Hospitals earn greater profit from physician-administered meds than drugmakers, study finds

Hospitals earn a greater profit from physician-administered drugs than pharmaceutical manufacturers themselves, according to a recent analysis by the Partnership for Health Analytic Research.

The analysis from the physician-led consultancy firm found that for every $100 spent on physician-administered drugs in the outpatient setting, the hospital retained $58, while the drugmaker retained $42. 

"This suggests that hospitals are earning more from administering medicines than the manufacturers who created the medicines and is consistent with recent research published by the Moran Company, which found that in the commercial market, hospitals retain 2.4 times their acquisition cost for a basket of 20 brand-name medicines," the researchers wrote. 

Additionally, the report compared how much of the gross profit of physician-administered drugs physician offices retained in comparison to hospital outpatient settings.

The study found that while physician offices and hospital clinics treat a similar number of patients in the commercial market, hospitals received a larger share of the gross profit. In particular, hospitals retained 91 percent of the gross profit margin, compared to physician offices, which retained just 9 percent. 

This discrepancy indicates that commercial payers reimburse hospital clinics at a higher rate, researchers said. In addition, the discrepancy may be explained by the fact that hospital clinics are eligible for discounts not offered to physician clinics, including the 340B program.

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