New report: Hospitals mark up medicine prices 500%

Despite a myopic focus on drug spending, roughly 30% of every dollar spent on health care in the United States can be attributed to hospitals. Almost 4 times more is spent on hospitals than on retail prescription medicines annually, and this trend is predicted to continue for the foreseeable future. A new report shows how hospitals are driving up costs.

Finding one: Hospitals are charging 500% of what they paid for medicines, on average. For the 20 medicines that were analyzed, hospitals charged a range of more than 200% to more than 700% what they paid, confirming a trend identified in 2018.

Finding two: Commercial payers reimbursed hospitals almost 200% what the hospital paid to acquire the medicine. Because patient cost sharing is often based on these markups, this practice is driving up costs for patients.

Finding three: While this paper did not separately analyze data specific to 340B hospitals, it estimates using publicly available data that 340B hospitals are reimbursed, on average, almost three times the discounted 340B price of a medicine. Nearly 60% of all hospitals in the United States participate in the 340B drug pricing program, and the average markup at 340B hospitals is likely higher because medicines acquired by 340B hospitals are purchased at substantial discounts.

As policymakers continue to deliberate on health care costs and affordability, they should factor in the increasing role hospitals play in driving costs for patients and the broader health care system.

Full analysis here.