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Hospitals Get Creative as Drug Prices Jump

Administrators cope with broken prescription-drug system

Hospitals across the U.S. are finding creative ways to anticipate and mitigate drug-cost pressures, according to an article in the Washington Post. When doctors at the University Hospitals of Cleveland sign in online to prescribe medications, for example, they see an immediately recognizable symbol pop up alongside certain drugs: $$$$$. The dollar signs, affixed by hospital administrators, carry an overt message: “Think twice before using this drug. Pick a less-expensive alternative, if possible.”

Other hospitals have found additional ways to trim high drug costs.

At the University of Utah Health Care system, administrators pulled the injectable heart medication isoproterenol off mobile “crash carts” after its price skyrocketed, said Erin Fox, director of drug information services. Doctors now must specifically request it from the hospital pharmacy.

Vitamin K tablets, often used to help reverse the effects of the blood thinner warfarin, became a cost concern at the Indiana University Health system. The director of drug-use policy, Jennifer Reddan, said doctors and administrators scrambled after the price rose from a few dollars per tablet to more than $60. Pharmacy staffers began mixing the injectable form, which is less expensive and can be given by mouth, with cherry syrup to create a liquid that patients could take orally.

Numerous hospitals limited the use of intravenous acetaminophen after its price jumped in 2014. They opted for the cheaper pill form, placed restrictions on IV use, or encouraged doctors to choose alternative pain relievers.

A recent Bloomberg Business survey of approximately 3,000 brand-name prescription drugs found that prices had more than doubled for 60 medications since December 2014 and had at least quadrupled for 20. The survey also found that prices for many other drugs continued to rise at 10% or more annually, particularly as competition waned or patents neared expiration.

In December 2015, the Department of Health and Human Services identified a similar trend. Prices rose faster than inflation for nearly a quarter of top generic drugs between 2005 and 2014, even as prices for many other generics remained low.

Hospital officials around the U.S. say their predicament illustrates one dimension of a broken prescription-drug system.

“There’s been a huge consolidation of these generic companies … everybody is buying everybody else,” Dr. Gerard Anderson, a professor at the Johns Hopkins Bloomberg School of Public Health, told the Washington Post. “If there’s no competition, the prices go up. We are seeing a lot of [drug] shortages, and also price increases. That shouldn’t happen, but it is.”

Meanwhile, the pharma industry notes that drug spending accounts for only about 10% of the country’s health care costs and that published list prices do not reflect the discounts and rebates that companies may offer. Hospitals generally purchase drugs from wholesalers at costs below the list price, although wholesale prices are subject to increases.

But hospitals can’t immediately pass on the cost if a drug gets more expensive because reimbursement rates for certain procedures already have been set by Medicare and private insurers. That means sharply higher prices can lead to losses.

At Rainbow Babies & Children’s Hospital in Cleveland, Ohio, pediatric infectious disease specialist Dr. Frank Esper worried that if the combination of price increases and drug shortages he has seen in recent years continues, he and his colleagues will be forced to change how they practice medicine. And not for the better.

“I want drug companies to make money. I need them to make money, or I don’t have any ammo,” Esper told the Post. “But there has to be a balance, a middle ground. If this keeps happening … it’s only a matter of time before we get to a point where we have to choose less-desirable medications than what’s out there.”

Source: Washington Post; March 13, 2016. 

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