A community hospital survey sponsored by the American Hospital Assn. and the Federation of American Hospitals shows that inpatient drug prices rose 40% between 2013 and 2015. Almost all of the surveyed hospitals reported that the increases had a moderate to severe effect on their ability to manage costs.
“These price increases are extremely troublesome throughout the healthcare system,” according to the report. “They not only threaten patient access to drug therapies, but also challenge providers’ abilities to provide the highest quality of care. Drug costs also are a major factor in the rising cost of healthcare coverage.”
The report comes as pharmaceutical companies like Mylan (NSDQ:MYL) face questions about extreme price increases for their products.
The AHA used self-reported data from 712 hospitals to assess how costs have changed over the past 2 years. One of the primary factors responsible for the drastic increase in total inpatient drug spending is growth in unit price, not volume, the AHA explained. The report also pointed to a complex reimbursement system that cannot keep pace with rapidly increasing drug prices.
“The way in which hospitals are reimbursed compounds the impact of increasing drug costs. Most hospitals are not directly reimbursed for the drugs they purchase for use in the inpatient setting.11 Instead, they generally receive a single payment for all non-physician services, including drugs, that they provide during an inpatient stay or, less commonly, each inpatient day (per diem),” the report said. “When reimbursement rates cannot keep up with input costs, such as drugs, hospitals must absorb the excess.”
The organization also examined prescription drug purchase cost information for 28 drugs for more than 1,400 community hospitals. The drugs were chosen because they were either drugs that have experienced substantial price increases recently or they are drugs with high inpatient spending.
They found that the price increases appear to be “random, inconsistent, and unpredictable”. Unit price increases happened with low and high volume drugs, as well as both branded and generic. They also point out that half of the sample drugs have no generic competition.
Many community hospitals are burdened by increasing prices, the AHA reported, and are concerned that paying their bills will come at the cost of providing quality care for their patients. “There might be upgrades you were trying to do, but there is only [so much] budget to do those things. Is it mandated? Can we duct tape this equipment? If it breaks in six months, we’ll buy it out of contingency,” an anonymous pharmacy administrator said, according to the report. “These are the tough choices that a small community hospital needs to make…. Drug volume has gone down while dollars [prices] have gone up…. We’ll do anything to drive costs down, even [cut] costs like gas and electricity. It’s really like a household budget.”
