Study: Drug prices rise twice as fast as expected in a shortage

Drug prices healthcare costs pill money
Drug shortages can lead to significantly bigger price hikes, researchers found. (Jacoblund)

It's not unexpected for prices to go up during a drug shortage.

But during drug shortages in 2016, prices went up—way up—at a rate more than twice what would ordinarily be expected, according to a new study. 

Specifically, researchers at the University of Pittsburgh and Harvard compared prices for 617 formulations and dosages for 91 medications that went into shortage between December 2015 and December 2016.

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They found that the expected price increase for drugs within 11 months of a shortage was 16%, compared to about 7% for drugs that were not in a shortage. Price hikes were especially notable for drugs produced by three or fewer suppliers, which increased by about 12% ahead of a shortage and about 24% within 11 months of a shortage. 

Of course, drug shortages are a frequent source of blame for rising costs. Though the researchers do not definitively conclude the reason for the increases, they suspect drug manufacturers may be taking advantage of increased demand to charge higher prices, according to the study. 

RELATED: AMA tackles issues from gun violence to drug shortages to pay inequity 

The trend is particularly worrisome because manufacturing problems are often the cause of the shortage in the first place, Inmaculada Hernandez, Pharm.D., Ph.D., the study’s lead author and an assistant professor at Pitt’s School of Pharmacy, told FierceHealthcare. 

“We think it’s especially concerning that they are actually taking advantage of a problem that they created themselves,” Hernandez said. 

Hernandez said that the research team anticipated that drugs in shortage would go up in price, but that the rates they found exceeded their expectations. 

The rising cost of drugs is one of the biggest hot-button topics in healthcare today. Shortages and increasing prices have led some providers to get into the manufacturing game themselves, with the launch of Civica Rx, a nonprofit drug company spearheaded by some of the country’s largest health systems, such as Intermountain Healthcare, Mayo Clinic and Catholic Health Initiatives. 

“There is a very strong, almost perfect, correlation between shortages and price hikes,” Dan Liljenquist, Intermountain’s senior vice president and chief strategy officer, who will chair Civica’s board, told FierceHealthcare. 

RELATED: Hospital-backed Civica Rx nabs Amgen veteran as CEO and targets 14 drugs to knock off 

Drug shortages and accompanying price hikes are a public health concern that policymakers should be spending more time on, the Pitt researchers said. Shortages lead to an estimated $230 million in additional costs each year and can force patients to delay treatments or miss them entirely. 

One solution, the researchers suggest, would be for federal payers to set price caps on drugs that in are in shortage, preventing the high increases.

Or, Medicare and Medicaid could limit increases to those expected outside of a shortage, they said.

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