"It triggers a lot of work," Hart said. "It injects some complexity on the front end, but it provides a lot more safety on the back end."
More than 90% of around 1,200 surveyed hospitals reported having to identify alternative therapies to mitigate the impact of drug price increases and shortages, according to a new report from the American Hospital Association, the Federation of American Hospitals and the American Society of Health-System Pharmacists. Finding new suppliers can lead to errors, safety issues or delayed surgeries as well as inflate costs. Patients also forgo medication if it costs too much.
The average unit price of drugs in shortage in 2016 increased 23.4%, according to the data analyzed by the University of Chicago's NORC.
One in four hospitals had to cut staff to mitigate budget pressures as average total drug spending increased by 18.5% between 2015 and 2017. That rate tripled overall medical inflation over that period, resulting in $1.8 million in new spending for an average hospital.
Outpatient drug spending per adjusted admission increased 28.7% while inpatient drug spending per admission increased 9.6% during the same period as prices jumped more than 80% for anesthetics, parenteral solutions, opioid agonists and chemotherapy.
Inpatient drug costs per admission exceeded the Medicare reimbursement five-fold over that period, according to the report.
"Sourcing alternative drugs challenges our existing resources, primarily our pharmacy departments," said Tim Roettger, regional vice president of pharmacy services for SSM Health.
Once pharmacy experts determine the length of the shortage and find alternative drugs, then they ensure pharmacists and clinicians know how to use the drugs safely, he said.
There is an unsettling lack of redundancy along the generic pharmaceutical supply chain. Thin profit margins cause manufacturers to forgo generic products for more profitable branded therapies. So when one manufacturing line collapses, the entire supply chain implodes.
That's where Civica Rx comes into play, a group of about 750 hospitals and a handful of philanthropic groups that aim to bring 14 generic drugs to market in 2019. The venture initially plans to focus on older sterile injectable drugs, which are especially prone to manufacturing snafus or recalls.
"I don't think this will be dealt with by policy, hopefully hospitals will become more aggressive players in the market," Chip Kahn, president and CEO of the Federation of American Hospitals, said in a conference call with reporters.
Seven manufacturers comprise the vast majority of sterile injectables manufacturing, according to the report.
Oftentimes, one supplier owns about 70% of the market share, which means hospitals are negotiating on their terms, said Erin Fox, a drug shortage expert who is the senior director of drug information and support services at University of Utah Health.
"We need bupivacaine and lidocaine or sterile water and are stuck with paying the price they offer," she said during the call.
The shortages are one contributing factor to skyrocketing drug prices, which have triggered a blame game as to who's at fault.
There is a cohort of critics who blame drug shortages largely on group purchasing organizations. GPO's "pay-to-play" fees required to gain placement in their supply catalogs contribute to drug shortages, they claim.
GPOs are exempt from a federal law forbidding kickbacks in return for providing items or services. The pay-to-play fees could drive up the cost of supplies, as well as narrow the number of manufacturers that can pony up the money, researchers argue.
Meanwhile, GPOs claim they work closely with pharmaceutical manufacturers to find other sources. Each GPO works with the FDA to expedite applications for therapies in short supply or ones that have jumped in price, they say.
Premier, for instance, announced a new company Monday called ProvideGx, which has partnered with five generic manufacturers to target 60 crucial drugs. It expects to begin marketing additional products next month.
But even with Civica Rx and initiatives like ProvideGx, there is still a need for additional manufacturing capacity, Fox said. These groups will, at least initially, contract with manufacturers that are already in short supply.
"The supply chain is so fragile because so few players make sterile injectable drugs," said Fox, adding that there is talk at the FDA about creating some incentives to attract manufacturers.
Scrutiny is increasing on both the shortage and pricing front. The House Oversight Committee launched an investigation Monday into a dozen pharmaceutical companies and their drug-pricing methods.
"We have a new House and a president who wants to reduce prices even though that's not a historically Republican idea," said Scott Knoer, chief pharmacy officer for Cleveland Clinic.
The average unit price of the most financially burdensome drugs administered in the hospital increased 9.9% between 2015 and 2017, according to the AHA report.
Activase, a widely used drug to treat people suffering a heart attack, increased nearly 19% while immunosuppressants used to treat rheumatoid arthritis increased between 15% and 21%. Five of the top-spending drugs have orphan drug status for at least one of their indications and receive additional patent protection.
Hospitals spent between $210 million and $60 million in 2017 for the 10 costliest drugs. But there are a host of other widely used drugs that may have not been as expensive, but are as or more critical.
Hydromorphone's unit price surged 107% between 2015 and 2017 while mytomicine, vasopressin and ephedrine sulfate increased at least 87%.
Notably, the majority of hospitals reported that competition from new entrants had a small impact on the price of drugs. About one-quarter reported that competition from new entrants resulted in more competitively priced drugs to a "moderate" or "large extent."
Introducing generic and biosimilar competition has been a central tenet of the Food and Drug Administration's drug pricing strategy, although the full effects may not have been realized yet, experts said. Others are more skeptical.
"What we have seen is that older products introduced by generic manufacturers often have increased prices because nobody is making them. A lack of manufacturers in the marketplace seems to be driving up drug costs," an unidentified hospital executive told researchers of the report.
Hospital executives noted that prices should reflect the added cost-benefit for morbidity or mortality relative to existing drugs. They called for more evidence from manufacturers on the comparative effectiveness of new drugs and suggested increased scrutiny of new drugs to validate the need for substantive clinical trial data.
About 80% of the hospitals found it to be extremely or somewhat challenging to obtain opioid injectables (for pain management), saline (for rehydrating patients, wound cleaning and irrigation), sodium bicarbonate (an alkalinizing agent for oral or parenteral therapy), sterile water (used to prepare many drug products for IV use), epinephrine (used in severe acute anaphylactic reactions and shock), and dextrose (used as parenteral source of calories and water for nutrition and hydration).
As a result, 69% of respondents are doing more in-house compounding, including Cleveland Clinic, which plans to build a 503B-compliant compounding facility that could sell drugs to other hospitals. Nearly 30% are delaying equipment investments, a quarter are reducing staffing and 17% are cutting services.
Some healthcare facilities cut so many services that they are no longer viable, according to the report.
Ninety-three percent of hospitals substituted a more expensive drug, 85% repackaged drugs into smaller formats, 74% adjusted EHR documentation and 69% diverted staff to manage shortages.
Eighty-nine percent made off-contract purchases, 78% contracted with 503B compounders, 75% contracted with non-GPOs, 73% negotiated directly with manufacturers and 64% used secondary wholesalers.
Drug shortages have caused every health system to realize that this is a multidisciplinary problem, Hart said.
"We have to always be looking where the next issue might be," he said.
