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Drug price forecast projects 4.5 percent increase in hospital drug spending for 2020

Pharmaceutical costs are already a large share of most health organizations' budgets and this year's inflation rate may increase drug budgets.

Jeff Lagasse, Associate Editor

Health systems, including inpatient and non-acute environments, can expect a 4.57% increase in pharmaceutical spend for 2020. Vizient, which revealed that finding in its recent 2019 Drug Price Forecast, predicts a continued growth of pharmaceutical costs that far exceeds both inflation and wage growth.

Pharmaceutical costs are already a large share of most health organizations' budgets, and this is unlikely to change.

There are a number of factors contributing to this trend -- for one, specialty drug price inflation. Overall, the predicted total specialty inflation rate of 4.23% is similar to the general drug inflation rate of 4.57%. But this 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.

Drug shortages, which of course compromise patient care, will likely contribute both directly and indirectly to overall higher costs. Responses from about 365 hospitals and health systems show the total cost of increased labor is calculated to be a whopping $359 million, equating to over 8 million labor hours that are dedicated to managing drug shortages in U.S. hospitals.

BIOSIMILARS

Carina Dolan, senior director for oncology and pharmaceutical outcomes, Vizient Center for Pharmacy Practice Excellence, said the composition of the biosimilars market could change dramatically, and soon.

Biosimilars are off-brand drugs that are often identical, or nearly identical, to their brand-name counterparts, and carry with them a much lower cost.

As of July, the FDA has approved 22 biosimilars, with seven available in the market -- and the most relevant patents protecting rituximab, bevacizumab and trastuzumab will expire during the third quarter of 2019. These biologics presently account for over $10 billion in spend across the U.S. healthcare system.

"They really are an opportunity to really help us lower the cost of pharmaceuticals," said Dolan."This year we're anticipating the three largest oncology brands will have a launch, so that will greatly impact our member spend on those items. It also will increase competition in that space. We are advocates of biosimilars."

While it's still too early to predict the exact impact that biosimilars could have on the market, the potential is considerable, and Vizient will be monitoring the trend as it develops.

COSTS RISING FOR LEUKEMIA

Providers treating leukemia patients will experience higher costs as the standard of care shifts to new therapy combinations. Recent advances in the sequencing of many cancer genomes has inspired an explosion in drug development for acute myeloid leukemia and chronic lymphocytic leukemia, dramatically increasing the number of options for patients at all stages of treatment.

While these advances promise choice and potentially improved outcomes, providers and patients will experience a financial impact due to the standard of care shifting from mostly inexpensive, generic agents to combinations of branded targeted agents.

There's also an increasing complexity of the supply channel that's taking place, said Dolan. Part of that is a huge boom in oral agents that have been added to the current standard of care. Combined with new drugs approved in the specialty space, patients now have to come into the hospital to take certain drugs, contributing to additional expense.

"It's increasing in expense because you're adding more therapy, and more expense for the hospital as well aside from just the drug," Dolan said. "A lot of these oral medications are in the specialty pharmaceutical space. It depends on the integrated delivery network and their access to these specialty drugs."

THE igIV MARKET

Supply challenges in the immune globulin intravenous (IgIV) market will continue, and prices are expected to steadily rise. Dolan anticipates that supply of IgIV will continue to be limited for the remainder of 2019 and into the first half of 2020 as manufacturers work to increase production to meet higher-than-expected demand.

New entrants into the market are not anticipated to have a large effect on supply, and prices are expected to rise steadily in the coming year for immunoglobulin products, while albumin, for which supply remains abundant, will likely see price reductions.

"igIV is very important for our members across the country," said Dolan. "Right now they are experiencing a tight market, meaning this product is on allocation from the distributor. It means members have to submit the quantity they use at their institution."

Labeled indications for igIV drugs include chronic inflammatory demyelinating polyneuropathy; prevention of bacterial infections in B-cell chronic lymphocytic leukemia (CLL) with hypogammaglobulinemia; acute and chronic immune thrombocytopenia; primary humoral immunodeficiency syndromes; prevention of coronary artery aneurysms associated with Kawasaki syndrome; multifocal motor neuropathy; and passive immunity in susceptible patients for hepatitis A, measles, rubella and varicella, or chicken pox.

THE LARGER TREND

On July 31, Health and Human Services Secretary Alex Azar and Acting Food and Drug Administration Commissioner Ned Sharpless laid out a plan for the importation of prescription drugs intended for sale in other countries.

Other countries pay lower prices for the same drugs, Azar said. Two pathways under the Safe importation Action Plan would get the drugs into the hands of Americans as a less expensive alternative.

The first pathway is for drugs for sale in Canada and the second is for drugs sold in other countries.
 

Twitter: @JELagasse

Email the writer: jeff.lagasse@himssmedia.com