PhRMA, AHA Trade Blame, Barbs on High Drug Prices

Drug makers launch PR campaign blaming higher drug costs on hospital markups. Hospitals call the claims 'a brazen misrepresentation of the facts.'

The ongoing spat between hospitals and the pharmaceutical industry about who's to blame for high drug prices ratcheted up this week with PhRMA mounting a public relations campaign accusing hospitals price gouging.

Nearly one in five hospitals mark up medicine prices 700% or more, according to a new analysis from The Moran Company that was paid for by PhRMA.

The study also found that 320 hospitals—8% of hospitals included in the study—marked up some medicine prices more than 1,000%. 

"Hospitals receive billions of dollars every year in negotiated and mandatory discounts from biopharmaceutical companies while simultaneously increasing the price of these medicines to insurers and patients," PhRMA CEO Stephen J. Ubl said in a media release.

"In order to make medicines more affordable for patients, we must address the role hospital markups play in driving up medicine costs," he said.

The report, released Wednesday, is part of PhRMA's "Let’s Talk About Cost" public relations campaign launched this week that it says demonstrates how hospital markups lead to higher healthcare costs for patients. The ad campaign will be featured in print, radio, digital and social channels in Washington, DC, and select states.

On Thursday, the American Hospital Association fired back with a one-page rebuttal that called the PhRMA study "an obvious attempt to divert attention away from a problem of their own making: skyrocketing drug prices."

"They return once again to their standard playbook of pointing fingers and blaming everyone other than themselves to try to justify the dramatic increases in the prices of drugs, as they continue to make double-digit profit margins," said Ashley Thompson, AHA's senior vice president of public policy analysis and development.

Thompson called the latest PhRMA study "a brazen misrepresentation of the facts."

"The report conveniently fails to explain that, unlike drug manufacturers, hospitals are subject to fixed reimbursements for the vast majority of the care they provide," she said.

More than half of hospital payments are from Medicare, Medicaid, and other public payers, Thompson said, and those reimbursements are far below costs. In addition, she said, private payers negotiate prices that bundle the cost of drugs into a single, fixed reimbursement.

Thompson cited a 2015 study by NORC at the University of Chicago and paid for by the AHA and the Federation of American Hospitals found that inpatient drug spending per admission rose 39% from 2013 to 2015. The report blamed the growth in drug spending on growing drug prices.

Frustration and concern over rising costs and sketchy supplies of critical in-patient drugs has promoted seven major health systems to form their own drug company. On Thursday, the consortium representing nearly 500 hospitals rolled out Civica Rx, a not-for-profit generic drug company that could begin delivery products to hospitals as early as 2019.