Substantial and sometimes “excessive” price markups are common among the fraction of National Cancer Institute (NCI)-designated cancer centers that publicly disclosed payer-specific prices for often-used cancer therapies, according to a study published Monday in JAMA Internal Medicine.
Across the 27 cancer centers reporting their prices, researchers found hospitals’ median price markups ranged anywhere from 120% to 630% over how much they were estimated to have paid manufacturers to acquire one of 25 commonly used cancer drugs.
The extent of these price increases varied widely across the cancer centers as well as across different private payers being charged by a single center.
The latter, researchers wrote, suggests that variation in prices illustrates a hospital’s negotiating power with specific payers more so than the amount they are paying to purchase and administer these drugs.
“These findings suggest that, to reduce the financial burden of cancer treatment for patients, public policies may be instituted to discourage or prevent excessive hospital price markups on parenteral chemotherapeutics,” they wrote in the journal.
The researchers said their findings build upon prior investigations suggesting widespread hospital drug price markups over purchase prices and others spotting infrequent compliance with Centers for Medicare & Medicaid Services price transparency requirements, which went into effect at the start of 2021.
“Hospitals dramatically marking up the price of the drugs they use to treat patients has been a common practice and nothing new,” Michael Abrams, managing partner of healthcare consultancy firm Numerof & Associates, told Fierce Healthcare in response to the findings. “Patients who are insured are largely indifferent to the price shocks because they have the impression that all they pay is their deductible and copay, and ‘somebody else’ pays the rest.”
“However, what patients don’t realize is that the insurers who pay for these high-priced drugs simply pass the costs on to plan participants through increased premiums at renewal time. So insurers pay it in the short term, but in the end, it is the insured, their customers, who pay,” he said.
To conduct their analysis, the researchers sought out payer-specific price disclosures from 61 NCI-designated cancer centers between April 1 and Oct. 15, 2021.
The team chose to review prices for the top 25 injectable or infusible cancer therapies as determined by Medicare Part B spending in 2019. They estimated how much hospitals paid for the therapeutics using a percentage of Medicare average sales price, which they adjusted based on whether the hospital participates in the 340B Drug Pricing Program.
Of the 61 centers, just over two-thirds listed payer-specific negotiated prices for any item or service and only 44% disclosed for at least one of the study’s 25 cancer therapies. Disclosure rates for specific drugs ranged from 21% of the hospitals to 42.6%.
Among the drugs, leuprolide saw the highest median price markup (633.6%) across the sample, as well as the broadest pricing spread across the different cancer centers, the researchers wrote. More than half of the drugs had median price markups exceeding 200%, according to the study.
The researchers acknowledged that their analysis could be overestimating market-wide cancer drug price markups, as NCI-designated centers “likely have greater market power than many other hospitals when negotiating with private payers.”
On the other hand, it could also be an underestimate due to the large portion of centers that did not disclose their prices, due to the potential “to prevent public concern about price-gouging,” they wrote.
Aaron Wesolowski, vice president of policy research, analytics and strategy at the American Hospital Association, told Fierce Healthcare that the study was “narrow in its focus,” looking only at a small subset of hospitals and framing the conversation around high-cost cancer drugs.
“The fact is cancer drugs are extremely expensive drugs whose prices are set and continually increased at the sole discretion of pharmaceutical companies,” Wesolowski said in an email statement. “Hospitals across the country are forced to contend with arbitrary price increases on these products as well as other challenges related to accessing some of these drugs that are placed in limited distribution or have other supply chain issues. Many cancer drugs, as well as drugs used to treat other critical conditions, require specific handling, storing, compounding, and administration procedures, which are costs borne by the hospital, and are not factored into this analysis.”