WASHINGTON, D.C. (February 4, 2021) –A new report from the Pharmaceutical Research and Manufacturers of America (PhRMA) uncovers the system of incentives that lead hospitals to drive up costs for patients and employers by marking up the price of medicines. While the supply chain for medicines purchased at pharmacies has been well documented, little information is available about the distribution and pricing of medicines administered in the hospital outpatient setting.
The report sheds light on this critical but poorly understood part of the market for prescription drugs, explaining how the system routinely rewards hospitals for extracting two to three times more revenue from the sale of a medicine than the company who discovered and made it. Specifically, the report documents how hospital markups, consolidation, the site of care in which a medicine is administered and the 340B program impact the cost of medicines and health care spending.
“Many actors – including hospitals, insurers and other middlemen – influence what patients pay out of pocket for prescription medicines. In recent years, nearly half of spending on brand medicines went to someone other than the research companies that developed the medicines,” said Stephen J. Ubl, president and chief executive officer of PhRMA. “This new report brings transparency to the role hospitals often play in determining the cost of medicines and ultimately what patients pay out of their own pockets.”
Key findings from the report include:
“The status quo isn’t working for patients, and we want to help fix it,” continued PhRMA’s Stephen Ubl. “We are going to continue to highlight the ways middlemen, underregulated programs and a broken system contribute to the pain patients feel when it comes to paying for their prescription drugs. We stand ready to work with all policymakers and all health care stakeholders to develop a holistic solution, because that’s the only way to make a real difference for patients.”
This new report expands on a previous report that looked at how the flow of payments through middlemen in the pharmaceutical supply chain affects the costs of prescription medicines that patients pick up at the pharmacy.
View the full analysis on hospital practices 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. Since 2000, PhRMA member companies have invested nearly $1 trillion in the search for new treatments and cures, including an estimated $83 billion in 2019 alone
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