Saline that starts at $1.07 ends up costing about 90 times more

The pricing for drugs and other healthcare products is among the great mysteries of the world, and so it is not surprising that The New York Times recently found out that different patients treated in a recent food-poisoning event paid prices that ranged over hundreds of dollars for basic IV saline solution. More surprising is that the Medicare-approved rate for a liter of saline that can end up at $90 starts at $1.07 a liter.

"People are shocked when they hear that a bag of saline solution costs far less than their cup of coffee in the morning," Deborah Spak, a spokeswoman for Baxter International ($BAX), told The New York Times before then saying that its prices were private. A Hospira ($HSP) spokesperson also would not discuss prices.

The Times found that one 56-year-old woman was charged $787 for IV therapy, while the cost to her toddler grandchild was $393. Dr. Elizabeth Frost, a 73-year-old New York anesthesiologist who was treated at a different hospital, was charged $546 for 6 liters of saline.

Of course, the final prices charged and those paid also are different, and it is all tied up in the complex array of rebates and discounts between manufacturers and purchasing organizations which often buy products on behalf of hospitals. There also are distributors like Cardinal Health that factor into the equation, as well as the charges that hospitals themselves set based on often different criteria. Advocates of the current U.S. system say it helps healthcare providers negotiate discounts that keep prices down. Critics say it's so opaque that no one knows what anything costs and that lack of transparency is unlikely to get consumers the best price. "It's just absolutely absurd. That's saltwater," Dr. Frost said of being charged $91 a liter for saline.

For drugmakers, of course, pricing it works in a variety of ways. The retail price of some drugs is astronomical, say $60,000 or $100,000 for an annual regimen. But the retail price is seldom paid because drug companies negotiate discounts with health plans and government agencies. Some of those discounts come in the form of paybacks, like for Medicaid. A study from pharma consulting firm ZS Associates last year found that drugmakers were sometimes rebating up to 60% of the retail cost of their drugs based on a variety of factors. ZS estimated the practice costs the industry up to $40 billion a year.

But few buyers are feeling any sympathy for drugmakers. In fact, in April a group of cancer doctors from around the world published an op-ed piece in The New York Times suggesting that some drugmakers had lost their moral perspective in the way they are pricing drugs that are needed to keep people alive.

- here's the New York Times piece (sub. req.)

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