Drug prices are increasing at a rate that many believe to be unsustainable.
Hospitals have developed innovative ways to cope with meteoric rises in drug prices.
Every stakeholder involved in the path from drug manufacturer to patient is driven by financial incentives, and many of these stakeholders blame each other for drug prices’ upward spiral.
Compare the following consumer and medical inflation rates from 2015-2017:
| Type of Inflation | 2015-2017 Rate |
| Consumer Price Index | 3.5% |
| Overall medical inflation | 6.4% |
| Outpatient drug inflation | 28.7% |
| Inpatient drug inflation | 9.6% |
Results of the rapid increases in drug prices have included “moderate to severe” impact on healthcare system budgets, drug shortages, reduced provider staffing, and reduction in services. Here’s how healthcare systems are coping with swift increases in drug prices.
Emphasis on Appropriate Use of Drugs
Many healthcare systems are developing plans and protocols for appropriate use of drugs. This means striving to make sure that every drug prescribed is being prescribed for the right person, for the right reason. Some facilities are investing in software that provides drug recommendations based on patient genetic data, a practice known as pharmacogenomics.
Medication use initiatives, where resources like electronic medical records help drive decision-making on choosing the best medication for the patient, are another way hospitals and clinics develop medication plans that evaluate less-costly alternatives and discourage more casual prescribing habits.
Learning to Cope with Drug Shortages
As of late 2018, the top five drug classes that experienced shortages were antimicrobials, chemotherapy drugs, cardiovascular drugs, central nervous system drugs, and fluids (like nutrition and electrolyte fluids). The reasons for shortages vary, from quality concerns to natural disasters to lack of raw materials.
The hospitals and other healthcare systems that must protect patients during times of drug shortages are using several methods to cope, including:
- Using substitutes (like switching one broad-spectrum antibiotic for another)
- Conserving limited supplies (through methods like “cohorting” patients)
- Compounding their own drugs in-house
- Delaying treatment
- Creating teams to prepare for and manage drug shortages
Some hospitals are cutting costs by bringing pharmaceutical compounding in-house.
One of the biggest problems with drug shortages is that in aggregate, they add an estimated $230 million to annual U.S. drug costs. And patients may not be aware that their own out of pocket costs can go up when there is a medication shortage. Therefore, managing shortages effectively is becoming increasingly important in an era when drug prices are rising rapidly anyway.
Pharmaceutical Business Intelligence and Analytics
Analytics, price benchmarking, and monitoring the status of drug patents have not traditionally been major priorities of healthcare systems, but they are becoming so. Ongoing review of cost and spending data can help hospitals and other systems spot issues early on so that alternatives can be explored. Simply knowing which medications account for the greatest drug spending can help facilities plan on ways to cope in the event of drug shortages or other problems.
Market intelligence can keep healthcare systems apprised of which drug patents are close to expiration, potential new biosimilars, and the availability of generics. There are many resources, such as FDA listservs and newsletters, information from national group purchasing organizations, and pharmacy organizations; and they can help hospitals better understand exactly where drug prices are likely to increase most.
Increasing Flexibility with Suppliers
Managing their own supply chain of pharmaceutical sourcing is another area in which healthcare systems are focusing on in their efforts to manage the effects of increasing drug prices. Some use multiple-vendor contracting to help compare prices and stave off problems when drug shortages arise (which can cause particular problems when generics are affected, forcing hospitals to turn to more expensive name brand drugs).
Like market intelligence, supply chain monitoring and multiple vendor contracts have not traditionally been focus areas for healthcare systems, yet they have become necessary as facilities strive to provide excellent care despite high drug prices.
With the rise in drug prices, hospitals and other healthcare systems are having to worry about access to important medications when they need them. But they’re not content to simply wait and worry, and are taking both medical and non-medical steps to ensure they can manage drug prices effectively and ensure patients don’t go without medications.
