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Hospitals May Be Paying Less Than Expected for Drugs

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In recent years, our nation's healthcare system has experienced an alarming increase in drug prices for a range of products vital to patient care. But a new Premier analysis is showing some promising pricing projections.

Premier’s price inflation estimates for pharmaceuticals from July 2019 – June 2020 are now projecting a 1.8 percent drug price inflation rate for non-disproportionate share hospitals, and a 1.7 percent inflation rate for disproportionate share hospitals.

These updated rates are approximately 0.2 percentage points lower than Premier’s previous projections of a flat 2 percent increase. And this is good news, especially as health systems face increasing financial pressures and compressing margins.

Prices for drugs in Premier’s portfolio are expected to decrease

Most of the inflation is on non-Premier contracted items, which are typically on-patent, branded pharmaceuticals that do not go through the competitive group purchasing process.

However, for Premier-contracted drugs, a net pricing decrease of 0.2 percent is projected. This includes for drugs currently in shortage, which historically have been subject to pricing spikes when there is a lack of competition in the market.

In fact, the price of Premier-contracted drugs have grown less than half the rate of the industry average inflation rate, and the average inflation rate across Premier’s portfolio for brand and generic drugs is below the national average. This is the value of creating a level playing field and a competitive marketplace.

The method behind these projections is a useful tool for health systems

We’re able to conduct this analysis using a tool that provides pricing information on health system pharmaceutical purchases. Premier’s Drug Budget Development tool can be used by pharmacists to develop accurate forecasts and budgets for the coming year using their facility-specific purchasing information.

The tool includes data from Premier’s group purchasing contract portfolio, as well as non-contracted supplies, and compares it against inflation estimates provided by the U.S. Bureau of Labor Statistics in order to project estimated spending for contracted pharmaceuticals.

For more information on the tool or for assistance in building out a more precise pharmacy budget, please contact me, Jerry Frazier.

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