Rising drug prices squeeze hospital bottom lines

Pile of white tables and green capsules

Ever-rising drug prices are beginning to put a serious squeeze on the bottom lines of hospitals, which do not see much wiggle room for negotiation at this point, Crain's Detroit Business reported.

Total prescription spending on drugs increased at a 12.2 percent clip last year, up from a 2.4 percent increase in 2014, according to Crain's, which cited data from the Centers for Medicare & Medicaid Services. Pharma giants such as Amgen, Allergan and Pfizer have imposed double-digit percentage price increases on dozens of their branded drugs since late last year.

“We have really seen significant increases the past few years. Last year was just intensified and much larger than in the past,” Kathy Pawlicki, vice president of pharmacy for the eight-hospital Beaumont Health system in Troy, Michigan, told Crain's. Beaumont officials told the publication that its drug costs rose $20 million in one year, and this year costs are projected to reach $270 million, an 8 percent increase.

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Hospitals are getting hammered not only by the double-digit hikes by big pharmaceutical companies but by the practices of smaller companies such as Turing Pharmaceuticals that buy up patents to old-line drugs such as Daraprim and raising their prices 50-fold or more.

That has prompted some hospitals to try and take significant actions to cut their drug costs, such as using electronic medical record systems to prompt physicians about whether they are prescribing drugs that are particularly expensive. But as supplies of some drugs have run short, hospitals have also come under scrutiny as to which patients receive them.

But increased criticism and scrutiny from Congress makes it likely that the drug companies will not be able to continue such practices for long, Bob Kirby, corporate director for Fitch Ratings, told Crain's.

- read the Crain's article

 

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