The $1,416.51 Drug Markup

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Not long ago, I developed a sharp awareness of the costs of medical care.

One motivating factor was an anesthesia bill for a 30-minute operation at a suburban New York City hospital in March 2007 to remove hardware inserted to fix a broken leg.  The anesthesia bill, about $6,000, was triple the size of the anesthesia bill for two other surgeries in my family in the same timeframe (one to repair the broken leg, at a Westchester outpatient surgical center, and another an endoscopy my daughter had at a big New York City teaching hospital).

The bill included a charge of $1,419 for a drug named Ondansetron in a size called 4MG 2ML. That was among a total of 10 things that looked like drugs during the surgery.  My co-pay for the third surgical experience was to have been $1,022.25 – while the copay at the surgical center was $750 and the one at the city hospital was $300. (All of the providers were “participating.”)

I questioned the charges with the hospital, the insurance company and the health-insurance hotline of my then-employer.  I was told that the charges were billed correctly, that the amount due from me was indeed correct, and that the cost for the drug was fine. A $2,000 anesthesia bill is customary for a 30-minute surgery, and a $6,000 bill is also customary?

I Googled the drug (it’s a generic anti-nausea agent) and found it could be purchased in the size noted for $2.49 at a local drug supply company. (That document is no longer on line, but a newer list has a price of 25 vials for $35.) A Texas Medicaid document showed that the wholesale price there was $10.11. (That document’s no longer on line; the cost now, judging from a newer document, seems to be 73 cents). A Center for Medicare and Medicaid Services document I found online (no longer available) suggested that the cost for reimbursement would be $14.92. An Office of the Inspector General report from the Department of Health and Human Services said the reimbursement rate would be $24.36 (Medicare) or $15.76 (Veterans Administration). A Michigan Blue Cross Blue Shield document said the cost for a 30-day supply of the drug would be $528.30. (That 2007 document’s no longer on line; an updated one shows the cost to be $88.20).

I questioned the charges again. I pointed out other issues in the bill – double-charging for bandages and drapes, for example. A separate bill for the anesthesiologist, of $1,250. Additional hospital-bill entries of $848 for “anesthesia general” and  $647.75 for “anesthesia.” Not to mention the drugs, including the $1,419 one. I had multiple conversations  by phone and by letter. It seemed wrong, I said, that a drug that can be purchased for $2.49 or $10.11 should be marked up to $1,419. Oh, and about that extra $4,000 for one anesthesia experience?

At the end of a year-long discussion, I made no progress except for accumulating a stack of research and letters contesting the charge. And also, I decided not to pay that bill in full – instead sending a check for $500, about half of what the hospital had billed me as my co-pay. They cashed the check and the discussion ended (though I probably shouldn’t count on visiting that hospital again).

This brought me to a radical idea: what would happen if people knew before they had a medical procedure what it would cost, and what the insurance company would reimburse? Wouldn’t that be extraordinary? What if, when the bill or the explanation of benefits came, people had information for comparison? Would medical consumers shop around, budget, make different decisions?

When I was deeply involved in the sociology of the Internet, in the late 1990’s, we talked a lot about how things that were inefficient or broken in the real world (airline ticket pricing, real estate sales, car sales, 411 information phone calls) could be fixed to some degree by the Web.

Technology and transparency are the consumer’s friends. And a $1,416.51 markup on a tiny quantity of a generic drug is just not right.