The price of prescription drugs has skyrocketed over the past several years. Consider that in 2015, total U.S. spending on retail prescription drugs reached $324.6 billion, an increase of 9 percent over the prior year, according to a summary of Centers for Medicare & Medicaid Services’ National Health Expenditures data.
The price of some individual drugs shot up by as much as 3,600 percent between 2013 and 2015. And a recent American Hospital Association/Federation of American Hospitals-commissioned report by the University of Chicago’s NORC showed that inpatient hospital drug costs had increased more than 38 percent per admission during that same time period.
There are few signs that this upward trajectory in drug spending will abate. The number of high-cost specialty drugs has increased dramatically in the past several years, and many more are in the development pipeline.
More surprising still, some of the most dramatic price increases are for older, generic drugs, some of which have been on the market for decades but without many competitors. These sudden and unpredictable price increases are particularly challenging for hospitals, as many of these drugs are widely administered on an inpatient basis.
There will always remain the need and the potential to develop innovative drug therapies, but the dramatic increases in the price of both new and existing drugs threaten to make necessary medications inaccessible to patients and their providers. Hospitals are major purchasers of drugs and so bear a heavy financial burden when the cost of drugs increases. Furthermore, patients often end up in the hospital when they cannot afford to take their medications as prescribed. Action is urgently needed to protect patients and hospitals from runaway drug prices and their repercussions. To that end, the American Hospital Association is proud to be an active member of the Campaign for Sustainable Rx Pricing — a diverse coalition of consumers, doctors, hospitals, pharmacists, employers, health plans and others who have come together to find common ground and solutions. The campaign’s aim is to highlight the need for action and to advocate for solutions that address the problem through greater transparency, competition and value.
These ideas are consistent with the AHA’s specific policy recommendations, developed in concert with our member hospitals and health systems, to rein in escalating drug prices. Our recommendations support five overarching goals:
- Increased competition and innovation
- Increased transparency
- Payment for value
- Improved access
- Alignment of incentives
To achieve these goals, we recommend that the government reduce the backlog of pending generic applications to make cheaper generics available sooner; develop value-based payment models for drug therapies; allow for the importation of safe drugs; and eliminate tax benefits for pharmaceutical drug advertising available to drug manufacturers, among other solutions.
The AHA is deeply committed to making high-quality, efficient health care available to all Americans. Hospitals, and the clinicians who work in them, know firsthand the lifesaving potential of drug therapies. Indeed, investigators in U.S. academic medical centers generate much of the research underpinning new drug development. However, an unaffordable drug is not a lifesaving drug. We urge Congress and the administration to take action as quickly as possible to increase transparency, competition and value while fostering innovation. Patients and the hospitals that treat them need relief.
For more on our principles and research, please visit www.aha.org/drugpricing.