Total drug spend per hospital admission increased 18.5% between fiscal years 2015 and 2017, resulting in $1.8 million in additional costs for an average hospital, according to a report sponsored by the American Hospital Association, Federation of American Hospitals and American Society of Health-System Pharmacists. This follows record growth in prescription drug spending between fiscal years 2013 and 2015.
Outpatient and inpatient drug spending per admission both increased in the same time, by almost 30% and 10%, respectively. Hospitals found price increases of more than 80% across some different drug classes, including those for anesthetics, parenteral solutions, opioid agonists and chemotherapy, according to the report released Tuesday.
NORC at the University of Chicago, a nonprofit life sciences research group, collated the study through countrywide survey data, interviews with hospitals and health system executives and pricing and spending data from two group purchasing organizations before any net discounts or rebates were applied.
The report is the latest sortie in the ongoing PR battle between providers and pharmaceutical companies over who exactly is to blame for skyrocketing drug prices in the U.S.
Those costs have been growing at an unsustainable rate over the past few years, faster than overall healthcare costs and inflation alike. Snowballing prices aren't tied to utilization — instead, the U.S. Department of Labor found the increases are driven primarily by higher launch prices and annual price increases in the drugs themselves.
Providers, which purchase such drugs in bulk, are furious about the situation. "With today's report, we're putting drug companies on notice," AHA President Rick Pollack said on a Tuesday call.
More than 90% of the hospitals surveyed had to identify alternative therapies to mitigate the impact of the cost increases and drug shortages, according to the report. One in four facilities had to downsize staff.
"Each shortage is basically an emergency," said Erin Fox, senior director of drug information and support services at University of Utah Health. "All hands on deck."
Some specific drugs saw much higher spend increases than others, including the widely-used heart attack and stroke drug Activase (19% increase from $3,486 in 2015 to $4,143 in 2017) and immunosuppressants Remicade, Humira and Enbrel (between 15-21% over the time period). Orphan drugs and hepatitis C treatments were also significantly more expensive at the study period's end.
The majority of U.S. hospitals surveyed reported that competition from new entrants into the market had a small impact on drug prices. The report found that for the 10 most expensive drugs in FY 2017, two had a generic or biosimilar competitor enter the market in 2016. Those two still saw a 4.1% increase in prices (compared to a 14.4% increase among the other eight).
However, interviewed hospitals were still concerned that brand manufacturers were raising prices prior to a generic launch, along with the overall lack of generic competition in the market (of the five biosimilars approved in 2017, only one launched).
The report also noted the effect high prices have on insurers, finding that the growth in prices exceeded the Medicare reimbursement update by a factor of five from 2015 to 2017 and exceeded the growth in general healthcare expenditures.
Powerful drug lobby PhRMA has in the past reiterated that hospitals mark up drug prices by an average of 500% in an attempt to deflect the blame.
The report comes as lawmakers are ramping up pressure on drug companies. This week, House Oversight Committee Chairman Elijah Cummings, D-Md., sent letters to a dozen drug companies asking for information on their pricing practices, investments in research and development and corporate strategies.
And President Donald Trump has proved himself verbally bullish on lowering drug costs, with HHS following through in October of last year with a plan to link Medicare Part B reimbursement to an international composite.
Many hospitals are fed up with what they see as governmental inaction, however. Roughly 750 hospitals have joined a venture called Civica Rx, a not-for-profit generic drug company established last year to cut costs and provide a predictable supply of drugs to health systems.
"At the minimum, we need to focus on the generics," Chip Kahn, president and CEO of the Federation of American Hospitals told reporters. "All those actions on the generic front would go at least 40 to 50% down the way to solving our problems."