Cleveland Clinic: Pharma can't police its own prices

drugs
Drugs.

There have been many high-profile stories about the cost of pharmaceuticals and they are affecting patients, but they are also hitting hospitals and their business operations quite hard.

According to a new study by NORC at the University of Chicago of more than 700 community hospitals and two large group purchasing organizations, spending on drugs in fiscal 2015 was $309 billion. Hospitals have experienced a 38.7 percent increase in inpatient drug spending on a per admission basis between 2013 and last year and a 23.4 percent increase overall.

The report, which was commissioned on behalf of the American Hospital Association (AHA) and the Federation of American Hospitals said the price of the drugs was the “predominant contributor” to the spending increase. Some drug prices, according to the report, have risen 3,600 percent over the past couple of years.

That has been a nagging concern for various hospital officials. Rick Pollack, chief executive officer of the AHA, said at a press conference earlier this week that pharmaceutical companies were manipulating the market through price increases.

“They need to hold down costs like hospitals have in recent years,” he said.

The pharmaceutical sector has drawn some unwelcome headlines for drastic increases in drug prices, such as Turing Pharmaceutical's decision to raise the price of Daraprim more than 5,000 percent, even though it has been on the market since the early 1950s. Another company, Valeant Pharmaceuticals, dramatically raised the prices on drugs used for physician-assisted suicides as more states legalized the process.

Scott Knoer, chief pharmacy officer of the Cleveland Clinic, noted that a recent double-digit percentage price increase for Remicade, used to treat rheumatoid arthritis, cost the hospital system an additional $3 million a year. He also observed that steep price increases for insulin have led to prescribing patients less expensive and less effective medications, leading patients to have less consistent blood sugar levels and causing them to miss work.

“The system is clearly broken,” Knoer said. “The drug companies cannot police themselves.”

David T. Vandewater, chief executive officer of Ardent Health Services, a Tennessee-based operator of 14 hospitals, noted the facilities have been struggling with 300 percent-plus price increases for drugs that have been on the market for decades, such as Isuprel and Nitropress.

"If the oil companies hiked prices this much, we would be paying about $30 for a gallon of gas, and there would be government intervention,” he said.

The AHA issued a list of proposals to reform the pharmaceutical sector at the press conference, including encouraging greater competition, making it easier for generic versions of drugs to enter the market and tighten up rules for extending patents.