That is the title of a article yesterday in Kaiser Health News. What is your initial reaction to this title? That pharmaceutical firms are making unfair profits here? Likely so. However, if you keep reading, you will see the following:
In the United Kingdom, where health care is generally free and Takeda sells the drug [Lupron Depot] under the name Prostap, all physicians can purchase a three-month dose for about $260.
It’s likely that Chicago Medicine, where Hinds got his shots, paid something close to the British price. That’s because the health system’s hospital on Chicago’s South Side participates in a federal program called 340B, which allows hospitals that serve low-income populations to purchase drugs at deep discounts.
In short, while the drug price in the headlines was $38,398 dollars, the drug manufacturer probably only received a few hundred dollars for the drug. However, the hospital was able to charge the insurer and patient $38,398 for the drug. Thus, it is the hospital, rather than the pharmaceutical company, who is actually making money off the $38,000 drug in this case. This is due to the 340B program which mandates pharmaceutical firms to give discounts on drugs to hospitals serving disadvantaged communities.
The article continues:
After the second shot [of Lupron Depot], in August 2021, a pharmacist told him he could instead receive the pill. His doctor prescribed…[the patient] three months’ worth of Orgovyx last November, for which he paid $216 and the insurer paid over $6,000. The drug’s list price is about $2,700 a month
Why did the hospital recommend the injection rather than the pill? One reason may be because when a hospital prescribes the injection, it could make tens of thousands of dollars under the 340B, much more than when the pill is prescribed.
Hospitals will largely counter this point, saying they are not the bad guys. Reimbursement rates from payers–particularly government payers–have fallen over time and the only way for them to make up for this shortfall reimbursement for inpatient and outpatient hospital services is through the additional funds through the 340B program.
Regardless, it may surprise many of you that when patients are charged $38,398 for an injection, pharmaceutical firms are not the ones who always benefit financially.