New Report Considers Impact of Drug Prices and Shortages on Hospitals and Patient Care > Hospital Association of Pennsylvania

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New Report Considers Impact of Drug Prices and Shortages on Hospitals and Patient Care

January 23, 2019

As both Congress and the Administration place a focus on exploring policy options to address rising drug prices, a new report identifies challenges facing hospitals and patients in managing the financial burden of increased spending on prescription drugs, and the threat of disruption in access to care resulting from shortages of critical medications.

The new report, Recent Trends in Hospital Drug Spending and Manufacturer Shortages,” was issued by the University of Chicago’s NORC, an independent research institution. It details trends in the rising prices of drugs, growth in spending by hospitals on prescription drugs, and ongoing manufacturer shortages. The report speaks to the overall impact of these dynamics on hospital budgets and potentially negative impacts on patient care.

Hospitals and health systems are major purchasers of prescription drugs. Escalating drug prices are particularly felt as hospitals’ must manage costs within a fixed price based payment system.

Additional key findings from the report include:

  • Average total drug spending per hospital admission increased 18.5 percent between fiscal years 2015 and 2017, significantly more than the 6.4 percent increase in overall medical inflation
  • Outpatient drug spending per adjusted admission increased 28.7 percent, while inpatient drug spending per admission increased 9.6 percent during the same period
  • Payers are unable to keep up with rising drug costs, e.g., the growth in expenditures per hospital admission on inpatient drugs exceeded the Medicare reimbursement update five-fold during the study period
  • Hospitals experienced price increases in excess of 80 percent across different classes of drugs, including those for anesthetics, parenteral solutions, opioid agonists, and chemotherapy
  • More than 90 percent of surveyed hospitals reported having to identify alternative therapies to mitigate the impact of drug price increases and shortages
  • One in four hospitals had to cut staff to mitigate budget pressures
  • Hospitals report that drug shortages put patient care at risk and create additional burden and cost

The analysis was commissioned by the American Hospital Association, the Federation of American Hospitals, and American Society of Health-System Pharmacists to support policymakers in understanding how drug prices are impacting hospital budgets and operations, and patient access to care.

This new study supplements a previously issued 2016 report, Trends in Hospital Inpatient Drug Costs: Issues and Challenges,” which documented that hospitals are faced with large and unpredictable increases in the price of drugs used in the inpatient setting, resulting in a significant increase in inpatient drugs spending and putting budgetary pressure on hospitals.

That 2016 study included important findings offering insight into the dynamics driving the increase in inpatient drug spending, including:

  • For most of the drugs, growth in unit price—not volume—was primarily responsible for the increase in total inpatient drug spending
  • Unit price increases occurred for both low- and high-volume drugs and for both branded and generic drugs
  • About half of the drugs sampled had no active generic competition, leaving no lower cost alternatives

HAP is working in partnership with the American Hospital Association to find common ground and policy solutions among doctors, hospitals, pharmacists, employers, health plans, seniors, patients, and consumers to address ever-increasing drug prices.

AHA President and CEO Rick Pollack recently issued a “Perspective Column” recommending steps to restrain out-of-control drug prices and address drug shortages. Options put forth by the AHA include:

  • Stopping brand-name manufacturers’ anticompetitive actions by addressing ever-greening and pay-for-delay practices
  • Speeding up generic drug approvals
  • Passing the CREATES Act which would allow generic drug manufacturers facing certain anticompetitive delay tactics to bring an action in federal court for injunctive relief
  • Strengthening manufacturers’ drug shortage disclosure requirements
  • Developing drug shortage plans
  • Incentivizing the production of drugs in shortage and manufacturing contingency plans and redundancies
  • Encouraging early drug shortage alerts to mitigate the risks

HAP also has worked with Pennsylvania lawmakers to express concern about drug shortages, and urge appropriate action to ensure essential medications are always available.

Please contact Laura Stevens Kent, HAPs vice president, federal advocacy with questions regarding federal activity pertaining to drug prices.

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