Sep 13, 2022 - Health

Hospitals mark up discounted cancer drugs at much as 11 times, report says

Illustration of a hospital with a dollar sign
Illustration: Lazaro Gamio/Axios

Safety net hospitals are marking up the cost of drugs they buy through the government's discount drug program by as much as 11 times the cost, according to a new report provided first to Axios by the Community Oncology Alliance (COA).

Why it matters: It's the latest evidence of how providers can benefit from the federal 340B drug pricing program, which provides discounted medicines to ensure access to low-income patients.

  • Those markups ultimately drive up the cost of care for cancer patients by thousands of dollars — particularly those with high-deductible health plans or who are paying cash, the oncology group says.

What they're saying: "This program has turned into literally an unbelievable cash cow," said Ted Okon, executive director of the COA.

Zoom in: The COA examined self-reported drug pricing data for 49 of the top acute care hospitals in 340B that see a disproportionate share of poor patients.

  • Based on the assumption of they were receiving a 34.7% discount on the average sales price of the drugs, the median markup of the oncology drugs studied was 4.9 times hospitals' acquisition costs.
  • The lowest average markup was for the leukemia drug Kymriah (3.2 times). The highest was Faslodex, for breast cancer (11.3 times).
  • The price that 340B hospitals charge insurers relative to their purchase price is substantially higher for commercial insurance compared to Medicare
  • “They’re marking up drug prices that are already high by an excessive amount," Okon said. "What that means regardless of what the government may do in saying they’re going to bring down drug prices by negotiating is hospitals are going to mark them up even more.”

The big picture: 340B hospitals have been facing increasing scrutiny over how they pocket savings from drug purchases that are supposed to be passed on to low-income patients.

Reality check: Both of those groups are partially funded by the pharmaceutical industry, which is forced to provide those drugs at a discount. The industry has been fighting to change the 340B program and as we reported yesterday, drugmakers have been scaling back their participation in recent years.

  • Hospital groups such as the American Hospital Association strongly defend the program, saying the "340B discounts help hospitals devote more resources to services and programs for vulnerable communities and increase access to prescription drugs for low-income patients."
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