Drugs Administered In-Hospital Cost Double That of Specialty Pharmacy Rates, AHIP Analysis Finds

A new analysis from AHIP found hospitals are charging double for some drugs they acquire and administer, while those dispersed via specialty pharmacies may serve as a more affordable and safer option for patients.

Researchers investigated the costs of 10 drugs purchased, stored, and administered in a health care setting (hospital or physician office) between 2018 and 2020: Botox (omabutlinumtoxinA), Herceptin (trastuzumab), Keytruda (pembrolizumab), Ocrevus (ocrelizumab), Opdivo (nivolumab), Prolia (denosumab), Remicade (infliximab), Rituxan (rituximab), Tecentriq (atezolizumab), and Xolair (omalizumab).

Notably, the drugs assessed had a wide range of disease indications spanning from non–small cell lung cancer (NSCLC) to psoriatic arthritis.

According to AHIP, higher drug prices and costs set by these providers are determined with the aim of increasing reimbursement rates and higher payments, not counting the sums hospitals and providers are already paid to administer the drug.

Investigators chose to assess these particular drugs because they were listed in the top 25 drugs by spending in Medicare Part B in 2019 and are commonly delivered through specialty pharmacies.

The data were gleaned from the IBM MarketScan Commercial Database and researchers calculated 3-year average costs per drug (adjusted for inflation to 2020 dollars) in 3 different settings.

Analyses revealed:

• Costs per single treatment for drugs administered in hospitals were an average of $7000 more than those purchased through specialty pharmacies
• Drugs administered in physician offices were an average of $1400 higher than specialty pharmacies
• Hospitals, on average, charged double (108%) the prices for the exact same drugs, compared with specialty pharmacies
• Prices were 22% higher in physicians’ offices for the exact same drugs, on average

Of the markups investigated, that of denosumab—a treatment for osteoporosis, hypercalcemia, and bone cancer—saw the steepest increase in price when administered via hospitals, at 215%, and via physicians’ offices, at 49%.

“Now more than ever, Americans deserve more affordable solutions, and we all need to work together to deliver for them,” said Matt Eyles, president and CEO of AHIP. “The data are clear, specialty pharmacies lower patient costs by preventing hospitals and physicians from charging patients, families, and employers excessively high prices to buy and store specialty medicines themselves. Secure, direct delivery is a safe and smart competitive alternative that improves affordability and access for everyone.”

Several health insurance providers have already opted to implement “white bagging” or “brown bagging,” whereby they leverage lower-cost specialty pharmacies to safely distribute physician-administered drugs, study authors explained.

All drugs included in the study require multiple treatments, while the average cost for a single treatment was determined by dividing the total claim cost of the drug (including both insurance and out-of-pocket costs) by the metric quantity purchased. Authors then multiplied it by the average adult dose per single treatment based off dosing information found in the FDA-approved labels.

“The physician office and hospital markups were calculated as a ratio of the average cost for a single treatment in physician office or hospital setting to the average cost for a single treatment in pharmacy setting,” authors wrote.

Based on the findings, AHIP “encourages lawmakers to support the use of specialty pharmacies, and to reject policies that take away lower-cost choices from patients.”