Drug prices will rise an estimated 3.59% through next year, continuing a recent trend of moderate increases, although the high cost of some pharmaceuticals still rankle health systems and patients, according to research by one group purchasing organization.
Advocacy and awareness as well as a more competitive market have contributed to more modest price increases over recent years, according to Vizient's outlook from July 2020 through June 2021. Its two previous outlooks, which analyzed what the group's member hospitals pay for drugs after discounts and rebates, projected increases of around 4%.
Still, biologic therapies, oncology drugs, disease-modifying antirheumatic pharmaceuticals and other products that can carry $1 million price tags are disrupting treatment regiments.
"Hospitals and patients are still getting killed by new million-dollar drugs that won't see any competition for decades," said Dan Kistner, group senior vice president of pharmacy solutions for Vizient.
Specialty drugs are the main drivers of rising prices. They account for about half of total spending even though they only make up 2.2% of total prescription volume, Vizient's analysis shows.
Cleveland Clinic, for instance, set up an entire supply chain and treatment protocol to ensure it didn't waste any of Biogen's Spinraza, the first Food and Drug Administration-approved drug for spinal muscular atrophy that runs about $750,000 for a full-year's supply.
"These drugs are curing diseases that were uncurable," Kistner said. "But it is coming to a head where we need to have a balance in understanding the cost and quality and pricing mechanisms as they come to market."
There are some positive signs, he said. A dozen biosimilars are on the market, which can lower prices by up to 30% when there are two or more competitors. But biosimilar development and adoption have been slow given application issues, spotty coverage by insurers and providers' hesitancy to prescribe them.
The FDA has also approved a record number of generic drugs and expedited approvals for ones with minimal competition. But some bad actors are still inflating prices when competition wanes, Kistner said.
There are also unintended consequences associated with policies like the Drug Efficacy Study Implementation review, where the FDA removes an unapproved, but often longstanding drug, and ultimately fewer manufacturers remain in the market. This can enable price increases and cause drug shortages, Kistner said, pointing to vasopressin, a drug used to increase blood flow that saw its price surge 1000% after the FDA granted a subsidiary of Endo Pharmaceuticals exclusive rights to sell it.
"Competition is the No. 1 thing that lowers drug pricing. It's transparency that really allows that," he said. "We need to get away from the bogus patent loopholes that drive away new competitors."
Relatively few blockbuster drugs are losing patent protection, and branded manufacturers have exploited creative loopholes to extend their exclusive market control, which continue to buoy price inflation.
One of those loopholes is addressed by the Creates Act, which stops drugmakers from blocking access to samples of brand and biologic drugs that are necessary for generic and biosimilar drug development.
While that was passed in December, the House Democrats' bill that would allow Medicare to negotiate drug prices was dead on arrival in the Senate. The bipartisan drug pricing legislation from Senate Finance Committee Chair Chuck Grassley (R-Iowa) and ranking Democrat Ron Wyden of Oregon has stalled.
Meanwhile, hospitals are still grappling with weekly, if not daily, drug shortages. Vizient recently published a list of "essential" drugs susceptible to shortage. This represents a hidden cost as clinicians and staff spend hours to mitigate shortages and source alternatives.
"There is no bigger issue related to drugs than helping ensure that our patients have uninterrupted access to their life saving and life sustaining medications in this era of non-stop drug shortages," Scott Knoer, chief pharmacy officer at Cleveland Clinic, said in prepared remarks.