Practice Management News

Hospital Drug Spending to Increase 3.59%, Vizient Estimates

Hospital drug spending is slated to increase from July 1, 2020, to June 30, 2021, due to expensive biologic therapies, oncology drugs, disease-modifying antirheumatic drugs, and immunomodulators.

Hospital drug spending

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By Jacqueline LaPointe

- Hospital drug spending will increase by 3.59 percent through next year, indicating a “continuation of the sustained modest growth” observed over the last several years, according to the group purchasing organization Vizient.

Previous forecasts found hospital drug spending to increase by nearly 4.6 percent in 2020 and 7.35 percent in 2019. But prior forecasts predicted double-digit percentage increases, raising concerns for hospitals and other purchasers.

The most recent forecasted percentage is lower relative to years past because of advocacy work done by industry groups and improved supply chain transparency for pharmaceutical companies, Vizient’s outlook for July 2020 through June 30 showed.

Nevertheless, certain drugs are leading to higher hospital spending, including expensive biologic therapies, oncology and oncology-related drugs, disease-modifying antirheumatic drugs (DMARDs), and immunomodulators. These are some of the most expensive drug treatments available, with some carrying price tags well into the hundreds of thousands of dollars.

But even modest increases in drug prices can also quickly impact the bottom line. The organization projected the modest increase to translate to over $2.5 billion in additional drug spend for member hospitals in the next year.

“Over the last three forecasts, we have seen a trend toward price increases that are meaningful but smaller. Still, we don’t want to minimize the impact that continued price increases have on providers and patients,” Dan Kistner, group senior vice president, pharmacy solutions for Vizient, stated in a press release.

Among its member hospitals, Vizient projected the following prescription drugs to experience the largest slated increases in drug spend due to price growth:

  • Adalimumab (Humira)
  • Ustekinumab (Stelara)
  • Etanercept (Enbrel)
  • Pembrolizumab (Keytruda)
  • Secukinumab (Cosentyx)
  • Alteplase (Activase, Cathflo)
  • Vasopressin (Vasostrict)
  • Tofacitinib (Xeljanz)
  • Certolizumab pegol (Cimzia)
  • Vedolizumab (Entyvio)

The list highlights the influence biologic drugs, which include recombinant pharmaceuticals, naturally derived products, and vaccines, have on hospital drug spending, Vizient stated. Researchers pointed out that, of the top 20 medications by spend, only one product was not a biologic agent.

The industry needs greater evaluation and adoption of biosimilars, researchers gleaned from this year’s report.

“One of the keys to managing costs for health systems is the adoption of biosimilars as they come on the market,” explained Kistner. “There are now 12 biosimilars available and where there are two or more competitors, we have seen prices as much as 30% lower than the branded product. Providers and payers must now become better aligned to realize the full benefit that competition can offer in driving down the cost of care.”

The greatest barrier to further adoption of biosimilars is the payer formulary, the forecast stated. Payers need to add more biosimilars to their formularies and design hospital reimbursement policies that allow for greater adoption of the drugs.

At this point in adoption, variations in coverage are prompting hospitals to stock multiple versions of the same product, which is not the intention of biosimilars, researchers added. However, stocking multiple versions ensures reimbursement for the hospital.

Despite this challenge, 2020 is poised to be “a seminal year for the adoption of biosimilars,” the forecast stated.

“If there is meaningful uptake of the oncology biosimilars, we may finally begin to see effective competition. Therefore, we must continue to focus on achieving and sustaining that desired level of adoption,” Vizient wrote.

Hospitals will continue to grapple with drug prices through the next year as industry leaders and policymakers tackle the issue head on. Lowering drug prices is a top priority for the Trump administration, which has taken several steps to slash prices, including a recent proposal that would allow for the importation of certain prescription drugs from Canada.

Hospitals and other providers have also banded together to enact change. For example, the Campaign for Sustainable Rx Pricing, which includes the American Hospital Association and American College of Physicians, pushes for greater drug pricing transparency, quicker FDA approval of generic drug applications, and value-based pricing in Medicare and Medicaid.