The lowly IV bag has a tremendous value for patients admitted to hospitals and are widely used to deliver medications and replenish lost fluids. IV therapy, however, can be billed at a exceptionally high rate in hospitals across the United States, despite its simplicity. A recent piece by The New York Times points out that patients can be billed "100 to 200 times the manufacturer's price [to produce them], not counting separate charges for 'IV administration.'" In some bills, the paper costs, IV therapy charges can results in bills in which patients pay nearly 1,000 times the cost of producing the bags. According to data from the United States government, the price of IV bags has fluctuated over the past decade from $1 down to 44 cents. "People are shocked when they hear that a bag of saline solution costs far less than their cup of coffee in the morning," notes Deborah Spak, a spokesperson for pharmaceutical giant Baxter International. Baxter is one of three companies that manufactures almost all IV solutions in the U.S.

The article belongs to a series on the high cost of healthcare in the United States. A recent installment was titled "In Need of a New Hip, but Priced Out of the U.S." That article drew criticism from Biomet's CEO.
AdvaMed, the industry lobby group, has repeatedly argued that medical devices themselves may not be the cause of rising healthcare costs. According to a study by AdvaMed national medical device prices and spending on them haven't increased over the past 20 years. On average, diagnostic and device prices increased at 1% annually. This compares to an average U.S. inflation rate of 2.8%.
"A significant driver of changed medical practice has been the development of new medical devices," notes the report. "In view of the conventional wisdom about the role of medical technology in driving up costs, it is surprising that the cost of medical devices during this period has risen little as a share of total national health expenditures and, since 1992, has remained essentially constant as a percent of national health expenditures."

By contrast, The New York Times' argument centered around the inflation of the costs of medical devices and pharmaceuticals as they are billed to patients. The paper also points to other ways costs can be inflated, including the lack of transparency resulting from confidential deals between distributors, group purchasing organizations (GPOs), insurance companies, Medicare, and manufacturers. Because of these secretive deals, the actual price of a medical device can be obscured to the point where few people can say what a single component actually costs. Both patients and taxpayers face inflated bottom lines with little recourse.

Before a product is sold, the real cost of a medical device disappears into the realm of confidential rebates, byzantine contracts and fees that obscure real prices. In other industries, some of these costs could be considered illegal kickbacks. Hospitals themselves don't negotiate prices. Instead, many healthcare facilities rely on giant distributors and group-purchasing organizations.


In a paper titled "Aspirin, Angioplasty, and Proton Beam Therapy: The Economics of Smarter Health Care Spending," Harvard researchers stake a different argument than AdvaMed does, arguing that medical technologies contribute towards almost half of annual cost increases.

While medical costs are clearly spiraling upwards for U.S. patients, the core reason behind that trend is hard to nail down.