By: TAHP | Thursday, May 9, 2024

Soaring Mark-Ups: New research shows hospitals and physicians are marking up drug prices significantly, driving up health insurance premiums by $13.1 billion annually.

• 42% Mark-ups: On average, providers charge 42% more than specialty pharmacies for the same medications.
• Situational awareness: By comparison, Medicare only allows a 6% mark-up on drugs.

Why It Matters: This is just the latest evidence from a growing body of research showing that providers are excessively marking up clinician-administered drugs. Everyone should be able to afford their medications, but these mark-ups are ultimately borne by patients through higher premiums and out-of-pocket costs.

What We’ve Learned About Drug Price Mark-ups:

• Increased Premiums for Patients: Due to provider mark-ups on specialty drugs, all patients and employers will face increased premiums—$50 more for single coverage and $175 more for family coverage in 2024.
• Lower Costs at Specialty Pharmacies: Specialty drugs supplied through a specialty pharmacy are less expensive to patients than the same drugs bought and billed by hospitals and physician offices.
• Potential Savings on Premiums: If hospitals and physician offices matched specialty pharmacy prices for these drugs, the total savings on health insurance premiums could amount to as much as $13.1 billion in 2024.

Health plans are responding with competition: To fight back against these excessive hospital drug mark-ups, health plans are leveraging lower-cost specialty pharmacies to distribute the same drugs safely but without the big mark-up. One state found that bringing in lower-cost drugs saved 38% on some medications.

The Bottom Line: Drugs shouldn’t cost three times more just because of where you get them. Texas should avoid mandates that reward price gouging on medications. Instead, allowing insurers to skip the mark-up and bring in specialty pharmacy drugs at a lower-cost will protect Texas patients from these excessive drug mark-ups.