Rising cost of prescription drugs tops Becker’s list of ‘headwinds’ facing healthcare industry, but no clinical laboratory issues make the list
Clinical laboratory managers and anatomic pathologists working in hospitals and health network systems will find their employers facing many familiar challenges in the coming year. And a report by Becker’s Hospital Review (Becker’s) predicts the top challenges it expects hospitals and health systems to encounter in 2019.
Topping the list is the rising price of prescription pharmaceuticals, which is a chronic strain on the wallets of hospitals, health networks, and patients. However, other items on Becker’s list may be equally challenging.
Readers of Dark Daily who are pathologists and clinical laboratory managers working in hospitals and health systems will find the list presented by Becker’s in “11 Headwinds Facing Hospitals and Health Systems” to be useful at bringing together the main challenges confronting their parent organizations today.
Drug Prices Spiraling Upward
The top challenges facing hospitals and health networks include:
- “Pharmaceutical costs, particularly non-generic;
- “Payers expanding into providers and combining with providers;
- “Payer market share;
- “Health IT and cybersecurity costs;
- “Labor costs and a labor-intensive business;
- “High costs of bricks and mortar;
- “Medicare as a larger percentage of health system revenue and Medicare reimbursement softening now and over time as federal deficits rise;
- “Slowing overall healthcare inflation as hospitals rise;
- “Siphoning off of better paying commercial patients;
- “Siphoning off of profitable ancillaries; and,
- “Entry of big technology firms into healthcare.”
Since pharmacy operations consume an estimated 10% to 20% of the average U.S. hospital’s overall operating budget, persistent drug-price increases can be damaging to a hospital’s bottom line. According to PipelineRx, a medication management company, average inpatient drug spending increased 38.7% on a per admission basis (from $714 to $990) from fiscal year 2013-2015.
“Drug prices for both commonly and infrequently used drugs are spiraling up faster than bundled reimbursements can keep up with,” explained PipelineRx.
And the Vizient Drug Price Forecast estimates that in 2019 health systems can expect a 4.92% increase in the price of pharmaceutical purchases. The Vizient forecast for 2018 had projected a 7.61% boost in drug costs.
“While the projected increase for 2019 is less than 2018, it is still growing quickly,” said Dan Kistner, Senior Vice President, Pharmacy Solutions for Vizient, in a news release. “Two key themes we saw were the continued growth of specialty pharmacy products as a share of total spending and the critical importance of ongoing, robust generic and biosimilar competition on restraining overall price growth.”
In spite of pressure from the White House to lower drug prices, Pfizer is one of several large pharma companies that recently announced drug-price increases beginning January 1. The Wall Street Journal (WSJ) reported Pfizer is boosting the prices of 41 prescription drugs—10% of its portfolio. Elliot Wilbur (above), Senior Equity Research Analyst with Raymond James Financial, told the WSJ that drug companies have raised list prices on 263 drugs by an average of 7.8%. (Photo copyright: CNBC.)
While the 2019 increases are below the double-digit averages seen in 2014 and 2015, the American Hospital Association’s “Trends in Hospital Inpatient Drug Costs: Issues and Challenges” report explains the impact of rapidly rising hospital pharmacy costs.
“Hospitals bear a heavy financial burden when the cost of drugs increases and must make tough choices about how to allocate scarce resources. One hospital put the challenge starkly: last year, the price increases for just four common drugs, which ranged between 479% and 1,261%, cost the same amount as the salaries of 55 full-time nurses,” the report noted.
Meanwhile, many of the other items on Becker’s 2019 “headwinds” list will not surprise healthcare administrators, such as:
- High cost of stand-alone hospitals;
- Impact of softening Medicare reimbursements;
- Health insurers’ changing business model; and,
- The entry of Apple, Google, and other giant technology companies into the healthcare space.
Becker’s list could be a harbinger of tough times ahead. It should make pathologists and clinical laboratory mangers who work within health networks and hospitals mindful of the importance of adding value to their parent organizations while providing their patients with excellent service.
—Andrea Downing Peck