8 Tips For Hospitals to Combat Increasing Drug Prices

Prescription bottle filled with money.

Rapidly rising drug prices and shortages are predicted to continue for the foreseeable future, say industry experts. In fact, Vizient issued a drug price forecast predicting a 7.35 percent price increase in pharmaceutical purchases made between July 2018 and June 2019.

The good news is that pharmacy leaders can help their hospital mitigate these budget busters.

“We encourage all pharmacy leaders to take an active role with their administration, physicians and nurses to find solutions that preserve patient safety while controlling costs,” said Rick Burnett, CompleteRx COO.

The pain is being felt across the country, in hospitals large and small. A few reported examples include:

  • Texas Health Resources reported an 8 percent increase in drug prices in its acute care settings.
  • Trinity Health of Michigan reported it spent $16 million more on drugs in 2017 due to prices hikes alone.
  • Edward-Elmhurst Health of Illinois reported a 14 percent increase in inpatient drug costs per admission between 2013 and 2015.

What can you do in the face of rapidly increasing costs?

How Hospitals Are Getting Into Drug Manufacturing

It sent shock waves through the pharmaceutical industry when it was announced in January 2018 that Intermountain Healthcare, Ascension, SSM Health, Trinity Health and the U.S. Veterans Affairs Department, representing 450 hospitals, had banded together to fight unexpected price hikes and supplies shortages by manufacturing their own generic drugs.

Since January, the consortium reports that several other systems have asked about partnering with them on the endeavor. Meantime, Cleveland Clinic is talking about expanding its compounding facility and manufacturing its own generics. Each hospital’s executives cite stable, sustainable supplies as much as cost-control when discussing manufacturing their own drugs and supplies like sodium bicarbonate and injectable local anesthetics.

Expressing caution, industry experts question whether it’s practical for hospital systems to band together to manufacture their own drugs and supplies given the infrastructure challenges of obtaining FDA approval for factories and the thin margins of generic drugs.

Advice for all hospitals

“We’ve reached a critical stage where shortages are endangering patients,” said Terry Andrus, CompleteRx CEO and President. “These innovative partnerships show great promise in helping some health systems, but the group planning to form a generic drug company represents just over 450 hospitals which is less than 10% of the 4,840 community hospitals registered in the U.S. and the first of its pharmaceutical products are not likely to be available until 2019. Hospitals need immediate relief from rising drug costs and shortages.”

Should your hospital not join one of the groups hoping to make their own drugs, CompleteRx offers these suggestions to combat rising drug costs in your hospital:

  1. Consider using biosimilars when possible
  2. Research alternatives to high cost medications such as cervidil to misoprostol
  3. Substitute combination drugs with their respective components
  4. Look for substitutes to drugs that undergo dramatic, unexpected price increases
  5. Optimize your 340B drug pricing program
  6. Streamline your formulary judiciously
  7. Review your formulary for frequently used drugs with potential lower-cost substitutes that perform equally well
  8. Investigate how you are using the current formulary medications (i.e. dosages, volumes) and determine if there are alternative formulations, routes, or if volumes can be shared or split.

Using such tactics, CompleteRx has been able to help its clients hold down costs. From 2016 to 2017, CompleteRx pharmacies saw an increase of 4.5 percent compared to the producer price index (PPI) increase of 6.31 percent over the same time period. That includes high cost/specialty drugs.

For example, on a drug budget of just $10 million, that represents a little over $180,000 savings in just one year. The three-year compounded effect of that one-year differential is $603,000.


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