Hospitals Slammed by Drug Price Hikes

Report finds 23% increase in inpatient medication spending

Hospitals are getting slammed by drug price hikes that often have nothing to do with improving patient health, according to a report from the National Opinion Research Center at the University of Chicago. The report was commissioned by the American Hospital Association and the Federation of American Hospitals. Its findings were derived from a national Web-based survey, which included responses from 712 community hospitals from April through June 2016.

The researchers weighted the survey responses to come up with estimates for 4,369 community hospitals in the United States. The analysis also included aggregate data for 28 drugs from two group purchasing organizations (GPOs). The GPOs represented 1,400 community hospitals.

The report found that inpatient drug spending increased by 23.4% annually from 2013 to 2015, compared with a 9.9% annual increase in retail drug spending during the same period. The price hikes driving these increases “appear to be random and inconsistent from one year to the next,” the researchers wrote. Approximately half of the price increases in the report involved drugs with no generic competitors. 

“Drugs that were around for decades—almost a century, sometimes—caught us off guard,” said Scott Knoer, chief pharmacy officer of the Cleveland Clinic, referring to price hikes for medications such as nitroprusside, which increased 672% per unit from 2013 to 2015, according to the report. “For a long time, old generic drug prices were so stable we didn’t even think about that,” Knoer said

The brand-name version of nitroprusside, Nitropress, was originally approved in 1981 to treat cardiovascular patients. Today, it’s made by only one company, Valeant Pharmaceuticals, which bought it in early 2015 and raised the price to $790.46 per unit from $150 per unit, according to the report. The price hike has been the subject of Congressional attention.

Nitroprusside cost hospitals almost $95 million in 2015, up from $48 million the year before, the report noted.

The Pharmaceutical Research and Manufacturers of America said that the report misses the big picture by focusing on certain drugs, and that it leaves out the fact that hospitals mark up drug prices when they bill patients.

“Focusing on a set of unrepresentative, older, and off-patent medicines at a time when new generic drug applications had a record backlog gives a distorted portrayal of medicine spending,” said PhRMA spokesperson Holly Campbell.

When companies raise drug prices, hospitals lose money on insured patients, but they make money on uninsured or out-of-network patients because they can legally charge a markup for drugs, said Gerard Anderson, a health policy and management professor at Johns Hopkins Bloomberg School of Public Health. Drugs are regularly marked up at least 500%, so if the drug price is higher, so is the profit, he said.

Ultimately, even healthy individuals wind up paying the price for out-of-control drug costs in the form of higher premiums and copays, increased deductibles, and higher taxes, Knoer said.

“If these kinds of increases took place in the sale of gasoline in the U.S., you’d be paying $30 a gallon,” remarked David Vandewater, president and CEO of Ardent Health. “And if that was the case, the federal government or somebody would decide enough is enough.”

Source: Kaiser Health News; October 11, 2016.