Though possibly a signal that drug spending could be on the decline in the future, a report from Vizient says health systems will face even higher pharmaceutical prices in 2019, due largely to drugs that have no competition and therapeutics accounting for those that have the biggest share of spending.
According to the 2018 Drug Price Forecast, health systems will face a 4.92 percent increase in the price of pharmaceuticals in 2019. Though daunting, considering the current state of drug spending, that figure was 7.61 percent for 2018, signaling a potential slowdown in drug spending growth.
Even though the overall growth rate of price increases is expected to slow, specialty pharmaceutical is forecasted to maintain significant growth, and accounts for most of the overall price inflation, Vizient said.
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"While the projected increase for 2019 is less than 2018, it is still growing quickly," said Dan Kistner, senior vice president of pharmacy solutions for Vizient. "Two key themes we saw were the continued growth of specialty pharmacy products as a share of total spending and the critical importance of ongoing, robust generic and biosimilar competition on restraining overall price growth."
One of the main ways drug spending has been mitigated is through the introduction of market competition, namely new biosimilar and generic drugs. However, biosimilar adoption is low and 79 percent of projected price inflation come from drugs with no competition.
Accounting for the largest share of drug spending are medications concentrated in therapeutic classes, including drugs that treat multiple sclerosis, hepatitis C and cancer, as well as disease-modifying anti-rheumatic drugs.
Driving price inflations are several root causes including the unsustainable introductory costs for new drugs, the opioid addiction crisis, supply chain interruptions and reimbursement issues that continue to drive price inflation.
Drug shortages also aren't going away anytime soon. While Vizient's report said they've peaked, the total number of shortages isn't going down. In an ironic twist, the Drug Enforcement Administration's efforts to limit opioid quotas has also aggravated the overall drug shortage crisis, the report said.
For hospitals and health systems, the report should tell decision-makers that current budgeting for drug spending can remain largely unchanged at least for the next year or two. Even though a decline in drug spending may be on the horizon it will likely be very slow to materialize given its upward momentum. It also shows that innovation is still necessary in positing solutions to high drug spending, since policy has been slow to address the problem.
For those pushing the FDA to approve drugs more quickly, this report certainly adds fuel to that fire. A majority of drug spending is attributed to medications that have little to no market competition, yet competition is a major factor in lowering prices and therefore spending. For stakeholders in the healthcare space, a major focus of any effort to lower drug spending includes pushing for faster drug approvals without compromising safety.