Hospital purchases of oncology practices drive up cancer drug costs

Hospital-acquired and owned oncology practices contribute to the ever-rising costs for cancer drugs, according to a new report issued by the IMS Institute for Healthcare Informatics.

More than 40 percent of U.S. oncologists are now in practices of seven or more physicians, up from just 29 percent in 2012, an increase attributed to hospital and hospital system acquisition of physician practices.  

Meanwhile, hospitals charge 189 percent more on average for cancer drugs and chemotherapy than physician's offices. That means a single dose of the 10 most widely-used forms of chemotherapy runs an average of $134 more in a hospital-owned setting than in an independently-owned medical practice.

The pricing trend accelerated rapidly in recent years. A 2012 report indicated that hospitals charged only 24 percent more for cancer drugs than an individual medical practice.

The average cost of branded cancer therapy per patient in the U.S. is about $10,000, double the cost a decade ago, the report said.

Some hospital-owned practices mark up prices dramatically. For example, Levine Cancer Institute, owned by Carolinas Healthcare System, charges $4,500 for a a single dose of a drug that typically retails for $60. As a result, patients experience a rapid rise in out-of-pocket costs, according to the study, while hospital outlays for uncompensated care remain flat.

Moreover, many hospitals can purchase cancer drugs at up to a 50 percent discount through the federal 340B program, but the federal government cannot dictate how hospitals use that savings, according to Kaiser Health News. In many instances, hospitals funnel their discounted drug purchases through their oncology-owned practices and still increase prices for the patients.

Carolinas, along with Duke University Hospital and UNC Hospitals, have been accused of reselling 340B drugs to insured patients and pocketing tens of millions of dollars in profits.

To learn more:
- check out the IMS Institute study (registration required)
- read the Kaiser Health News article