Profitability Of Infused Biologics For Hospitals And Physician Practices: Case Study Of Keytruda

Physician-administered drugs and biologics account for a growing share of pharmaceutical spending, but they also generate substantial revenues for the hospitals and physician practices that acquire the products at one price and are reimbursed at a higher price. This study analyzed insurer expenditures and provider margins with a focus on Keytruda, the world's largest biologic in terms of sales, using detailed insurer, provider, and market data on 59,717 patients treated in 5,008 hospitals and physician practices. Keytruda expenditures by private insurers increased by 142 percent from 2020 to 2024, while the number of patients using Keytruda increased by 110 percent. Price markups-the ratio of the reimbursement price charged to insurers compared with the acquisition price paid to the manufacturer-averaged 173 percent in hospitals eligible for 340(B) discounts, 78 percent in hospitals not eligible for those discounts, and 16 percent in community-based physician practices. For hospitals eligible for 340(B) discounts, each Keytruda patient was associated with $102,680 in annual revenue, measured through insurer reimbursement, after organizational, patient, and market factors were adjusted for. Each Keytruda patient was associated with $67,825 in revenue at noneligible hospitals and $3,094 in revenue at physician practices.