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The Pulse of the Pharmaceutical Industry

Sales & Marketing: Facts and Figures

Written by: | | Dated: Sunday, August 11th, 2019

Hospitals are continuing to charge, on average, five times their cost for medicines, according to a study by The Moran Company commissioned by PhRMA. The study, which analyzed 20 medicines, found that the amount hospitals receive even after negotiations with commercial payers is, on average, almost twice what they paid to acquire the medicine.

The study also estimated what drug markups and margins mean for hospitals that acquire medicines through the 340B drug discount program. While hospitals that participate in the program are given a significant discount on medicines, the study’s authors concluded that it does not appear that all of them are using the money to help patients as was intended by the program. In fact, the hospitals’ own data show they are providing less and less care to needy patients.

To estimate how much money these 340B hospitals are pocketing from the program off of each medicine, Moran applied a conservative 340B discount to the medicines in their sample. For example, in the case of a medicine with an Average Sales Price (ASP) of $2,500, 340B hospitals can purchase the medicine from the biopharmaceutical company for an estimated $1,875, mark up the price and, as a result, receive payment from an insurer of $6,000 for administering the medicine. $4,125 is retained by the hospital, meaning Moran estimates these hospitals receive, on average, 3.2 times what the biopharmaceutical company receives in payment for the drug.

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