Premier, Inc. survey suggests health system C-suite also concerned with ongoing drug shortages, which contribute to high-cost pharmaceuticals
CHARLOTTE, N.C. — The rising cost of pharmaceuticals and ongoing drug shortages are two major issues challenging providers, according to health system C-suite respondents to the fall 2015 Economic Outlook survey. Premier, Inc. (NASDAQ: PINC), a leading healthcare improvement company, conducts the biannual survey to highlight economic and industry trends affecting health systems.
Nearly every C-suite respondent to Premier’s Economic Outlook survey suggested that pharmaceutical price increases pose a challenge for their organization (Figure 1), citing this issue as their top area of concern. Second to drug pricing, nearly 95 percent of respondents reported that drug shortages will continue to be a problem for their organization for at least the next three years (Figure 2).
“Providers are finding it increasingly difficult to deliver outstanding patient care in the midst of ongoing drug shortages and ever increasing pharmaceutical pricing,” said Michael J. Alkire, chief operating officer, Premier. “Premier is committed to tackling this problem head on to help create healthier, more rational pharmaceutical markets. A potential solution to rising drug costs being considered is for manufacturers to replace their fee-for-service contracts with those that reward how well their products work.”
However, one of the challenges in healthcare is the lack of measurement to understand the cost-effectiveness of drugs so that providers can make meaningful comparisons and choices. For example, the FDA measures for drug and device safety and efficacy, but it does not assess the cost-effectiveness of products compared to others on the market.
“Another challenge is the lack of cross-continuum clinical data, so the ability to effectively track drug performance is limited,” said Alkire. “Premier is working with health systems and manufacturers to address these shortcomings by measuring a product’s performance both in and out of the hospital to help fill the evaluation gap in an objective and scientific way, and arm purchasers with information to challenge drug pricing.”
In addition to high prices, drug shortages prevent providers from properly caring for their patients and can lead to even larger price spikes. In fact, a 2014 Premier analysis found that drug shortages increased U.S. hospital costs by an average of $230 million annually.
“Ongoing drug shortages are resolving very slowly,” said Alkire. “One of the barriers is the FDA approval backlog, which is delaying the introduction of new generic drugs. Although approvals are accelerating, there remain 4,000 applications pending that could help drive competition and create healthier markets. Congressional action may be needed to help prioritize the FDA process and reduce the generic backlog. Additionally, Premier only contracts with generic manufacturers with a good FDA record to reduce the risk of shortages and provide a more efficient means to bring safe alternatives to market.”
Last week, Premier’s industry trade association, the Healthcare Supply Chain Association, sent two letters appealing to Congress and the FDA to take action to facilitate new generic entrants into the market, increase competition among manufacturers and support quality metrics for manufacturers.
“There are some very important drugs in shortage that continue to impact patients, clinicians and health systems every day,” said Alkire. “We’re working with our members to proactively address problems that can lead to high costs and shortages of critical drugs. With the right data, measures and policies, we can make more informed decisions, which is a central goal of our alliance.”
About the Economic Outlook survey
Premier’s Economic Outlook survey highlights emerging economic and industry trends impacting health systems. C-suite respondents to the most recent survey, which was conducted online in summer 2015, represent 55 health system executives across the U.S. – primarily CEOs, chief financial officers and chief operating officers.