High Drug Prices Are Hospitals’ Fault, According to Drug Makers

By September 6, 2018Commentary

Drug prices are high and due to copays and coinsurance, are a major source of financial pain for patients.  Various participants in the drug making, distribution and retailing chain are busy creating sponsored reports to point the finger at each other.  Today we report on the drug manufacturers issuing a study saying it is hospitals’ fault.   (PhRMA Study)  You have to read these sponsored studies with a grain of salt, okay, maybe a few tablespoons.  But there is good reason to think that everyone finds a way to get a piece of the hefty drug margins pie; after all look at hospitals’ behavior in regard to the 340B program.  The report focuses on what hospitals charge for drugs that they buy and then in essence resell as part of a patient’s treatment and is a brief follow-up to an original analysis done last year, which showed that for 20 common drugs hospitals marked up their charges by an average 487% of acquisition cost, and actually received as payment from commercial payers, 252% of acquisition.  Whoa, that is a nice margin if you can get it, and apparently if you are a hospital you can.  Oh but wait, maybe it’s because increasingly you are the only hospital in town.

The update looks more broadly at all hospital-administered drugs.  Guess what, the hospitals aren’t quite as greedy in this updated analysis; only an average 479% markup.  53% of hospitals have average markups of 200% to 400%.  17% charge 7 times the acquisition cost of the medicine or more and 8% have average markups of 1000% or more.  Now that is really impressive and ballsy.  Not only do these higher costs undoubtedly add to premiums, but they increase member cost-sharing dramatically.  Hospitals should be ashamed, but I can assure you they aren’t.  Got keep those multi-million dollar pay packages coming for upper management, especially in a non-profit institution.   And don’t fear that any publicity these results get might lead to a crack-down of some type; hospitals give lots of political contributions to ensure that they can keep acting this way.  Makes me want to puke; hope I don’t need any hospital-administered drugs to treat that.  And tomorrow, we will learn that the PBM industry thinks drug manufacturers are to blame for higher prices.  Personally, I think there is lots of attribution of bad acting for everybody in the chain.

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