- The Center for Medicare & Medicaid Services’ new transparency rule discloses how much major insurers overpay hospitals for outpatient drugs.
- A new Senate report reveals unprecedented information about PBMs, manufacturers, and the gross-to-net bubble for insulin.
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US Healthcare: As hospitals are forced to release real prices, we learn their drug markups average 250%; will dynamics change?, Ronny Gal, Sanford C. Bernstein & Co.
CMS’s Hospital Price Transparency rule went into effect on January 1, 2021. Hospitals are now required to report previously hidden details about their third-party contracts.
Ronny Gal at Sanford C. Bernstein was the first to dig into the new disclosures. Here’s a summary of the shocking details for five hospitals:
These figures are jaw-dropping:
Amazingly, America’s Health Insurance Plans (AHIP) keeps touting that “health insurance providers work hard on behalf of patients and consumers to negotiate lower prices.” The new CMS data appear to disprove this assertion.
P.S. Sorry, I can't share a link to the full report. Please contact Ronny Gal (ronny.gal@bernstein.com) to learn more about his research and how you can access a customized analysis of the data.
Ronny Gal at Sanford C. Bernstein was the first to dig into the new disclosures. Here’s a summary of the shocking details for five hospitals:
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These figures are jaw-dropping:
- Hospitals earn massive markups over the average sales price (ASP). For example, Coventry and Humana paid hospitals 700% more than Neulasta’s ASP and 1,100% more than Epogen’s ASP.
- Insurers pay wildly different prices for the same drug. Consider payments for Avastin, which ranged from $894 (UnitedHealth) to $5,993 (Anthem).
- Manufacturers earn a minority of the third-party payers’ drug reimbursement. Contrary to popular belief, hospitals—not drugmakers—keep about 80% of what insurers pay for these provider-administered drugs. After 340B discounts, hospitals keep an even greater share. (Four years ago, I showed how hospitals can even earn more than the drug’s manufacturer does.)
Amazingly, America’s Health Insurance Plans (AHIP) keeps touting that “health insurance providers work hard on behalf of patients and consumers to negotiate lower prices.” The new CMS data appear to disprove this assertion.
P.S. Sorry, I can't share a link to the full report. Please contact Ronny Gal (ronny.gal@bernstein.com) to learn more about his research and how you can access a customized analysis of the data.
Insulin: Examining the Factors Driving the Rising Cost of a Century Old Drug, United States Senate, Senate Finance Committee
This must-read report delves into the murky world of insulin pricing. The Senate Finance committee had access to thousands of internal documents. Many of these documents were made public. (See the links on the last page of the report.)
The report paints a highly unflattering picture of PBMs’ contracting practices and manufacturers’ increases in wholesale acquisition cost (WAC). It also offers unprecedented disclosure of business terms, rebates, PBM administrative fees, and more. Many of the worst aspects of our crazy drug channel system are exposed.
This report further illustrates how the gross-to-net bubble distorts decision making, patient costs, and more. If you are unfamiliar with my arguments about our systematic problems, start with The Gross-to-Net Bubble Hit $175 Billion in 2019: Why Patients Need Rebate Reform and Five Top Drugmakers Reveal List vs. Net Price Gaps (Plus: The Trouble With Insulin Prices).
Note figure 1 (page 16) and the multiple footnotes that link to Drug Channels articles. I was pleased to see Drug Channels Institute make another appearance in a bipartisan report.
The report paints a highly unflattering picture of PBMs’ contracting practices and manufacturers’ increases in wholesale acquisition cost (WAC). It also offers unprecedented disclosure of business terms, rebates, PBM administrative fees, and more. Many of the worst aspects of our crazy drug channel system are exposed.
This report further illustrates how the gross-to-net bubble distorts decision making, patient costs, and more. If you are unfamiliar with my arguments about our systematic problems, start with The Gross-to-Net Bubble Hit $175 Billion in 2019: Why Patients Need Rebate Reform and Five Top Drugmakers Reveal List vs. Net Price Gaps (Plus: The Trouble With Insulin Prices).
Note figure 1 (page 16) and the multiple footnotes that link to Drug Channels articles. I was pleased to see Drug Channels Institute make another appearance in a bipartisan report.
Chart of the day… or century?, American Enterprise Institute
Mark Perry of AEI recently published a 2021 update to his thought-provoking and informative chart (reproduced below).
Services vs. manufacturing? Government vs. free market? Domestic vs. international competition? Healthcare & education vs. everything?
Don’t blame prescription drugs for medical care inflation. Drugs constitute only 13% of the Medicare Care Services index. Sorry, drug pricing flat earthers!
Services vs. manufacturing? Government vs. free market? Domestic vs. international competition? Healthcare & education vs. everything?
Don’t blame prescription drugs for medical care inflation. Drugs constitute only 13% of the Medicare Care Services index. Sorry, drug pricing flat earthers!
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