Biologic Markups Are Doubling Health Care Costs

Report Shows Hospital Biologic Markups Doubling Health Care Costs. The Employee Benefit Research Institute (EBRI) released new research that found higher hospital markups on biologic medicines. These markups are roughly doubling employers’ costs—reducing savings that could be achieved through biosimilar competition.

Biologics and Biosimilars

An original biologic—the innovator biologic—can have substitutes known as biosimilars. Biosimilars are nearly identical to the innovator biologic, with no significant differences in effectiveness or safety. A strong biosimilar market has emerged over the past few years, resulting in considerable cost savings for patients, employers and insurers. As of February 2023, there were 29 biosimilars on the market and 11 competing innovator biologics.

EBRI Findings

The EBRI report investigated whether the potential cost savings from biosimilars are impacted by whether patients seek care from physician offices (PO) or hospital outpatient departments (HOPD). Trends toward HOPDs could impact potential savings.

Consider these key findings from the EBRI report:

Biosimilar markups in HOPDs ranged from 75% to 183% in 2020. The HOPD markup increased between 2019 and 2020 for all examined innovator biologics.
Allowed charges for biosimilars were higher in HOPDs than in POs.
Biosimilar markups were lower than those for innovator biologics.
The innovator biologics market share was between 65% and 87% in 2020, excluding biosimilars for Neupogen.

“As HOPDs continue to mark up the price of biologics—and at rates that are higher and faster than those for biosimilars—and consolidation drives care away from POs into HOPDs, employers will continue to see costs go up, and the savings potential from biosimilars may not be fully realized.”

– EBRI report

Employer Takeaway from Biologic Markups are Doubling Health Care Costs

Competition in this evolving market suggests innovator biologics and biosimilars are battling to gain market share. While HOPDs may charge higher prices for medicines relative to the PO, higher HOPD biologic markups are doubling employers’ costs and minimizing savings that could be achieved through biosimilar competition.

Employers should continue to monitor health care trends, utilization and spending. We’ll keep you updated with any notable changes.

Contact TIG Advisors to learn more about the latest prescription drug trends.