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Prescription Drugs

Drug Prices

The price of prescription drugs has rapidly increased over the past several years. These price increases have negative impacts throughout the health care system. They not only threaten patient access to drug therapies, but also challenge providers’ abilities to provide the highest quality of care. Drug costs also are a major factor in the rising cost of health care coverage.

Hospitals bear a heavy financial burden when the cost of drugs increases and must make tough choices about how to allocate scarce resources. Managing these rising costs forces difficult choices between providing adequate compensation to employees; upgrading and modernizing facilities; purchasing new technologies to improve care; or paying for drugs, especially when these price increases are not linked to new therapies or improved outcomes for patients.

Impact on Hospitals

In 2016, the Federation of American Hospitals and the American Hospital Association commissioned a study to better understand how drug prices are changing in the inpatient hospital setting. The study found:

  • Average annual inpatient drug spending increased by 23.4 percent between FY2013 and FY2015.
  • Inpatient drug spending increased on a per admission basis by 38.7 percent during the same period.
  • Growth in unit price – not volume - was primarily responsible for the increase in total inpatient drug spending.
  • Over 90 percent of surveyed hospitals reported that inpatient drug price increases had a moderate or severe effect on their ability to manage costs.
  • Due to delays in refreshing the pharmaceutical index, Medicare reimbursement cannot keep pace with rapidly increasing drug prices.
  • The growth in spending on inpatient drugs exceeds the growth in spending on retail drugs.
  • Price increases appear to be random, inconsistent, and unpredictable: large unit price increases occurred for both low- and high-volume drugs and for both branded and generic drugs. About half of the drugs sampled had no generic competition.

FAH is committed to supporting market-based reforms that help combat these rising prices by increasing transparency, promoting competition and innovation, and improving value.  As such, FAH is a member of the Campaign for Sustainable Rx Pricing, a group comprising providers, patient organizations, and insurers committed to finding solutions to the problem of rising drug prices.  More information about CSRxP and solutions to this problem can be found here.