WASHINGTON, D.C. (August 2, 2023) – Hospitals are charging 500% of what they paid for medicines, on average, according to a new analysis from The Moran Company. For the 20 medicines that were analyzed, hospitals charged a range of more than two to more than seven times what they paid, confirming a trend identified in 2018.
The analysis also looked at the amount hospitals receive after negotiations with commercial payers and found that, on average, hospitals are reimbursed almost 200% what they paid to acquire the medicine. Because patient cost sharing is often based on these markups, this practice is driving up costs for patients.
“Hospital markups are driving up patients' out-of-pocket costs, which particularly hurts patients living paycheck-to-paycheck and those in need of extensive medical care,” said Stephen J. Ubl, president and chief executive officer of PhRMA. “This is yet another example of how medicines are being used to pad the profits of hospitals, insurers and PBMs at the expense of patients.”
Despite a myopic focus on drug spending, roughly 30% of every dollar spent on health care in the United States can be attributed to hospitals. Almost 4 times more is spent on hospitals than on retail prescription medicines annually, and this trend is predicted to continue for the foreseeable future.
Of note, nearly 60% of all hospitals in the United States participate in the 340B drug pricing program, and the average markup at 340B hospitals is likely higher. This is because medicines acquired by 340B hospitals are purchased at substantial discounts. While this paper did not separately analyze data specific to 340B hospitals, it estimates using publicly available data that 340B hospitals are reimbursed, on average, almost three times the discounted 340B price of a medicine.
It’s important to take a holistic look at the U.S. health care system when considering any policy changes. As policymakers continue to deliberate on health care costs and affordability, they should factor in the increasing role hospitals play in driving costs for patients and the broader health care system.
View the full Moran Company analysis here.
The Pharmaceutical Research and Manufacturers of America (PhRMA) represents the country’s leading innovative biopharmaceutical research companies, which are devoted to discovering and developing medicines that enable patients to live longer, healthier and more productive lives. Over the last decade, PhRMA member companies have more than doubled their annual investment in the search for new treatments and cures, including nearly $101 billion in 2022 alone.