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New study finds some hospitals mark up medicine prices at least 700 percent

Holly Campbell   |     September 5, 2018   |   SHARE THIS

A new analysis from The Moran Company found nearly one in five hospitals marks up medicine prices 700 percent or more. With this 700 percent markup, a $150 medicine purchased by a hospital could cost patients up to $1,050.

The study, which was commissioned by PhRMA and looked at total costs and charges for all medicines from 3,792 hospitals using Centers for Medicare and Medicaid Services (CMS) data, also found:

  • Hospitals marked up the price of medicines, on average, nearly 500 percent, a number that mirrors a previous Moran analysis of 20 medicines

  • Eight percent of the hospitals included in the study (320 total) marked up some medicine prices more than 1,000 percent

For hospitals, higher charges are associated with greater profitability. These markups lead to higher costs for everyone — patients, employers and payers. For one, they often lead to higher reimbursement by health plans; more than half of commercial payers reimburse hospital outpatient departments as a percent of billed charges. Additionally, uninsured patients can face the full charge.

It’s also important to note that nearly 50 percent of Medicare acute care hospitals in the United States participate in the 340B drug pricing program, and the average markup at 340B hospitals is likely much higher. This is because medicines acquired by 340B hospitals are purchased, on average, at a 50 percent discount. Consequently, independent economists have called attention to the role of 340B hospitals in driving up health care costs across the country.

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New “Let’s Talk About Cost” campaign ads, launched in conjunction with the study, will be featured in print, radio, digital and social channels in Washington, D.C., and select states. The advertisements highlight how hospital markups can lead to higher costs for patients.

Holly Campbell

Holly Campbell Holly Campbell is a deputy vice president of public affairs at PhRMA focusing on the cost and value of medicines. Prior to joining PhRMA, Holly worked for large and small public relations firms where she provided strategic communications counsel, media relations and partnership expertise to health care and pharmaceutical clients. In her free time, she enjoys taking barre classes, trying new restaurants and spending time with Boss and Poppy, her rescue pups.

Topics: drug cost, 340B, hospitals, Market Distortions

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