The consequence of secret prices: the politics of physician preference items

This paper assesses the implications for policy of recent aggressive efforts by manufacturers to enforce price-confidentiality clauses in contracts with hospitals for purchases of physician preference items (PPIs) such as implantable medical devices. Secrecy clauses prevent hospitals from revealing prices to third parties that help them negotiate prices and to surgeons who specify which device brands and models hospitals purchase. Litigation focused the attention of journalists and policymakers on problems that result from the asymmetry of information between buyers and sellers in the market for PPIs. Legislation is pending.