Increases in drug prices often result in higher reimbursements by health plans. More than half of commercial payers reimburse hospital outpatient departments as a percentage of billed expenses. Hospitals have incentives to increase profit margins, as higher expenses are associated with higher profitability. Shocking as it may be, these exorbitant margins on drugs are an accepted practice in the medical industry and are considered one of the factors contributing to the high cost of medical care in the United States.
From access to medicines to intellectual property and drug safety, the PhRMA is dedicated to promoting public policies that support innovative medical research, improve treatments and deliver real results. Of course, hospital medicines are not expected to be cheap, but a 700% mark-up seems outrageous, and rightly so. Improve transparency of profit margins by requiring hospitals to provide a benchmark rate, such as Medicare would pay for the same services, on all medical bills so patients can compare amounts, and also by requiring hospitals to disclose total charges as a separate line item on their annual income statements. Drug price mark-ups are common and contribute to the rising cost of medical treatment in the United States.
Hospitals receive drugs from pharmaceutical companies at a significant discount compared to what would be paid at the pharmacy, making these extreme increases all the more outrageous. A new analysis by The Moran Company found that nearly one in five hospitals increases drug prices by 700% or more. According to the researchers, some of the price increases, such as those for specialty and generic drugs, appear to be due to new drugs entering the market. If you have already received a bill with these increases, try to negotiate with your medical provider for a lower price.