Transparency, the Sunshine Act, and Unintended Consequences

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I read a fascinating editorial in the New Yorker's Financial Page over the weekend that had me wondering if, instead of driving down the costs of healthcare by making financial transactions between physicians and pharmaceutical companies public, the section of the Affordable Care Act could in fact end up making those payments larger. It's something to think about as pharma meeting managers scramble to implement and audit their physician-payment-tracking systems so they know who ate eggs and bacon and who just had toast as well as what they pay physicians who speak at their programs. 

In the editorial, James Surowiecki explores the correlation of corporate CEO pay and how transparent their salaries are. Surprisingly, at least to me, he finds that the easier it is to find out how and exactly much top execs are compensated, the more they get paid. Talk about the law of unintended consequences! While parts of his argument aren't relevant for the pharma/Sunshine situation—for example, I don't believe pharma companies use peer benchmarking pegged to a certain percentile to determine how much to pay top docs to serve on their speakers bureaus or head up their clinical trials (though they must know at least what the going rate is)—the psychology of it absolutely rang my bell.

Surowiecki says that, especially for high-stakes situations (as would be the case for a clinical trial), you don't want to look like you went bargain shopping—you want the best. That's why prices hospitals pay for some procedures go up instead of down after they publicly disclose their fees, he says.

While I've never actually heard anyone say that the point of the Sunshine Act is to reduce the cost of healthcare by reducing what companies pay docs for various services they perform, I always assumed it is one of the act's implicit goals. Instead, companies are spending huge amounts of money to institute and implement transfer-of-value tracking systems, and will spend more huge amounts to monitor and audit them, and it could very well backfire as docs learn what other docs are getting paid for similar work. Instead of the payments dropping, they could very well rise. As I see it, it could go either way.

I guess we'll have to wait and see what happens.

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