New study: Hospitals hike cancer drug prices

How much do U.S. hospitals mark up the price of parenteral cancer therapies for patients with private health insurance?

Researchers set out to answer that very question in a new study published in JAMA Internal Medicine. Their findings revealed that hospitals—not manufacturers—often determine what patients and insurers pay for lifesaving cancer drugs.

The study showed that hospitals—not drug manufacturers—often determine what patients and insurers pay for lifesaving cancer drugs.

The research began with a deep dive into the prices of 25 top-selling cancer therapies at more than 60 National Cancer Institute-designated cancer centers. Researchers then analyzed how those prices compared to acquisition costs, or the drug’s average sales price when taking into consideration all discounts and rebates.

In their own words, researchers discovered that “median price markups across centers ranged from approximately 120% (sipuleucel-T) to 630% (leuprolide) of estimated hospital acquisition costs.”

In other words, for every cancer therapy analyzed, hospitals are charging insurers at least double the drug’s acquisition cost.

Patients ultimately pay

Patients pay a steep price for these cost hikes. Although it’s private insurers directly footing the bill for these heavily marked-up cancer therapies, it’s ultimately patients who suffer. Insurers offset revenue losses from hospital markups by charging patients higher premiums and out-of-pocket costs.

While private insurers directly foot the bill for these heavily marked up cancer therapies, it’s ultimately patients who suffer.

The JAMA isn’t the only study that supports this conclusion. Consider that more than half of total spending on brand-name medicines in 2020 went to “non-manufacturer stakeholders—including PBMs [pharmacy benefit managers], health plans, hospitals, the government, pharmacies, and others.”

This is a big problem. Data show an alarming trend of premiums rising faster than inflation and wages over the last decade.

Drug prices, by comparison, are declining. Last year marked the fourth consecutive year of declines in the growth of list prices. According to one report, the growth  of drug list prices “slowed sharply, from 13.5% in 2014 to 4.3% through the first three quarters of 2021.” Net drug prices, meanwhile, fell by 1.2% during the same time-period. (Read more).

Price-setting legislation won’t work

Why does this matter? Drug manufacturers often get the blame for patients’ cost sharing on drugs. As a result, lawmakers are continuing to pursue harmful price-setting legislation that would hinder innovators’ ability to develop first-in-class treatments for a variety of debilitating diseases.

That’s the wrong approach. Targeting drug manufacturers will do little to lower patient out-of-pocket costs. Worse still, it could mean the next generation of cures dies in the lab.

The best path forward is fixing the flaws in drug pricing structures that allow insurers and hospitals to profit heavily from patients.

The researchers of the JAMA study conclude: “The findings of this study suggest that, to reduce the financial burden of cancer treatment for patients, institution of public policies to discourage or prevent excessive hospital price markups on parenteral chemotherapeutics may be beneficial.”

Read the full study here.

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