zealand, Norway, Scotland, Sweden, the Netherlands, and the United States (i.e., Department of Veterans Affairs). All systems routinely negotiate confidential discounts for primary care prescription drugs, and even more frequently, specialty drugs.

Discounts range considerably, with the most common discount falling between 20 percent and 29 percent. Respondents from six health systems reported at least one discount of 60 percent or more. Four said that at least half of approved medicines covered by their system are priced using this practice.

A flat rebate is the most common form of discount the surveyed authorities report their systems use. Seven systems use outcomes-based discounts for specialty pharmaceuticals. Respondents saw discounts as benefiting their institutions but not necessarily the health care market more generally.


The confidential survey responses revealed an underlying tension: respondents were concerned about the lack of transparency yet valued the benefit of lower prices. While the frequency and scale of discounts may be artificially inflating the list prices, the authors conclude that the payers involved may feel they have no option but to participate to get the best possible prices for the populations they serve.