Hospital drug spending has increased by nearly 20% between fiscal years 2015 and 2017, driven primarily by increasing drug prices and drug shortages for some of the most basic drugs, according to a new report from the American Hospital Association.
AHA, a national hospital organization, sponsored the report with the Federation of American Hospitals and the American Society of Health-System Pharmacists. The report, released Jan. 15, was conducted by the University of Chicago's NORC, a nonpartisan research institute.
Between fiscal years 2015 and 2017, total drug spending increased 18.5% per adjusted admission, resulting in an increase of about $1.8 million in new spending for average hospitals, according to the report. The rate of increase outpaced the increase in overall medical inflation by over 12% during the same period.
AHA President and CEO Rick Pollack attributed the increase in spending to the continual increase in drug prices and drug shortages, both of which are having negative impacts on hospitals and patients.
"This report confirms that we are in the midst of a prescription drug spending crisis that threatens patient access to care and hospitals' and health systems' ability to provide the highest quality of care," Pollack said in a Jan. 15 statement.
The AHA's report found that rising drug prices was one of the main factors leading to spending increases. Using data from group purchasing organizations, or GPOs, organizations that negotiate drug prices for providers, the report found that while pricing varied from drug to drug, the average unit price for the top 10 drugs purchased by hospitals increased overall by 9.9%.
Activase, a drug from Roche Holding AG's Genentech Inc. used to treat heart attacks and strokes, received the most hospital spending of any drug in fiscal year 2017 and had a price increase of 18.8% between fiscal years 2015 and 2017, according to the report. Hospitals spent $210 million on Activase in 2017.
AbbVie Inc.'s Humira, which is used for various autoimmune disorders, including rheumatoid arthritis, had the largest price increase among the top 10 drugs. During the time of the report, Humira's price rose by 21%.
Pollack said increased drug spending has caused "major disruptions" to patient care and hospital operations, including the reduction of staff.
National hospital group Federation of American Hospitals' president and CEO, Chip Kahn, told reporters on a Jan. 15 conference call that price increases are not just reflective of low drug volume or new innovations but are also impacting basic drugs.
"We are talking here about the workhorses of hospital patient care that patients are dependent on, and that we have been providing patients for many, many years," Kahn said.
'Severe' drug shortages continue
Erin Fox, senior director of drug information and support services for the University of Utah Health, said basic products such as sterile water and opioid injections are in short supply and causing an interruption of hospitals' regular operations.
Fox explained that a shortage of a drug forces her team at the University of Utah Health to take an immediate inventory of the drug and make a detailed plan to make sure that the drug lasts, adding that sometimes all of this has to happen with only a one-hour notice.
"Each shortage is basically an emergency," Fox said on the call. "All hands are on deck."
The report said that 78.7% of hospitals found it "extremely challenging" to find drugs that experienced drug shortages. According to the report, opioid injectables, saline, sodium bicarbonate and sterile water were the top four product shortages that gave community hospitals the most challenges.
The report did not use data past 2017, but Fox noted that "we are still experiencing severe drug shortages" and stressed that hospitals are still being affected.
To increase the supply of generic drugs, both Kahn and Pollack pointed to a company such as Civica Rx as a possible solution. Civica Rx is a generic-drug company recently started by HCA Healthcare Inc. — one of the country's largest hospital companies — and several other hospital groups that represent over 500 hospitals.
Jonathan Perlin, president of clinical services and chief medical officer for HCA, told Congress in November 2018 that along with improving the supply of generic drugs, Civica Rx will also be able to significantly reduce generic-drug costs.
Kahn was optimistic about the impact Civica Rx could have in the generic-drug market, saying that empowering hospitals could "shake the market up."
"I don't think this necessarily will be dealt with by policy," Kahn said. "I think it's going to be dealt with, hopefully, by hospitals becoming more aggressive as players in the market to assure that those drugs are available for their patients."