The markup on medicine:
The World Health Organization (WHO) defines a markup as the difference between the purchase price (cost price) and the sales price of a product. A markup is the sum of all additional fees and costs imposed on a product to cover production costs and make a profit. According to an analysis by Ronny Gal, a senior research analyst at Bernstein, hospitals show drug prices by an average of 250 percent. In general, medical care and pharmaceuticals account for 20 percent of gross costs, and as a result, even the slightest change in markup guidelines could have a huge financial impact.
Before switching mark-up medicine methods or executing new surcharges, hospitals should model the impact on gross fees. Hospital markup policies that set prices for medical care and medicines can vary significantly across the country, resulting in large variations in drug and delivery costs. Drug markup guidelines often differ from those for deliveries in that they are based on either the average wholesale price (AWP) or a cost-based method such as wholesale acquisition cost (WAC). As shocking as this may be, these exorbitant drug surcharges are a recognized practice in the medical industry and are considered one of the factors contributing to the high cost of medical care in the United States.
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