The nation’s preeminent cancer hospitals are charging commercial health insurers anywhere from double to seven times their costs of acquiring cancer drugs, a new study shows.
Most top cancer institutions also are keeping their drug prices secret in direct violation of federal law, potentially exposing themselves to fines.
The findings reinforce how cancer care, especially the drugs, generates significant revenue for hospitals and how markups on drugs potentially put insured cancer patients in financially perilous situations.
“A cancer diagnosis is extremely scary for patients. When your life is on the line, there’s no price you wouldn’t pay,’’ said Vinay Rathi, a resident physician at Mass General Brigham and one of the authors of the study. “But we know from evidence that these prices are very harmful to patients.’’
The study is similar to another from last year, which found big-name hospitals charged commercially insured and cash-paying patients significantly more than Medicare for common infused drugs.
In the new study, researchers analyzed the prices of 25 cancer drugs, negotiated and paid by commercial insurers, at 61 facilities that earn the highest designation from the National Cancer Institute, which is part of the National Institutes of Health. The authors did not list which hospitals they studied. However, all of the NCI cancer centers can be found online. Ten were excluded from this analysis.
Researchers then used federal data to estimate how much it cost hospitals to acquire each drug — all of which are injectable or infused and aren’t dispensed at a pharmacy. The difference between the net prices and acquisition costs represents the markup, or gross profit, that hospitals generate for each drug.
Only 27 of the 61 hospitals disclosed the negotiated price of at least one of those drugs, flouting federal law. Hospitals are required to publish all of their various prices, and failure to do so could result in a penalty of up to $2 million — still a relative pittance within the budgets of multibillion-dollar hospital systems.
Among the hospitals that published cancer drug prices, the average markups vary widely depending on the drug. The highest extreme involves leuprolide, a prostate cancer drug that has a median markup of 634 percent. Fifteen other drugs have net price markups of at least 200 percent, according to the analysis.
There also are wide variations in how different insurers paid for the same cancer drug within the same hospital. Pricing data similarly has shown hospitals, especially those that command a lot of market power, charge insurers significantly different amounts for the same services and surgeries.
Ultimately, researchers found the amount of money that a hospital gets from an insurance company, just for the cancer therapy, often is more than what the drug company receives.
“There’s no question that there are some pricing inefficiencies on the part of pharmaceutical manufacturers,’’ Rathi said. “But in this case, it’s very easy for pharma to say, ‘Yes, maybe our prices are high, but you know what’s even worse is if others are charging double for the same thing we made.’’’
The Association of American Medical Colleges, which lobbies on behalf of academic hospital systems, including many of the top cancer centers, declined to comment on the study.