Hospitals Feel the Strain of Increasing Drug Prices

As the public grows increasingly outraged over the rising cost of prescription drugs, the cost of hospital inpatient drugs has been overlooked. According to a new report conducted on behalf of the American Hospital Association (AHA) and the Federation of American Hospitals (FAH), inpatient drug spending increased 23.4% annually between 2013 and 2015.

The survey, conducted by the University of Chicago’s NORC, received responses from 712 community hospitals, and price and spending data on a subset of drugs was provided by 2 group purchasing organizations that represent more than 1400 community hospitals.

“This analysis is a real wakeup call on health care spending. It confirms what local hospital administrators recognize as a serious and growing problem for their patients,” FAH President and CEO Chip Kahn, said in a statement. “Rapidly rising drug costs combined with unsustainable Medicare and Medicaid cuts put hospitals in an impossible bind.”

More than 90% of hospitals reported that increases in inpatient drug prices had a moderate or severe effect on their ability to manage the overall cost of patient care.

As significant purchasers of prescription drugs, hospitals “bear a heavy financial burden” when drug prices increase, according to the report. And prices have risen sharply. Spending on prescription drugs is now $309.5 billion annually, which makes it the fastest growing segment in the healthcare industry. Healthcare spending grew 5.3% in 2014 compared with 12.2% for the growth in spending on drugs.

According to the NORC report, not only did drug spending increase significantly for hospitals, but drug price increases appear random and inconsistent from year to year. Some of the drugs studied were high-volume drugs, but most were not innovator, or brand-name drugs. NORC speculated that the reason for price changes was a change in drug ownership.

For example, Oncaspar was approved for leukemia in 1994, but the increased nearly $10,000 after it was purchased by a new company. Another example is the infamous 5000% price increase of Daraprim after Turing Pharmaceuticals bought it.

“The women and men who work in America’s hospitals recognize the value of truly innovative, life-saving medicines as much as anyone. But a drug priced beyond a patient’s reach will not save anyone’s life,” said AHA President and CEO Rick Pollack.