Healthcare costs are very expensive and continue rising. Patients feel as if they have no control because we do not know the prices ahead of time. Without any sense of how much our health care will cost before receiving it, we are also getting charged extremely different rates for the same healthcare services, with absolutely no idea of what is fair. 

This variability in healthcare services has been discussed for a long time, but a new report has shown that this is also happening with the price of drugs. An analysis done by Three Axis Advisors reviewed available hospital drug price data, and what they found is shocking.

First, they found extremely high markups, compared to the Medicare payment rate, for the gross charges and cash prices of these drugs. Ocrevus (ocrelizumab), which is used to treat multiple sclerosis, had an average markup of 2,271% for the gross charge, 1,300% for the cash discount price, and 195% for the average negotiated rate. The report claims that these markups lead to significant profits for the hospitals that even exceed the manufacturers’ profits. 

They also found that, while hospitals typically have just one gross charge and cash discount rate, there is an average of 20 different negotiated rates with insurers that vary significantly. For example, Fairbanks Memorial Hospital in Alaska has negotiated rates ranging from $4,498.17 to $24,623.28 for 24 ml of Opdivo, a cancer drug. At the same hospital, TRICARE and the VA pay just $33. On average, there is a difference of over $35,000 in therapy costs, all depending on the hospital. 

This variance exists even within the same insurance companies. For example, UnitedHealthcare pays $12,000 for Keytruda (another cancer drug) in Colorado. In Massachusetts, they pay $43,000. They could pay for patients to travel to Colorado for the drug and still save tens of thousands of dollars. 

You can see the data used for this report by visiting https://hospitaldrugprices.org/.

The cost of drugs is not the only health care service with great price variation. A different analysis by Trilliant Health found, for example, that a major knee and hip replacement surgery ranges from $22,000 in Austin, TX, to $197,000 in Hackensack, NJ. Even at the same facility, there are wide cost variations. For a coronary bypass surgery at the Tufts Medical Center in Boston, Aetna pays $95,989, and UnitedHealthcare pays $144,204. How much we pay out of pocket for drugs or surgeries ultimately depends on the facility and insurance we use, not the quality of care.

This underscores the importance of ensuring hospitals are giving patients complete and accurate price information. Of the 1,300 hospitals analyzed for the report, only 62% of them had usable price information for the most common and expensive medications. 

Price transparency is about giving every American the basic information they need to make decisions about their own health. When all prices are public, patients can finally see their options, gain leverage, and start restoring trust in a system that has otherwise kept them in the dark. 

The Patients Deserve Price Tags Act (S. 2355), bipartisan legislation introduced by Sens. Roger Marshall (R-KS) and John Hickenlooper (D-CO), codifies, strengthens, and expands federal hospital and health insurance rules requiring the posting of upfront prices for all healthcare, including drugs. This bill would usher in true price transparency, empowering employers and individuals to compare their healthcare options, try to find the best price, and protect themselves from overcharges.

We can’t fix what we can’t see. By strengthening price transparency, patients can better understand all their options for their healthcare needs, such as expensive medications, and we can better hold the industry accountable.