Prescription Drug Rate Growth Slows, But Prices Still Rising 7.35%

February 01, 2018 - Providers should anticipate a 7.35 percent increase in prescription drug rates between July 2018 and June 2019, researchers from Vizient projected in a new study.

Based on hospital and non-acute facility purchasing data from the company’s Pharmacy Program, Vizient described the projected price increases as a “slightly moderated level of growth.” Last year, providers faced an estimated 7.61 percent increase in prescription drug rates.

Prescription drug rate growth will slow in the next year as fewer medications will experience excessive price hikes and the costs associated with some specialty drugs, like hepatitis C agents, will level off, researchers predicted.

But just because prescription drug rate growth is slowing does not mean provider organizations should relax.

“While slightly lower, this increase still represents a substantial impact, especially given the use of many high-cost drugs across our members,” stated Dan Kistner, Senior Vice President of Pharmacy Solutions at Vizient.

READ MORE: Prescription Drug Rates Remain Top Healthcare Supply Chain Issue

As prescription drug costs continue to account for a substantial portion of provider organization budgets, Kistner advised providers, pharmacy leaders, and policymakers to promote the use of biosimilars.

“The areas where our members spend the most money are in the disease-modifying, anti-rheumatic drugs, where biosimilar competition already exists, and in oncology drugs, where substantial biosimilar competition is expected in 2019,” he explained. “If we do not find a way to capitalize on this introduction of competition for therapeutically similar products, we waste an incredible opportunity to influence drug spend.”

Providers and stakeholders should particularly target disease-modifying anti-rheumatic drugs (DMARDs), which researchers projected to be the greatest area of cost for health systems based on the percentage of purchases and anticipated rate increases. Researchers estimated that DMARD prices will rise nearly 12 percent between 2018 and 2019, representing the largest price hike among the analyzed therapeutic classes.

“These agents comprise the greatest area of spend and will retain that designation for some time,” the report stated. “This therapeutic category is also increasingly the subject of discussion when it comes to biosimilars.”

Biosimilar use could lead to about $54 million in savings over the next decade. The Food and Drug Administration (FDA) and healthcare stakeholders capitalized on potential savings by marketing three approved biosimilar drugs in 2017 and approving six other biosimilars.

READ MORE: Provider Profitability Drops Under Biosimilar Use Reimbursement

However, provider organizations face an uphill battle with realizing a return on investment for these treatments. Many payers have designated the original, branded drugs as “preferred” treatments in their formularies and will not reimburse providers for using biosimilars not on the payer’s list.

In one case, the reimbursement challenge prompted litigation. Pfizer recently filed a lawsuit against Janssen Biotech, which manufactures the originator drug for infliximab. Janssen Biotech still dominates the market for the drug despite four other versions emerging and two competitors offering significantly lower prices.

Many private payers include the branded originator on their preferred lists because of the drug’s market dominance. The branded originator drug accounts for 99 percent of infliximab purchases, according to Vizient’s data. However, this has limited the use of other biosimilar versions of infliximab.

Pfizer filed the lawsuit to counter the use of “exclusionary contracts” by Janssen Biotech to “diminish the incentive of insurers and providers to switch to the use of biosimilars.”

While stakeholders are waiting for the legal battle’s conclusion, the reimbursement challenge remains.

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“As additional competitors enter the market and prices for those products fall relative to the originators, it is hoped that the potential savings will prompt more payers to designate biosimilars as either preferred or equivalent to the originator product,” researchers explained. “Improved placement of biosimilars on payer formularies is very much needed.”

Private payers may want to seek guidance from their public peers, such as Medicare, the report added. CMS recently updated its methodology for paying providers for biosimilar use. Biosimilars will receive their own unique Healthcare Common Procedure Coding Systems (HCPCS) code instead of Medicare assigning one code for originator biologics and a separate code that included their biosimilars.

As concerns that the coding system discouraged providers to use competing biosimilars emerged, CMS modified the payment system so that the calculation of a biosimilar’s average sales price will not be impacted by the pricing of other biosimilars.

In 2018, CMS will also offer pass-through payments for all biosimilars, not just the first biosimilar of a product.

Additionally, Vizient researchers advised provider organizations to consider adding or partnering with another organization to deliver specialty pharmacy services. Specialty pharmaceuticals, such as DMARDs, multiple sclerosis drugs, and oral oncology agents, represent a large portion of increasing drug spend and that growth is unlikely to subside as new agents enter the market.

By the end of 2017, the FDA approved 42 new drugs and all but seven of the treatments could be designated as specialty pharmaceuticals.

“As a result, expanding functional capacity to deliver high-quality specialty pharmacy services, either alone or in concert with an external provider, remains critical objective for member organizations,” the report stated. “Fortunately, member health systems are expanding their proficiency in providing this care and the clinical and operational results (such as abandonment rate, time to fill, compliance and persistence) continue to improve compared with the performance of traditional ‘big box’ specialty pharmacies.”

For example, Vanderbilt University Medical Center (VUMC) developed the Vanderbilt Specialty Pharmacy (VSP) model. The model includes 24 clinical pharmacists and 20 pharmacy technicians across 20 specialty clinics and these providers manage the processes for medication selection, delivery, and approval.

Within the infectious diseases clinic, the VPS model results in a 78 percent decrease in time to medication approval and a 68 percent reduction in time to medication initiation following an initial visit. The digestive disease center also noted care access improvements.

While VUMC reported a 25 percent denial rate for private and federal pharmacy benefit managers, the VSP pharmacists achieved access for 100 percent of patients by appealing the denial or enrolling patients in supplier-sponsored patient assistance programs.

“While not every health system has the wide array of resources available to an academic medical center such as VUMC, pharmacy integration — to whatever extent possible — should result in improvements in prescribing, achieving and sustaining medication access, and monitoring,” researchers stated.

Prescription drug rates may not be climbing as quickly as in the past, but provider organizations should still be aware of the costs associated with their prescription purchases, especially with new drugs, Vizient emphasized.

“The latest Drug Price Forecast highlights the ongoing market dynamics that continue to contribute to rising pharmaceutical costs and exacerbate the challenge of managing health system pharmacy expenses,” stated Kistner. “Pharmacy and C-suite leaders must collaborate and strategically address these issues by implementing cost-saving and quality optimization measures. They must also leverage their voices in advocacy to address the more systematic issues including drug shortages and high-cost medications.”