PhRMA report misleads on drug costs

America’s hospitals and health systems, and our heroic caregivers, have been on the front lines of the battle against COVID-19 for the past year, working tirelessly to provide needed care to patients and communities. Along the way, the hospital field has incurred deep financial losses, which the AHA projected to be $323 billion in 2020 alone, due to the cancelation and delay of non-emergent care and the costs associated with treating COVID-19 patients. Meanwhile, COVID hospitalization rates surged over the last several months, and in many states, hospital intensive care unit bed utilization rates are near capacity. Hospitals have never before experienced such a widespread, national health crisis.

Amidst this crisis, PhRMA recently released a misleading report about the costs associated with drug administration in hospital outpatient departments. The PhRMA report conveniently focuses only on patients with commercial health insurance, while ignoring patients with Medicare, Medicaid or no insurance at all. Hospitals treat all who come through their doors, 24/7 and regardless of ability to care. However, Medicare and Medicaid pay far less than the costs hospitals incur for delivering care, while accounting for approximately 60% of all payments for care provided by hospitals. In fact, in 2019 alone, hospitals provided $41.6 billion in uncompensated care while incurring $75.8 billion in underpayments from Medicare and Medicaid.

The report also makes a misguided attack on the 340B drug savings program. 340B hospitals have continuously demonstrated their commitment to using their savings to provide important services and programs to vulnerable communities that they otherwise would not be able to provide. 340B hospitals use their savings on medication management programs, diabetes education programs and mental health services, to name just a few examples.

Meanwhile, this PhRMA report fails to acknowledge immense drug company profits that have been highlighted by many respected organizations, including the U.S. Government Accountability Office (GAO) and the Journal of the American Medical Association (JAMA). It is also a fact that it is the drug companies that are solely responsible for setting list prices for their drugs as well as determining subsequent price increases.

While continuing to provide all levels of care to their patients and communities, hospitals and health systems are playing a leading role in vaccination efforts across the country as our country strives for the goal of herd immunity. They are working closely with other stakeholders – including drug companies – in this critical effort. Instead of attacking hospitals and health systems caring for patients during the pandemic, PhRMA should instead focus on lowering the costs of drugs for Americans.  


Tom Nickels is AHA’s executive vice president for government relations and public policy.