WASHINGTON — By raising the price of prescription drugs nearly 20% in 3 years, drug companies put the squeeze on hospital budgets, disrupted patient care, and forced staffing cuts, according to a report from three major hospital and pharmacist groups.
In some cases, drug companies even exploited shortages of certain products to raise their prices, claimed the report from the American Hospital Association (AHA), the Federation of American Hospitals (FAH), and the American Society of Health-System Pharmacists (ASHP). The report was produced by researchers at NORC at the University of Chicago.
“With today’s report, we’re putting the drug companies on notice,” said Rick Pollack, AHA president and CEO, on a phone call with reporters Tuesday. “Hospitals are working hard to hold down costs and drugmakers need to do the same.”
For the report, a drug survey was sent to 4,262 U.S. community hospitals, 1,184 of which responded. The surveys were then matched to the AHA’s annual survey of hospital characteristics. The report also included an analysis of prescription drug purchasing data from two large group purchasing organizations (GPOs).
NORC, AHA, and FAH conducted key informant interviews with six individuals involved in the oversight of pharmaceutical procurement and management at community hospitals. “Those surveyed included individuals overseeing services in large private or public hospitals in the West Coast or the South and all six worked for hospitals that participated in GPOs,” the report authors explained.
On average, total drug spending rose 18.5% from fiscal year (FY) 2015 to FY 2017, and one in four hospitals reported having to cut staff because of budget pressures, noted the report.
Broken down by setting, outpatient drug spending jumped 28.7% per adjusted admission, while inpatient spending saw a 9.6% spike from FY 2015 to FY 2017. This is on top of the 38.7% “record growth” seen from FY 2013 to FY 2015 in inpatient spending, noted the current report, an update and expansion from a 2016 report.
One consequence of these higher drug prices, and of drug shortages in general, is that they force hospital staff to spend time searching for substitute treatments, which can delay patient procedures and other services. The alternatives are often also more expensive than usual care, the report noted.
And some hospitals saw price increases “in excess of 80 percent” for certain products including anesthetics, parenteral solutions, opioid agonists, and chemotherapy.
Nine in 10 hospitals surveyed reported having to locate an alternative therapy to manage a drug price spike or shortage, and eight in 10 suggested that drug shortages increased spending “to a moderate or large extent.”
For patients, higher drug costs can also lead individuals to skip or delay treatment. In some cases, this can lead to patient readmissions when symptoms are not controlled, simply because patients can’t afford their medicines, Pollack said.
One limitation of the report was the self-report of FY 2015 to FY 2017 spending for inpatient drugs. Also, the survey requested information from individual hospitals, but some hospitals submitted aggregate information for hospital systems, which the report authors said they accounted for in their analysis. Lastly, not all hospitals work with GPOs, which can consolidate hospital’s purchasing power, so the data may not be representative of all hospitals’ experience.
‘Basically an Emergency’
Erin Fox, PharmD, senior director for drug information and support services at the University of Utah Health in Salt Lake City, explained that drug shortages are still a problem today.
“Each shortage is basically an emergency,” she said. When a shortage is identified, hospitals must act quickly — “within an hour or two,” Fox said — to identify how much of a product is available, how long it will last, and what interventions might make it last longer.
Hospitals must sometimes make off-contract purchases to stretch the supply of a product or medicine. When this happens, staff must update the electronic health record system and other automated services related to the drug or product to ensure patient safety, she said.
In some cases, hospitals are forced to rely on compounders, which can be expensive and create an “additional risk” since there isn’t much quality data on compounded drugs, Fox said.
She noted that the “types of products that are in short supply are very basic products … things like lidocaine and bupivacaine, sterile water, ketamine, and opioid injections.”
And even when a drug is not in short supply, price hikes by drugmakers can have the same effect as a shortage, forcing providers to use the same tactics, Fox said.
Drug and product shortages can have multiple causes, such as when Hurricane Maria hit Puerto Rico and created a shortage of saline IV bags. In some situations, drug companies will capitalize on a bad situation by putting “the hospitals and our patients at their mercy, in terms of raising prices,” said Chip Kahn, MPH, FAH president and CEO.
For instance, two chemotherapy agents, mitomycin and vinblastine sulfate, as well as Ringer’s Solution, were all in short supply in 2016, and their unit prices increased by roughly 30%, according to the report.
As for solutions to address rising drug prices and drug shortages, Pollack said Congress and stakeholders should focus on increasing competition and innovation.
He recommended eliminating “gaming” tactics common to the pharmaceutical industry, such as:
- Pay for delayed contracts: brand-name drugmakers paying a generic firm to delay entering the market after the brand-name drug’s patent expires
- Evergreening patents: brand-name drugmakers making a small modification to a product in order to extend its patent life
- FDA Risk Evaluation and Mitigation Strategies (REMS) abuse: brand-name drugmakers blocking generic companies from accessing samples of their products
Kahn stressed that hospitals must lead the way in addressing shortages. “I don’t think this necessarily is going to be dealt with by policy. I think it’s going to be dealt with, hopefully, by hospitals becoming more aggressive as players in the market to assure that those drugs are available for their patients,” he said.
He highlighted the hospital-funded non-profit Civica Rx, whose mission is to ensure access to essential and life-saving drugs at an affordable price, as one approach to resolve the issue.
“Maybe that’ll shake the market up,” Kahn stated. “Something needs to, because the results of the study clearly show that the position of the drug companies is such that they’re misusing their leverage.”
Pollack pointed out that “healthcare improvement company” Premier has launched ProvideGx, a program that is similarly focused on making shortage medications accessible and affordable.
Fox noted an FDA proposal to create a “critical drugs list” that incentivizes manufacturers to create redundancies or business continuity plans for certain drugs where a shortage would have the potential for significant harm.