Pharma association blames hospitals for high healthcare costs

In a new report, an association for the pharmaceutical industry has blamed rising healthcare costs on hospitals jacking up prices for prescription drugs. The report comes as price transparency has become a bigger issue in Washington, D.C., with policymakers and the Trump administration undertaking initiatives to lower prescription drug costs.

The Pharmaceutical Research and Manufacturers of America (PhRMA), which represents the nation’s largest biopharmaceutical research companies, asserted hospitals mark up charges for 20 drugs by nearly 500 percent.

"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," Stephen J. Ubl, president and CEO of PhRMA, said in a statement. "In order to make medicines more affordable for patients, we must address the role hospital markups play in driving up medicine costs."

Most hospitals–83 percent–charge patients and insurers more than double their acquisition costs for medicines, increasing prices 200 percent or more, according to the report, which was prepared by consulting firm The Moran Company. More than half of hospitals–53 percent–charged between 200 percent and 400 percent more for medicines on average.

One out of every eight hospitals in the study, or 320 total, has average markups of more than 1000 percent, charging 10 times the acquisition cost for medicines. About one in six hospitals charge seven times the price. For a drug that costs $150, a 700 percent mark-up would result in a $1,050 bill for that medicine.

In addition to releasing the report, which used 2016 cost report data from CMS, PhRMA launched an ad campaign taking aim at hospital charges. The ads also aim to defend the role of pharmacy benefits managers (PBMs), which negotiate prices between providers and drug companies. PBMs have come under fire for their opaque process and prices.

Some of PhRMA’s ads directly state that the “middlemen” in the drug industry save money. PhRMA has also blamed higher drug prices on PBMs within the last year.

The American Hospital Association slammed PhRMA’s report, calling out the association for “blaming everyone other than themselves” to justify skyrocketing drug prices.

“This most recent report is a brazen misrepresentation of the facts,” Ashley Thompson, an AHA senior vice president of public policy analysis and development, said in a post on AHA’s website. “The report conveniently fails to explain that, unlike drug manufacturers, hospitals are subject to fixed reimbursement amounts for the vast majority of the care they provide.”