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New Drugs, and New Prices on Old Drugs, Fuel Steep Rise in Prescription Costs

Report authors foresee 10% to 12% jump in hospital spending in 2016

A sharp rise in prescription medication prices—driven by the introduction of new, expensive specialty medications and huge increases in the costs of older drug products with few competitors—drove an 11.7% increase in hospital and clinic spending on medications in 2015, according to a report published in the American Journal of Health-System Pharmacy.

The article provides an overview of the factors driving medication costs up, often far past the rate of inflation. The report projects an 11% to 13% increase in total drug expenditures in hospitals and health systems in 2016, which includes a 15% to 17% increase in clinic spending and a 10% to 12% increase in hospital spending.

To make their predictions, the report’s authors relied on information from the IMS Health National Sales Perspectives database to examine past trends in drug expenditures and expected changes in the drug marketplace that may influence drug costs, including anticipated new drug approvals and patent expirations. The American Society of Health-System Pharmacists (ASHP) publishes this annual projection of drug expenditures to help health-system pharmacy leaders plan drug budgets.

Total U.S. prescription drug sales in 2015 were $419.4 billion, and prescription expenditures in clinics and in nonfederal hospitals totalled $56.7 billion (a 15.9% increase) and $33.6 billion (a 10.7% increase), respectively.

In nonfederal hospitals, rising prices of existing drugs (specifically injectables) drove the growth in spending, according to the report. In clinics, increased volume of use led to higher expenditures. Infliximab was the top drug based on total spending in both settings. “Individual drugs with the greatest increases in expenditures in 2015 were specialty agents and older generics; these agents are likely to continue to influence total spending in 2016,” the authors noted.

According to lead investigator Glen T. Schumock, PharmD, MBA, PhD, a professor at the University of Illinois, pharmacists need to be diligent about understanding what factors influence drug spending within their own organizations. “By understanding the key cost drivers, pharmacy leaders can implement programs to target them,” he noted, adding that such strategies could include working with prescribers to use equally effective but less- expensive medications or developing programs such as antibiotic stewardship to reduce the unnecessary use of drugs.

Schumock believes that the continued expansion of the number and use of high-priced specialty medications will push costs even higher in 2016. “Specialty medications will constitute a significant portion of new medications on the market in the future,” he said. “As such, they will drive even higher spending.”

The authors note that in 2015, the FDA approved 45 new medications for complex, chronic, or rare diseases, such as metastatic breast cancer, plaque psoriasis, hepatitis C virus infection, cystic fibrosis, and pulmonary arterial hypertension. The authors also preview other challenges that are on the horizon, including restricted distribution channels created by manufacturers for certain specialty medications.

An aging patient population, greater patient access to health care services as a result of the Patient Protection and Affordable Care Act, and a growing U.S. economy will also influence medication costs in the future, according to Schumock. One of the bright spots on the horizon for reducing medication costs may be the advent of biosimilars. “However, drug spending will be reduced only when there is a sufficient number of these products on the market to create competition and drive down prices,” he cautioned.

Source: ASHP; July 7, 2016.

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