New analysis confirms hospitals markup prices for oncology therapies

A recent study from The Journal of the American Medical Association (JAMA) examined 61 hospitals using data made public under new requirements from a recent price transparency regulation. The researchers found hospitals, on average, mark up medicines for commercial insurers by more than double the price they paid to acquire them. Put simply, this means hospitals may earn more revenue on medicines than even the biopharmaceutical companies that developed them. This also leads to higher out-of-pocket costs for many patients. The study reinforces what the Berkeley Research Group found earlier this year: more than half of every dollar spent on medicines goes to someone who doesn't make them.

Here are three key takeaways from the JAMA study:

1. “Hospitals may earn greater revenue per unit from cancer therapies than the pharmaceutical companies that manufactured them.” Median price markups for cancer therapies administered to patients with commercial insurance across the hospitals in the study ranged from 118.4% to 633.6% more than what it cost the centers to acquire the medicines.

2. “Hospitals that administer cancer drugs and inflate their prices do not create additional value.” Research shows that spending is higher for medicines administered in hospital outpatient departments relative to non-hospital-owned physician offices because of differences in commercial insurance reimbursement rates, rather than differences in the type or intensity of treatment. Analysis by a large commercial health plan similarly found that costs could be reduced by up to 52% if patients received provider administered medicines in physician offices and patients’ homes rather than hospital outpatient settings.

3. “Proponents of the 340B Drug Pricing Program contend that the profits earned through the administration of discounted drugs cross-subsidize the care of patients with low incomes. However, there is evidence that the program instead provides incentives for hospitals to increase market share among patients with private insurance.” Explosive growth in the 340B Drug Discount Program, particularly in the hospital outpatient setting, has resulted in significant market distortions that drive up the cost of treatment, while failing to ensure that patients benefit from the discounts hospitals receive on medicines. Evidence suggests that hospital profits generated by the 340B program may create financial incentives to further consolidate and to administer medicines in more costly hospital outpatient settings—which ultimately increases costs for patients, employers, health plans and the health care system.

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