Mylan’s 1,100 percent EpiPen price increase recently drew the nation’s attention back to pharmaceutical pricing. The EpiPen controversy follows the 2015 price-gouging by Martin Shkreli at Turing Pharmaceuticals. Shkreli unapologetically raised the price of an off-patent antifungal drug by 5,500 percent and was for a time labeled the “most hated man in America.”
Americans are concerned about the cost of health care. Spending continues to outpace inflation despite a post-recession slowdown. Although the uptick isn’t particularly surprising, given expanded coverage and expected demand, what’s interesting is the role pharmaceutical costs appear to be playing in the spending growth — they appear to be a key driver.
A recent report from the Bureau of Labor Statistics found that prescription drug prices grew 7.3 percent from September 2015 to September 2016 — the highest rate since 1992. That’s bad news for consumers. Unfortunately, it’s only the tip of the iceberg.
The American Hospital Association and Federation of American Hospitals recently released a report on trends in inpatient hospital drug costs. The study found that average annual inpatient spending on pharmaceuticals increased 23.4 percent between fiscal years 2013 and 2015. On a per-admission basis, the spending grew by 38.7 percent during the same period. Moreover, the increase in spending primarily was driven by increases in unit prices and not by greater volume.
Researchers found that “Price increases appear to be random, inconsistent and unpredictable: Large unit price increases occurred for both low- and high-volume drugs and for both branded and generic drugs.” So, what’s going on? A recent report on NPR’s Marketplace included a suggestion by one analyst that the price spikes may be in anticipation of controls on drug pricing. “A piece of what we are seeing may be an anticipation from industry that the end is coming,” said Walid Gellad M.D., MPH, from the University of Pittsburgh. “At some point they are not going to be able to increase prices the way they have.”
No matter what is currently driving costs, pharmaceutical price increases are constraining hospitals’ ability to invest. According to the AHA-FAH report, “Over 90 percent of the surveyed hospitals reported that inpatient drug price increases had a moderate to severe effect on their ability to manage costs.”
Medicare continues to ask more of hospitals in an effort to improve value. However, Medicare is failing to appropriately reimburse hospitals for high drug costs. The researchers found that the Medicare pharmaceutical index was unable to keep pace with drug price increases. What’s surprising is that many of the top-10 drugs researchers sampled for price were not new entrants into hospitals’ pharmacopeia. Moreover, approximately half of the sampled drugs had no generic equivalent, and therefore hospitals had no option to switch.
Clearly, the growth in inpatient drug costs isn’t sustainable. The report concludes that during the same period, “CMS’ update to hospital rates through the IPPS increased by only 2.7 percent. Large and unpredictable increases in the price of drugs used in the inpatient setting significantly impacted hospitals’ ability to manage costs within a fixed price-based payment system.”
The ongoing attention to meteoric growth in consumer and institutional drug prices may help constrain the spike in costs. However, hospitals’ ability to invest in care improvement is being diminished as resources are shunted to inpatient pharmaceuticals, rather than other priorities.
Mylan and Turing may be legitimate bad actors. However, the problem isn’t the single drug with a 5,000 percent price increase, it’s the dozens of drugs that are staples in hospital care that have moderate unit price increases. That’s the bitter pill.
Let me know what you think.
In This Issue
Herb B. Kuhn
MHA President and CEO
Report Assesses Rural Hospital Engagement In Delivery System Reform
CMS Announces IPFQR Program Education Session
Citizens Memorial Hospital To Join CoxHealth
CMS Announces IPFQR Program Education Session
Staff Contact: Sherry Buschjost
An outreach and education webinar for participants in the Inpatient Psychiatric Facility Quality Reporting Program is scheduled at 1 p.m. Thursday, Nov. 3. The webinar, titled “IPFQR Program FY 2019 New Measures Review,” will provide an overview of the measure specifications and data reporting requirements for the following newly adopted measures: Alcohol and Other Drug Use Disorder Treatment Provided or Offered at Discharge (SUB-3); Alcohol and Other Drug Use Disorder Treatment at Discharge (SUB-3a); and the 30-Day All-Cause Unplanned Readmission Following Psychiatric Hospitalization in an IPF measure. Registration and additional information is available on the Quality Reporting Center website.
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October 20, 2016
Insurers Engage CBO On Medicare Telemedicine Coverage
MLN Connects Provider eNews Available
October 19, 2016
HHS Finalizes MACRA MIPS, APM And Criteria For Physician-Focused Payment Models
CMS Announces HHCCN Form Effective Date
October 18, 2016
MO HealthNet Managed Care Vendors Selected
TJC Announces Pioneers In Quality Expert-To-Expert Webinar
CDC Releases Health Advisory For Cardiac Surgery Patients
October 17, 2016
MHA Distributes Medicare Proposed Episode Payment Model Analysis
HIDI HealthStats — Adverse Childhood Experiences
The Commonwealth Fund Mongan Fellowship Seeks Applications
State Office Recognizes Rural Health Day