Rush denotes Rush University Medical Center; JH, The Johns Hopkins Hospital; MGH, Massachusetts General Hospital; BWH, Brigham and Women's Hospital; UCLA, University of California Los Angeles Ronald Reagan Medical Center; Mayo, Mayo Clinic Hospital; BJC, Barnes-Jewish Hospital; UM, University of Michigan Hospital; Cedars, Cedars-Sinai Medical Center; CC, Cleveland Clinic; and Mayo-AZ, Mayo Clinic Hospital-Arizona.
Variation in the pricing of clinician-administered drugs by commercial insurer, hospital, and drug. Boxes represent the IQR of payer-negotiated prices, and whiskers extend to the minimum and maximum payer-negotiated prices. The Medicare payment limits for each drug were from the October 2020 file released by the Centers for Medicare & Medicaid Services and are equal to 106% of the average sales price. Prices from government-funded plans (including Medicaid, Medicare Advantage, and the Veterans Affairs Health System) are excluded from this analysis. Payer-specific negotiated prices and self-pay cash prices were not reported for all drugs. The first and third quartiles of prices at the Mayo Clinic were equal to the median for all drugs in the study sample, and therefore, the IQR is not shown.
eTable 1. Hospital compliance with the requirement to post payer-specific pharmaceutical prices and self-pay cash prices
eTable 2. Number of insurance plans listed by hospital and drug (among hospitals listing payer-specific negotiated rate
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Feldman WB, Rome BN, Brown BL, Kesselheim AS. Payer-Specific Negotiated Prices for Prescription Drugs at Top-Performing US Hospitals. JAMA Intern Med. 2022;182(1):83–86. doi:10.1001/jamainternmed.2021.6445
Nearly one-third of pharmaceutical spending in the US is for clinician-administered drugs (eg, infusions).1 Medicare Part B reimbursement for these drugs is set at the average sales price (ASP)—the average price charged by manufacturers to wholesalers net of any rebates or discounts—plus a 6% markup (or 4.3% during budget sequestration). By contrast, hospitals and physician offices charge commercial insurers whatever price they negotiate, and they retain any difference between the negotiated price and cost of acquisition.
While these negotiated prices have long been confidential, a transparency rule that took effect on January 1, 2021, requires hospitals to post payer-specific negotiated prices for all items and services, including clinician-administered drugs. We analyzed a set of top-performing hospitals to quantify drug pricing variation across insurers.
We searched the websites of the 20 top-rated hospitals by US News and World Report rankings for pricing files from January 1 through September 15, 2021. We selected these hospitals because they were likely to have sufficient resources to comply with reporting requirements and would serve as a model for other hospitals that were deciding on how to comply (eTable 1 in the Supplement). We extracted commercial insurer-negotiated prices and self-pay cash prices (the discounted prices for patients paying without insurance) for the 10 drugs with the highest 2019 Medicare Part B expenditures (eTable 2 in the Supplement).2 We evaluated median prices relative to the Medicare payment limit to enable comparisons of hospital markups across drugs. We used Stata, release 16.1 (StataCorp LLC) and Excel, version 16.16.27 (Microsoft) for the study analysis, which was performed from July 1 to September 15, 2021. Institutional review board approval was not required because we used only publicly available data on prices of prescription drugs and did not use patient information.
Seventeen of the 20 hospitals (85%) posted files aimed at complying with the new transparency rule. Eleven (55%) included payer-specific pharmaceutical prices. Of the hospitals that released pharmaceutical data, 82% (and 85% of hospitals overall) were 340B entities, which entitled them to acquire drugs from manufacturers at prices below the ASP.3
Prices varied between and within hospitals (Figure). Median negotiated prices for the 10 drugs in the study sample ranged from 169% (IQR, 137%-264%) of the Medicare payment limit at Rush University Medical Center to 344% (IQR, 307- 368%) at the Mayo Clinic Hospital–Arizona, and median self-pay cash prices ranged from 149% (IQR, 124%-203%) of the Medicare payment limit at Rush to 306% at Brigham and Women’s Hospital (IQR, 273%-327%) and Massachusetts General Hospital (IQR, 283%-327%; Table). There was also substantial variation by drug, with the lowest median negotiated prices relative to the Medicare payment limit observed for abatacept and the highest median negotiated prices observed for infliximab.
Top-performing US hospitals routinely charge commercial insurers prices far in excess of Medicare payment limits, which are based on the average acquisition costs of drugs for non-340B entities. While hospitals often charge commercial insurers more than Medicare for a range of services, they generate revenue on pharmaceuticals by buying and reselling drugs, earning sums in addition to the amounts that they separately bill insurers for the professional services required to administer these drugs.
The gap between pharmaceutical acquisition costs and hospital charges is particularly wide for 340B entities, including many hospitals in the study sample. The 340B program was designed to help hospitals provide care to vulnerable patient populations and offset the costs of uncompensated care. Our findings are consistent with a recent report examining the prices of oncology drugs at 340B hospitals.4 Further research is needed to understand how 340B entities generate revenue from commercial insurers and how proposed cuts to the 340B program may affect the ability of hospitals to fulfill their obligations to provide care for marginalized communities.
This cross-sectional analysis was limited by its small sample size. Many hospitals have still not complied with the new transparency requirements.5 In addition, we lack data on the number of patients at each hospital covered by different insurance plans, and therefore, our findings may not be reflective of average prices after weighting by payer and plan mix. Nonetheless, the findings show substantial variation in payer-negotiated prices and self-pay cash prices at top-performing US hospitals and considerable markups on clinician-administered drugs.
Accepted for Publication: September 17, 2021.
Published Online: November 8, 2021. doi:10.1001/jamainternmed.2021.6445
Corresponding Author: William B. Feldman, MD, DPhil, MPH, Division of Pulmonary and Critical Care Medicine, Department of Medicine, Brigham and Women’s Hospital, 75 Francis St, Boston, MA 02115 (firstname.lastname@example.org).
Author Contributions: Dr Feldman had full access to all the data in the study and takes responsibility for the integrity of the data and the accuracy of the data analysis.
Concept and design: Feldman, Rome, Kesselheim.
Acquisition, analysis, or interpretation of data: Feldman, Rome, Brown.
Drafting of the manuscript: Feldman.
Critical revision of the manuscript for important intellectual content: All authors.
Statistical analysis: Feldman.
Obtained funding: Kesselheim.
Administrative, technical, or material support: Brown.
Conflict of Interest Disclosures: Dr Feldman report serving as a consultant to Alosa Health and Aetion and grants from the National Institutes of Health (5T32HL007633-35) and the US Food and Drug Administration’s Sentinel Initiative, all outside of the submitted work. Drs Feldman and Rome report receiving an honorarium for a presentation to Blue Cross/Blue Shield of Massachusetts.
Funding/Support: This work was funded by Arnold Ventures.
Role of the Funder/Sponsor: The funder had no role in the design and conduct of the study; collection, management, analysis, and interpretation of the data; preparation, review, or approval of the manuscript; and decision to submit the manuscript for publication.