Percent Change in Key Pharmaceutical Prices

Hospitals Are Playing Gotcha! with Big Pharma – at Last

Everyone from politicians to 80% of consumers have been complaining about high drug prices. But at last, a group of hospitals are actually doing something about it.

Like a frog in tepid water, generic drug prices have been slowly rising for years. But, in October 2016, the frog jumped when the American Hospital Association and Federation of American Hospitals released a survey that gathered pricing data from 712 U.S. community hospitals and two GPOs with several key findings, including:

  • Inpatient Drug Spending had increased on a per admission basis by 38.7% ($990/patient) between FY2013-15 – due to growth in unit price, not volume
  • Over 90% of Hospital Administrators Reported that Higher Drug Prices had a Moderate or Severe Impact on their Budgets
  • Inpatient Drug Spending Growth Eclipsed Retail Prescription Drug Spending Growth.

As Scott Knoer, chief pharmacy officer at the Cleveland Clinic, said at the time of the survey’s release, “With these drug prices so far outpacing the consumer price index, hospitals are struggling to come up with trade-offs to preserve access to affordable care for our patients.”

Obviously, some key decision makers read the report, took it seriously, and now four nonprofit health systems – Intermountain Healthcare, Ascension, SSM Health, and Trinity Health, which together run over 300 hospitals – are ready to start manufacturing and marketing the generic drugs that have been breaking their budgets. Intermountain, which is known for its clinical cost accounting expertise, is leading the quartet of hospitals in this newco. And, as the person responsible for leading the initiative, Dan Lijenquist, VP of the enterprise initiative office at Intermountain, said: the new nonprofit will set its own prices, and will “understand our production costs really well” – without having to report to Wall Street.

Already, clients – like the VA and other hospitals around the country – are lining up to purchase the tablets, patches, and sterile injectable medicines the group plans to make. And, hospitals aren’t the only ones ready to support this bold move: philanthropists are also expressing their interest, according to Liljenquist, “because they are interested in solving this problem.”

Who isn’t?

Mimi Grant, President, Adaptive Business Leaders (ABL) Organization – Round Tables and Events for CEOs of Healthcare and Technology Companies