A report released in January by the New England Journal of Medicine (NEJM) found that hospitals are substantially marking up cancer and specialty drugs, and maintaining a sizable share as profit.

“The ability of hospitals to charge high prices and earn high revenues from specialty drugs creates socially undesirable incentives for all the major stakeholders in the health care system,” said James C. Robinson, the lead author of the study.

The research found that hospitals eligible for federal drug discounts charge 300 percent higher for these specialty drugs than what they pay for them.

More than 50 hospitals in North Carolina qualify for these mandated discounts, including many of the biggest and wealthiest: Atrium Health, Novant, Vidant, Duke, UNC and WakeMed.

Huge markups on drugs acquired at a discount is not new. 11 years ago, the problem was so bad the United States Senate launched an investigation.

It was discovered in 2012 that Duke University Hospital purchased $65.8 million in drugs through the discount program. It turned around and sold the drugs to patients for $135.5 million. That’s a profit of $69.7 million. UNC received more than $65 million in revenue from selling discounted drugs from 2008-2011. Atrium Health (then Carolinas Medical Center),refused to even answer the Senate’s investigation.  

What is new is the price of drugs, specifically advanced therapies on the market.

Prices for breakthrough gene therapies, for instance, start in the millions.

Even this week, the world got a new ‘most expensive drug:’ a $4.25 million gene therapy.

A 300 percent markup, like those found in the NEJM study, puts that price tag at $12,750,000. For one dose. Of one drug.

Now, in many cases, insurance contracts with hospitals would not allow such egregious markups.

But the problem is that the market is changing so fast that contracts don’t have time to catch up.  And the issue can’t be addressed until the contract is re-negotiated, which could be years away.

A contract signed 5 years ago between an insurer and a hospital could not have imagined a $4.25 million drug.

And since these therapies are oftentimes not covered by a contact, the hospital is free to charge whatever they want. Even $12.75 million.

But just because it is allowed, doesn’t mean it is right.

It is price inflation at its worst. And it is something that should be stopped because it is bad for everyone who pays for healthcare.

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