Frequently asked questions accompanying One Drug, Many Prices: A Proposal to Reform US Healthcare Pricing. Back to overview.
These are the questions most commonly raised about the three reforms. They are answered here rather than in the body of the note so that readers can scan and expand only what interests them.
No individual reform is new. Each of the three has been studied, advocated, or partially implemented. What is new is the claim that they belong together, and the specific design that makes them enforceable as a single system. Reform 1 without Reform 2 produces a powerful buyer facing private-pay loopholes that erode its gains, which is the current situation. Reform 2 without Reform 1 imposes a uniform rate with no one empowered to set it low. Either without Reform 3 remains exposed to the secret side-deals and misreporting that have defeated past price-control efforts. The contribution of this note is to integrate the three.
Reform 1 (consolidated negotiation). That the federal government leaves bargaining power on the table by fragmenting its purchasing across Medicare, Medicaid, the VA, the DoD, the IHS, and other programs has been documented repeatedly. The CBO reports that prices paid by federal programs for identical drugs differ by wide margins, with the VA paying roughly half of Medicare Part D for selected drugs (CBO 2021; GAO 2021). Gusmano and colleagues show that peer nations achieve lower fee-for-service prices precisely by negotiating as unified blocs (Gusmano et al. 2020). Consolidated purchasing works at smaller scales inside the US federal system: the Federal Supply Schedule serves the DoD, IHS, Federal Bureau of Prisons, and Public Health Service off VA-negotiated contracts, and state-level pooled purchasing coalitions such as the Sovereign States Drug Consortium extract supplemental Medicaid rebates of 5 to 15% beyond federal levels. Under the Inflation Reduction Act, Medicare's first exercise of negotiation, confined to ten drugs, cut net prices by roughly 22% on average (KFF 2024). Reform 1 scales the same mechanism from a dozen fragmented programs to one Bloc covering every federal healthcare purchase.
Reform 2 (uniform pricing as a condition of market access). The case for all-payer pricing has been argued in the US health-policy literature for decades. Reinhardt's sustained critique of multi-price systems showed that price discrimination across payers generates opacity, cost-shifting claims that do not hold up empirically, and persistent exploitation of the weakest payers (Reinhardt 2011). Subsequent work confirmed the empirics: White and Frakt find little evidence that lower Medicare payments push private payments up, undercutting the industry's standard defense of the multi-price system (White 2013; Frakt 2011). Anderson and Herring set out the design case for a US all-payer rate-setting framework drawing on the German, Swiss, and Japanese examples, and on Maryland's all-payer hospital system, which has operated since 1977 (Anderson and Herring 2015). Emanuel and coauthors advanced a version of the same proposal in a widely-cited New England Journal of Medicine piece (Emanuel et al. 2012). Cooper and colleagues document the magnitude of what all-payer pricing would undo, namely private-insurer prices that run at roughly 2.5 times Medicare rates, with the largest gaps in concentrated hospital markets (Cooper et al. 2019). Conditioning federal market access on pricing behavior is also not new: the 340B Drug Pricing Program requires manufacturers that participate in Medicaid to sell outpatient drugs to safety-net providers at roughly 25 to 50% below list, and the Medicaid Best Price rule requires manufacturers to offer Medicaid the lowest price offered to any non-federal purchaser. Both show that conditional-access mechanisms are workable and durable. Reform 2 combines the all-payer tradition with the conditional-access enforcement tool.
Reform 3 (price transparency). Empirical evaluations of price-transparency interventions consistently find price reductions where transparency is actually achieved. The CalPERS reference-pricing program, which covers California's public employees, reduced prices by 17 to 26% and shifted patient volume toward lower-priced facilities (Robinson and Brown 2013; Robinson, Brown, and Whaley 2015). New Hampshire's HealthCost tool produced modest price reductions for shoppable services, particularly imaging (Whaley 2019). Singapore publishes hospital-bill benchmarks for common procedures by provider and has induced visible price competition. These precedents reach only subsets of the market. The US Hospital Price Transparency Rule (2021) and Transparency in Coverage Rule (2020) are national in scope but have largely failed to deliver usable transparency because they delegate posting to thousands of providers and insurers and impose symbolic penalties as low as $300 per day, a trivial sum for a system billing millions (CMS 2021). Reform 3 departs from the delegated-posting model: because every price is set in a Bloc contract, the Bloc is the natural publisher of record.
What is incremental vs. novel. The consolidation of federal purchasing (Reform 1) is an incremental extension of existing mechanisms like the Federal Supply Schedule. The all-payer and conditional-access tools in Reform 2 draw on an established tradition and on existing federal programs. The transparency component (Reform 3) is incremental in substance but novel in design, since it removes the weakest link (provider-side posting) from existing transparency regimes. The novel contribution is the integrated system, in which each reform closes a loophole the others leave open.
References.
