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Thursday, September 06, 2018 1:00 am

Drug-firm study claims hospitals ratchet up costs

MATTHEW LEBLANC | The Journal Gazette


To see a PDF of the report, click here.

Hospitals often charge exorbitant prices for medicines, according to a study released Wednesday by a lobbying group for drug companies.

The Pharmaceutical Research and Manufacturers of America commissioned the report, which says nearly 20 percent of hospitals in the U.S. mark up medicine prices at least 700 percent. More than 300 of the nearly 3,800 hospitals included in the study inflated prices more than 1,000 percent, PhRMA reported.

Higher markups on medicines often lead to larger reimbursements by health plans to hospitals, so health care providers have incentives to raise costs, the group said in a news release.

“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,” President and CEO Stephen J. Ubl said in the statement. “In order to make medicines more affordable for patients, we must address the role hospital markups play in driving up medicine costs.”

But groups that represent hospitals and experts who study health care markets say the report conducted by The Moran Co. is misleading and leaves out important details.

According to Abe Schwab, a philosophy professor at Purdue University Fort Wayne who studies medical ethics, said drug companies also have raised prices in recent years, a point not mentioned in the PhRMA study. Drug costs also are negotiated by insurance companies, meaning patients rarely pay the prices listed by hospitals, he said.

The report is based on hospital reimbursement data compiled for a 2016 study by a pharmacy benefit management organization and government data on Medicare claims. It was released about a month after a report from America's Health Insurance Plans blamed drug companies for driving costs higher.

Indiana Hospital Association President Brian Tabor said the PhRMA report seems to be an attempt to “muddy the waters” in a fight among politicians and regulators over the cost of medications. He said hospitals have “sticker prices” for drugs, but patients in most cases will not pay those prices. His group represents Parkview Health facilities and Lutheran Health Network. 

Health plans and programs provided by hospitals for low-income patients ensure costs are often much lower, he said.

Tabor also took issue with claims in the PhRMA report that a government discount drug program is driving costs higher.

“It's an important program for a lot of hospitals,” he said. “The 340B program reduces drug costs not just for hospitals but also for the most needy and vulnerable patients.”

A spokesman for Lutheran referred questions to Tabor. A Parkview spokeswoman could not immediately comment late Wednesday afternoon. 

PhRMA announced the report as part of a campaign designed to show hospital markups lead to higher costs. The group said advertisements will be printed and shown in Washington, D.C., and “select states.”

A spokeswoman did not return a message asking whether the ads will run in Indiana.