CHARLOTTE, N.C. —Rising drug costs and pharmaceutical management remain top-of-mind for health system leaders, according to a new Premier Inc. survey. In fact, almost every health system leader who responded to the survey agreed that pharmaceutical price increases pose a challenge for their organization.
“While it’s imperative to compensate for breakthrough innovations, a balance must be struck,” said Michael J. Alkire, chief operating officer of Premier. “In our view, one of the best ways to ensure fair pricing is by driving increased competition and greater use of generics and biosimilars. At the same time, we also need to provide prescribers with apples-to-apples mechanisms they can use to compare products in a therapeutic category, evidence-based facts around which products deliver optimal quality at the best value and aligned financial incentives.”
- More than 90 percent of respondents suggested drug shortages will continue to be a problem for their institutions over the next three years.
- Over the past two years, leaders have consistently ranked drug pricing and pharmaceutical shortages as top areas for concern in the survey.
A major factor impacting rising drug prices is limited competition of generic drugs. A recent FDA report highlights progress of the agency around balancing the review process with a continued focus on patient safety. However, the report also documents nearly 3,000 applications are still awaiting approval. If the FDA maintains its current pace of review, applicants must wait nearly four years before being considered for approval to hit the market and challenge a manufacturer’s monopoly status. This allows high prices and shortages to persist by delaying competitive entrants from entering the market.
During a five-year period, a GAO report found more than 300 generic drugs experienced an extraordinary price increase of at least 100 percent or more. A recent Premier analysis examined generic drugs with the highest price increases between 2013 and 2015. The analysis identified four cases of generic drugs with monopoly market status and dramatic price increases.
- Neostigmine (treatment of neuromuscular disease): 3,000 percent
- Vasopressin (anti-diuretic hormone): 3,000 percent
- Calcitonin (treatment for bone disease like osteoporosis): 2,300 percent
- Nitroprusside (managing blood pressure): 1,800 percent
“We continue to champion effective solutions aimed at reducing the FDA backlog, including current bipartisan legislation being considered that would require the FDA to significantly accelerate the approval process for generic drug applicants and reduce the wait time from several years to six months in cases where competition is lacking. This work is critical to closing unfair loopholes that allow some manufacturers to game the system and profit by extending exclusivity on their products,” said Alkire.
- More than 90 percent of respondents said that the growth of personalized or precision medicine will increase their supply chain spend.
- Nearly 70 percent of respondents agree it will be necessary for their hospital or health system to operate its own specialty pharmacy.
While precision medicine holds great promise to individual outcomes, the specialty drugs used in the treatments tend to carry very high price tags ranging from $30,000 up to $1 million over the duration of use. Additionally, as these drugs increasingly become more targeted through personalized medicine, providers are concerned that trend may limit their ability to group purchase products and extract volume-based pricing discounts.
Incorporating the use of biosimilars holds potential for helping to reign in some of these specialty drug costs. To date, four biosimilars have been approved by the FDA Advisory Panel, in which only two have been released to market due to ongoing litigation. While the FDA has made progress in providing guidance to clarify the type and level of evidence required for interchangeability of biosimilars and reference biologics, the pace of approvals, payer stance and reimbursement and clinician education will continue to greatly impact product uptake and potential savings for providers and consumers.
Another solution for providers to better manage both pricing and administration of these therapies is through provider-led specialty pharmacies, which administer drugs, actively monitor patients for side effects and efficacy of therapy and ensure financial assistance to patients in need. They also practice cost reduction strategies, such as ensuring medication adherence to create optimal patient outcomes.
“As specialty drugs enter the market, many have the potential to cure chronic disease, but only if the therapies are taken as prescribed,” said Alkire. “Provider-led specialty pharmacies are uniquely able to manage this population to ensure adherence, and provide the necessary data back to front-line providers so that they can better coordinate care and ensure effective outcomes.”
About the Economic Outlook survey
Premier’s Economic Outlook survey highlights emerging economic and industry trends impacting health systems. Ninety-one respondents (C-suite, financial, supply chain and operations professionals and physicians) representing health systems from across the U.S. completed the survey, which was conducted online in winter 2017. The survey is part of the Economic Outlook report, published a bi-annual publication which highlights emerging economic and industry trends impacting decision-making of healthcare leaders.