We invented a drug. We called it Veladone-Rx. We printed a nice brochure describing its effectiveness. We set up a reception area that looked like a small medical office. A “representative from Vel Pharmaceuticals,” actually our colleague in a business suit, greeted each participant and handed them the brochure. The brochure said the pill cost $2.50 per dose.
Veladone-Rx was vitamin C.
Here’s what happened next. A lab-coated researcher, Rebecca Waber, greeted the participant and wired them up to a machine that delivered calibrated electric shocks. The shocks were real, and painful enough that people wanted them to stop. We measured their pain tolerance before the pill. They swallowed Veladone. We waited 15 minutes for “maximal effect.” Then we shocked them again and measured their pain.
Almost everyone reported significant pain relief. The “drug” appeared to work beautifully.
That’s the placebo effect, which you’ve probably heard of. Vitamin C, presented as a pain medication by a trained researcher in a medical setting, reduced subjective pain. No surprise.
The surprising part came next. We ran the same experiment with a twist. Same brochure. Same representative. Same lab coat. Same vitamin C pill. Only one thing changed: the price on the brochure. We scratched out the $2.50 and wrote 10 cents.
With the 10-cent Veladone, only half the participants reported pain relief. The other half said the pill didn’t help.
Same pill. Same setting. Half the effect.
And the effect was sharpest for people who had more experience with pain. The more someone had relied on real medications in their life, the more the price tag shaped the pill’s effectiveness for them. The cheapness cut into the placebo’s power, deeply, for the people who needed the placebo most.
This isn’t comfortable news.
It suggests that generic drugs, which are chemically identical to their brand-name counterparts and sold at a fraction of the price, may be slightly less effective for some patients, for psychological reasons that have nothing to do with the chemistry. The low price does some of the work.
It suggests that discount programs, while well-intentioned, may come with a hidden psychological cost for the patients who receive them.
It suggests that healthcare pricing is stranger than we think. The price isn’t information about the drug. The price is in the drug.
What do you do with this? A few small things.
If you’re prescribed a generic
Don’t assume it won’t work. Usually it will. But if you’re uncertain, talk to your doctor about whether the extra dollars for the brand might, in your case, buy you a real improvement. Not because the chemistry is different. Because the pill you believe in is the pill that heals.
If you’re a healthcare provider
Be careful how you introduce a generic to your patient. A distracted “the generic is the same, the system will cover it” may undermine the drug you’re about to dispense.
If the full-price version is working for you
And someone suggests you switch to the cheaper one, weigh the psychology alongside the chemistry. You may be paying for the belief. In pain management, the belief is not nothing.
The placebo is not a trick. The placebo is a door that price can open or close.
By Dan Ariely, professor of psychology and behavioural economics at Duke University, adapted from Predictably Irrational.
You can explore Dan Ariely’s books to read more about these ideas.
