Washington, D.C. (September 5, 2018) — Nearly one in five hospitals marks up medicine prices 700 percent or more, according to a new analysis from The Moran Company that was commissioned by the Pharmaceutical Research and Manufacturers of America (PhRMA). This means that if a hospital purchased a medicine for $150, a 700 percent markup could result in patients being billed $1,050 for that medicine. Additionally, the analysis found that 320 hospitals – eight percent of those included in the study – marked up some medicine prices more than 1,000 percent.
The analysis used Centers for Medicare and Medicaid Services (CMS) data that included total costs and charges for all medicines from 3,792 hospitals to conduct the study. On average, hospitals included in the study marked up the price of medicines nearly 500 percent, consistent with an analysis of 20 medicines previously conducted by Moran.
“Hospitals receive billions of dollars every year in negotiated and mandatory discounts from biopharmaceutical companies while simultaneously increasing the price of these medicines to insurers and patients,” said Stephen J. Ubl, president and chief executive officer of PhRMA. “In order to make medicines more affordable for patients, we must address the role hospital markups play in driving up medicine costs.”
Markups on medicine prices often lead to higher reimbursement by health plans. More than half of commercial payers reimburse hospital outpatient departments as a percent of billed charges, and uninsured patients face the full charge. Hospitals have incentives to increase markups as higher charges are associated with greater profitability.
Of note, average markups are likely much higher at hospitals that participate in the 340B drug pricing program because medicines acquired by 340B hospitals are purchased, on average, at a 50 percent discount. Nearly 50 percent of Medicare acute care hospitals in the United States participate in this program, contributing to hospitals’ role in driving up health care costs across the country.
The report is accompanied by new advertisements as part of PhRMA’s “Let’s Talk About Cost” campaign highlighting how hospital markups can lead to higher costs for patients. The new ads will be featured in print, radio, digital and social channels in Washington, D.C., and select states.
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 more than $600 billion in the search for new treatments and cures, including an estimated $65.5 billion in 2016 alone.