Bloc negotiators are paid as Senior Executive Service (SES) employees: a fixed salary, a performance bonus capped at 10% of base, and no other monetary upside of any kind. Bonuses are awarded on periodic peer-reviewed evaluations rather than per-contract outcomes.
Two failure modes must be guarded against. The first is laxness: salaried employees with no upside may have weak incentives to bargain hard. The second is gaming: employees paid against measurable outcomes will optimize for those outcomes at the expense of unmeasured ones. For complex public-sector roles like Bloc negotiation, where many dimensions of performance (supply security, manufacturer participation, clinical quality, equity) are not measurable, the economics literature consistently identifies the second failure mode as the more dangerous, and finds that low-powered incentives outperform high-powered ones (Holmström and Milgrom 1991; Prendergast 1999; Frey and Jegen 2001; Bénabou and Tirole 2003, 2006; Dal Bó, Finan, and Rossi 2013; Finan, Olken, and Pande 2017). The 10% bonus cap reflects a deliberate choice in the safer direction; structural anti-corruption controls (no outside payments, no industry employment for twelve months after tenure, public reporting of contracts) carry the load that high-powered incentives cannot.
References.
Fines must be large enough that a provider considering a deliberate overcharge, or negligent about avoiding one, expects to pay more than they would gain. The challenge is that few patients are likely to notice or file complaints over modest overcharges. If fines equal only the overcharge itself, providers can overcharge routinely, pay the occasional fine when caught, and still profit. Meaningful deterrence therefore requires a multiplier.
A multiplier on the order of 100 times the overcharge is a reasonable starting point. A $50 overcharge triggers a $5,000 fine, which is salient to the provider and still small enough to attract complaints if the overcharge is genuine. The multiplier need not be fixed at 100 by statute; it should be calibrated to whatever number induces routine compliance.
Fines alone are not enough. Repeat offenders should lose their Bloc contract entirely, which for most providers means losing access to the majority of the market. Termination, not the fine, is the real deterrent against systematic abuse. The fine handles single-instance overcharges; contract termination handles patterns.
Providers and hospitals could no longer maintain wide price gaps across payers. An average private insurer in 2022 paid 2.5 times the Medicare rate for hospital services, with the largest gaps in concentrated markets where a single hospital chain dominates (RAND 2024; Cooper et al. 2019). Under the Bloc, that gap would collapse and price discrimination across payers would disappear. Hospitals in concentrated markets would face the largest reductions, because they currently extract the largest markups. Provider margins on routine services would compress, but volume would stabilize and billing-and-collection overhead, much of which exists to sustain price discrimination, would shrink.
The insurance market would survive but would compete on different ground. Today, insurers compete partly by negotiating secret prices with providers and using narrow networks to steer patient volume toward providers who agreed to lower rates. Under Bloc-wide pricing, every contracting provider charges the same price to every payer, so narrow networks lose their rationale; no insurer can win a discount by restricting who its members can see. Competition shifts to coverage design: what fraction of the uniform price each plan covers, what services are included, what the premium is, and how generous the cost-sharing is. Insurers remain distinct entities competing for enrollees, but the secret-price arbitrage that drives much of today's market disappears.
The rebate ecosystem would cease to exist, and the drug supply chain would undergo an overhaul that eliminates many intermediaries. There would be no rebates to capture, no spread pricing to exploit, and no opaque price differentials to arbitrage. Pharmacy benefit managers, whose business model depends on these arrangements, would lose their function. The clinical role that PBMs sometimes fill, maintaining formularies and handling claims processing, is absorbed into the Bloc's negotiation and price-lookup infrastructure. Manufacturers, wholesalers, and pharmacies would continue to operate, but the economic rents extracted by intermediaries sitting between them would be eliminated.
No. Each seller chooses its own price. What the proposal enforces is non-discrimination: whatever price a provider sets, the provider must charge it to every patient regardless of who is paying. Sellers are not required to contract with the Bloc; any provider unwilling to accept the terms is free to walk away. The proposal sets no price; it conditions access to a large pool of publicly-funded patients on a single, transparent rate.
No. Centrally planned systems dictate what services are provided, in what quantities, to whom, and how resources are allocated. This proposal does none of that. It does not create rationing, waiting lists, or regional allocation. It does not tell providers what to produce or patients whom to serve. It does not replace the market for insurance with a government plan; insurers remain distinct entities competing on coverage and cost-sharing. The market thrives. Price transparency promotes a more competitive and efficient market. What disappears is secret prices that result in information asymmetry, inefficiency, and exploitation.
No, though it draws on the same tradition. Classic all-payer pricing enforces a single regulated price per service that every payer must pay. Maryland's hospital system works this way: the state sets one rate for a procedure, and Medicare, Medicaid, and every private insurer pay it.
