Practice Management News

Hospital Prescription Drug Spending to Increase 4.57% in 2020

Hospital prescription drug spending is slated for moderate growth in 2020 compared to prior years, but the growth rate is still substantial, Vizient says.

Hospital prescription drug spending

Source: Thinkstock

By Jacqueline LaPointe

- Including inpatient and outpatient settings, hospital prescription drug spending is likely to increase by about 4.57 percent in 2020, according to Vizient’s July 2019 Drug Price Forecast.

The forecast is an annual analysis of data from Vizient’s Pharmacy Program, which includes member participants’ purchases in hospital and non-acute care settings. This year’s membership accounted for approximately $67 billion in hospital prescription drug spending, meaning a 4.57 percent price change would translate to over $3 billion in additional spend in 2020, Vizient reported.

“This Drug Price Forecast predicts continued growth of pharmaceutical costs that far exceeds both inflation and wage growth, making healthcare less affordable. It also shows that the cost of pharmaceuticals continues to account for a large share of every healthcare organization’s budget and this trend is unlikely to change,” Dan Kistner, group senior vice president of pharmacy solutions for Vizient, stated in the announcement.

Rising prices for branded prescription drugs are behind Vizient’s estimated boost in hospital prescription drug spending, the forecast showed.

While generic prescription drugs are slated to experience a 0.02 percent decrease in price in 2020, Vizient estimated the prices of branded products to increase 4.59 percent during the same period.

“Nine of the top 10 drugs by total spend among Vizient members in 2020 will be branded biologics,” Kishner explained. “Healthcare and pharmacy leaders must be cognizant of competition—in the form of generic drugs and biosimilars—and support their adoption as soon as they become available.”

Biosimilars are like generic drugs for biologic medical products, which are drugs made from living sources. Like generic drugs, biosimilars have the same clinical outcomes and composition and are generally cheaper than brand-name biologics. Biosimilars also come to market when patents on branded biologics expire.

The potential to save money by using biosimilars over branded products is high. One recent analysis from the Pacific Research Institute shows the healthcare system could save as much as $7.2 billion annually by growing the biosimilar marketplace.

However, the think tank found that only nine biologic drug classes currently have approved biosimilars, making adoption tough for hospitals.

2020 could be the year for biosimilars though, Vizient stated in the forecast. The company reported that the FDA has approved 22 biosimilars as of July 2019, with seven of the drugs now available in the market.

Additionally, Vizient found that patents protecting the exclusive manufacturing of rituximab, bevacizumab, and trastuzumab could expire in the third quarter of 2019. The three biologics currently account for over $10 billion in prescription drug spending.

“The acceptance and adoption of biosimilars to combat the costs of these therapies is therefore critical,” the forecast stated.

Hospitals should also pay close attention to specialty drug spending, the forecast showed. Vizient projected specialty drug price inflation to increase by 4.23 percent in 2020.

The specialty drug inflation rate is similar to the general drug inflation rate of 4.57 percent. However, hospitals will likely need to increase their prescription drug budgets in 2020 to reflect the inflation rate of specialty drugs, Vizient stated.

“[T]his new price projection is important for health system leaders since prices of specialty drugs tend to outweigh prices for non-specialty medications. This inflation rate will likely result in the need for providers to increase their drug budgets in the coming year,” the company said in the announcement.

Implementing or expanding the role of a hospital or health system-based specialty pharmacy can help providers manage rising specialty drug prices, Vizient advised. Cited research showed the number of accredited specialty pharmacies owned by hospitals, health systems, and other provider organizations increased from 11 to 27 percent from 2015 to 2018.

Hospital-owned specialty pharmacies can quicken the time to therapy, improve care coordination, and monitor medication adherence.

Overall, hospitals should focus on pharmacy to prepare their organizations for rising prescription drug costs, Vizient emphasized.

“Whether an organization is attempting to reduce inpatient length of stay, expand medication management to include retail or specialty pharmacy, promote population health or decrease opioid abuse, pharmacy is an integral component of those efforts,” the forecast stated.