Location, location, location: Hospital markups on biologic meds ‘double’ the costs
Hospitals are marking up the prices for biologic medicines more than physician offices, particularly for “innovator biologics” that have clinically equivalent (and lower cost alternatives) on the market, says a new report.
A new research report from the Employee Benefit Research Institute (EBRI) found that higher hospital mark-ups on biologic medicines are roughly doubling the costs for employers – and minimizing savings that could be achieved through biosimilar competition.
The research report entitled, “Location, Location, Location: Spending Differences for Biologic and Biosimilar Medications by Site of Treatment,” looked at whether the potential cost savings from biosimilars is impacted by whether patients seek care from physician offices (PO) or hospital outpatient departments (HOPD), as the trend towards HOPDs might be impacting potential savings.
The original biologic, known as the innovator biologic, sometimes has substitutes, which are known as biosimilars. Biosimilars are similar versions of the medicine with no clinically meaningful difference in effectiveness or safety from the innovator biologic. In recent years, a robust biosimilar marketplace has emerged driving substantial savings for patients, employers and insurers. As of February 2023, there are 29 biosimilars on the market competing against 11 innovator biologics.
“Competition in the evolving market suggests innovator biologics and biosimilars both are competing on price to retain or gain market share,” explained Paul Fronstin, Ph.D., study co-author and director, Health Benefits Research, EBRI. “However, as HOPDs continue to mark up the price of biologics at faster and higher rates than biosimilars, and consolidation drives care away from POs into HOPDs, employers will continue to see costs go up. As a result, the savings potential from biosimilars may not be fully realized.”
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Other findings in the report showed that in 2020, the HOPD mark-up ranged from 75% to 183%. The HOPD markup increased between 2019 and 2020 for all innovator biologics examined.
Also, allowed charges for biosimilars were higher in HOPDs than in POs. However, the markups for biosimilars were lower than the markups for innovator biologics. Biosimilar markups in HOPDs averaged 87% in 2019 and 101% in 2020. In 2022, HOPD markups ranged from 59% to 141%. The HOPD markup increased for 7 of the 9 biosimilars examined.