Over the years on Drug Channels, I have explained the two primary reasons a drug’s list price doesn’t reflect what a third-party payer actually spends for that drug: (1) channel intermediaries and providers add markups that account for the costs, profits, and value of the services, and (2) manufacturers provide rebates and discounts to third-party payers.
Two recently-released reports confirm the often-overlooked magnitude of provider markups.
As you will see below, commercial payers use reimbursement approaches that permit hospitals to inflate specialty drug costs by thousands of dollars per claim when compared with physician offices. This is not about differences in patient care. It’s about hospitals adding big markups to drug costs.
Meanwhile, commercial insurers complain about “drug prices,” going so far as to publish misleading data about drug spending. Yet insurers conveniently forget to mention their own role in allowing powerful providers inflate drug spending. As evidenced by the proposed outpatient prospective payment system (OPPS) rule, the Secretary (of Health and Human Services) does not disavow any knowledge of site-neutral payments.
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