Hospitals, on average, charge double the price for the same drugs sold by specialty pharmacies, according to research from America’s Health Insurance Plans.
Upon analyzing the 10 drugs that amounted to the highest Medicare Part B spend from 2018-2020—and were purchased, stored and administered in a healthcare setting—an AHIP study published Wednesday found that drug treatments given in hospitals were marked up an average of $7,000, when compared to those purchased through specialty pharmacies.
As these drugs typically do not have biosimilars or generics that provide cost competition, specialty pharmacies are responding to a crucial market need to lower drug prices, said Sergio Santiviago, vice president of drug policy at AHIP.
Although the higher prices aren’t a result of hospitals “trying to game the system,” Santiviago said specialty pharmacies can save money per claim and per dose, allowing insurers to focus on paying the physician for the service of administering the drug, rather than the cost of the drug itself.
“We’re able to use these specialty pharmacies in these logistical advancements to really stretch that dollar and provide more access to these drugs at a lower cost without sacrificing safety or quality of care,” Santiviago said.
While the 10 drugs, on average, cost 108% more in hospitals than in specialty pharmacies, one treatment tripled in cost. Prolia, used to increase bone mass and treat problems in patients with bone cancer, cost 215% higher in hospitals, the report found, while using claims data from the IBM MarketScan Commercial Database.
Meanwhile, the cost of Herceptin, used to treat breast, stomach and esophageal cancer, was 131% higher in hospitals than the price offered in pharmacies.
Physician offices usually charged 22% higher prices—an average markup of $1,400—for the same drugs as specialty pharmacies. Ocrevus, a drug used to treat multiple sclerosis, had a hospital markup of nearly $20,000.
Despite this, many payer plans would be willing not to require the use of a specialty pharmacy if their contracted provider is willing to match specialty pharmacy prices for the cost of a drug, Santiviago said.
The overall goal of the study was to show how expensive it would be for a patient to access a drug in different settings, said Sherzod Abdukadirov, research director at AHIP’s Center for Policy and Research.
However, some industry experts emphasize its need for more context on contractor rates, payer rules, bundled services and other areas that contribute to hospital pricing, along with the whole episode of care that creates the total cost to a patient.
In addition to the limited population of drugs being evaluated in the report, the data is missing the complexities of running a pharmacy inside of a hospital, including the overhead costs, staffing costs, union contracts and other elements that contribute to a different cost structure and drug pricing model, said Rick Kes, senior healthcare analyst at RSM.
Rather than focusing on reimbursement for drugs from Medicare or other payers, providers generally look at the profitability across a patient’s entire experience, Kes said.
Most inpatient settings reimburse physicians on a diagnosis-related group level, meaning providers get paid the same, regardless of the drugs used or the services provided that appear on the bill, said Erin Fox, senior pharmacy director at University of Utah Health, in an email statement.
“What we have noticed is that health systems have focused more attention around their relationships with pharmacies—whether they build their own specialty pharmacy or look to contract with pharmacies for their patients—when thinking about the 340B Program and other things like that,” Kes said.