Mark Howell and Bharath Krishnamurthy of the AHA have criticized a recent report by America’s Health Insurance Plans (AHIP) that claims that hospitals drive increasing specialty medicine pricing. They argue that the claims are baseless, flawed, and misleading. The report fails to acknowledge the role of insurers in driving up costs and profits through their specialty pharmacies. Policymakers need to focus on increasing transparency and competition in the drug supply chain to address the root causes of high drug prices.
In recent years, the rising costs of prescription drugs have been a major concern for patients, healthcare providers, and policymakers alike. One of the key factors contributing to these high costs is the role of insurance companies in the drug supply chain. While insurance companies have traditionally been viewed as intermediaries between patients and drug manufacturers, recent reports suggest that they may be driving up costs and profits through their specialty pharmacies.
In this article, we examine the recent report by America’s Health Insurance Plans (AHIP), which suggests that hospitals drive up specialty drug costs. We argue that the report’s claims are baseless and that insurers are driving up profits by steering patients to their specialty pharmacies. We begin by outlining the key findings of the AHIP report before critiquing its methodology and conclusions.
The AHIP Report The AHIP report, titled “Driving Up Costs: Hospitals’ Role in High Drug Prices,” argues that hospitals are responsible for the high costs of specialty drugs. The report suggests that hospitals purchase specialty drugs at inflated prices and then pass these costs on to insurers and ultimately to patients. It also argues that hospitals have an incentive to prescribe more expensive drugs because they can mark up the prices and increase their profits.
According to the report, hospitals are responsible for a significant portion of drug spending in the US. The report cites data from the Centers for Medicare and Medicaid Services (CMS), which shows that hospitals accounted for 42% of Medicare Part B drug spending in 2015. The report also suggests that hospitals are responsible for driving up prices through their use of “buy and bill” practices, where hospitals purchase drugs from wholesalers and bill insurers directly for the cost of the drug plus a markup.
Critique of the AHIP Report While the AHIP report makes some valid points, its overall conclusions are flawed and misleading. One of the key flaws in the report is its failure to acknowledge the role of insurance companies in driving up costs and profits. The report suggests that hospitals are responsible for the high costs of specialty drugs, but it fails to acknowledge that insurance companies play a significant role in the drug supply chain.
Insurance companies often own their specialty pharmacies, which allows them to steer patients toward their products and increase their profits. By doing so, insurers can charge higher prices for specialty drugs than they would otherwise be able to. Furthermore, insurers have a financial incentive to steer patients towards more expensive drugs, as they can charge higher premiums and increase their profits.
Another flaw in the AHIP report is its reliance on incomplete data and flawed methodology. The report relies heavily on data from CMS, which only provides a partial view of the drug supply chain. The report also fails to account for the complex negotiations that occur between hospitals, insurers, and drug manufacturers, which can have a significant impact on drug pricing.