Reform 2 is narrower. Each provider negotiates its own rate with the Bloc. Prices therefore differ across providers. The rule the Bloc enforces is non-discrimination within a given provider: whoever contracts with the Bloc must charge the Bloc-negotiated rate to every payer, including the uninsured. Providers that do not contract with the Bloc remain free to set different prices for different payers.
So the Bloc's constraint is not "all insurers pay the same price for the same service" (the all-payer rule) but "a provider that accepts the Bloc's patient pool may not discriminate among payers" (a non-discrimination rule, implemented as a contract condition).
Yes. Bundled payment and price transparency are independent design choices. Bundling, including the diagnosis-related group (DRG) system used by Medicare for inpatient hospital stays, was developed as a cost-control tool. It pays a fixed amount per episode of care rather than per item, transferring efficiency risk to the provider and removing the incentive to over-test and over-treat. It has nothing to do with whether prices are visible.
Several developed countries publish DRG payment schedules. A patient in Germany, France, Japan, or Australia can look up what their hospital is paid for, say, an uncomplicated knee replacement before being admitted. The bundle itself is the priced unit, and that priced unit is published. The same approach works under this proposal: each bundled episode appears in the lookup system as a single price, just as each individual fee-for-service item appears as a single price. Whether the contracted unit is a CPT code, a DRG, a bundle, or a formula, the rule is the same: if the contract sets the price, the database posts the price.
The only situation that genuinely complicates transparency is open-ended pricing, where the contract specifies that the provider will be paid whatever the provider bills, with no preset schedule. The proposal rules this out. Every contract with the Bloc must specify, in advance, the price of every covered service or episode.
Some will. A concierge orthopedic surgeon or dermatologist serving an exclusively wealthy clientele can exit the system, just as such providers do today. The proposal does not depend on retaining them. The overwhelming majority of providers, including nearly all primary care physicians, general surgeons, and community hospitals, cannot afford to forfeit access to the Bloc's patient pool. Those who opt out serve a luxury market with negligible effect on the system's overall cost structure.
Under the Bloc, each provider negotiates its own rate. A rural hospital with high fixed costs and low patient volume will negotiate a higher rate. It has genuine leverage: the Bloc cannot leave its beneficiaries with zero access in a region served by a single hospital. Transparent negotiation yields a sustainable price. The hospital does not close; it charges what it needs to and justifies that price openly. Where additional support is warranted, existing mechanisms such as Critical Access Hospital designations and Disproportionate Share Hospital payments provide direct subsidies, and these can be maintained or adjusted without preserving a broken pricing system.
No. The United States is the most profitable pharmaceutical market in the world. Every other developed nation negotiates drug prices through centralized purchasing and pays a fraction of US prices. A manufacturer that withdraws from the US market to avoid consolidated negotiation would be abandoning its highest-margin customers in favor of markets that pay far less. This is a claim made by industry lobbyists, not a credible economic threat. For the vast majority of drugs, withdrawal is irrational. For niche drugs with very small patient populations, targeted accommodations can be made without abandoning the overall pricing framework.
Only modestly, and mostly at the low-value end of the pipeline. Applying the standard market-size elasticities (Acemoglu and Linn 2004; Dubois et al. 2015) to the Inflation Reduction Act negotiation provisions, the Congressional Budget Office (2022) estimated about 1% fewer new drugs over 30 years, with firms cutting their lowest-value projects first. Independent ratings classify only 10 to 13% of new approvals as offering a real clinical advantage over existing options (Light and Lexchin 2012; Naci, Carter, and Mossialos 2015), so even a small quantity effect falls largely on me-too drugs. Public funding underwrites the upstream science: NIH research contributed to every one of the 210 new drugs approved between 2010 and 2016 (Cleary et al. 2018). And every other developed country negotiates drug prices, yet European, Japanese, and Swiss firms produce roughly proportionate innovation per dollar of sales (Kneller 2010). The claim that negotiation would halt innovation is not supported by the evidence.
References.
Total healthcare spending is very likely to fall. The Bloc is larger than any single existing program, and larger insurers pay lower prices. Commercial rates, which currently exceed Medicare rates by multiples, would collapse to the negotiated rate. The savings to employers, patients, and state Medicaid budgets would be substantial.
The federal budget effect is theoretically ambiguous, with two opposing forces. The downward force is the gain from negotiating as a single large buyer rather than a dozen fragmented ones. The empirical record shows this gain can be enormous: even modest exercises of consolidated buying power, such as the VA's drug-price negotiation or the limited Medicare negotiation under the Inflation Reduction Act, have produced price reductions on the order of 50%. The upward force is that some providers, once they can no longer cross-subsidize from commercial payers, may demand higher rates from the Bloc than they accept from Medicare alone. The downward force is likely to dominate, because the consolidation gain applies to the full federal portfolio while only a minority of providers genuinely depend on commercial cross-subsidies to break even. The most plausible outcome is a meaningful net reduction in federal healthcare spending alongside the larger system-wide reduction. The precise magnitude is an empirical question that future research could investigate.