Drug prices, 340B cuts put pres­sure on cap­i­tal spend­ing

Modern Healthcare - - NEWS - By Alex Kacik

Ris­ing drug prices and po­ten­tial changes to the fed­eral 340B pro­gram con­tinue to ham­per hos­pi­tal ef­forts to cur­tail spend­ing, ac­cord­ing to an anal­y­sis by Moody’s In­vestors Ser­vice.

The rat­ings agency last week re­ported that the gap be­tween growth in not-for­profit and pub­lic providers’ rev­enue and sup­ply costs widened from 2015 to 2016. To­tal drug spend­ing rose by 8.5%, which marked a slight de­cline in sharp spend­ing spikes, but could trend higher if the CMS goes ahead with a pro­posal to cut out­pa­tient drug re­im­burse­ment to 340B hospitals by about 30%.

More than 90% of sur­veyed hospitals said drug price in­creases have had a moder­ate to se­vere ef­fect on their abil­ity to man­age pa­tient-care costs, Moody’s found. Providers said these fac­tors, cou­pled with pol­icy un­cer­tainty, have them cut­ting cap­i­tal ex­pen­di­tures that would help them op­er­ate more ef­fi­ciently.

Even big sys­tems in large metro mar­kets are dealing with op­er­at­ing mar­gins that are stretched thin, ac­cord­ing to Va­lerie Bres­lin Mon­tague, a part­ner at the law firm Nixon Pe­abody.

“It’s hard to en­vi­sion the kind of cap­i­tal ex­pen­di­tures nec­es­sary to mod­ern­ize a lot of as­pects of our health­care sys­tem that ad­van­tage pa­tients,” said Dr. Ken­neth Davis, CEO of Mount Si­nai Health Sys­tem in New York City.

Providers like Univer­sity of Utah Health will keep work­ing to iden­tify high-cost drugs and min­i­mize their use or find al­ter­na­tives that don’t com­pro­mise out­comes, said Erin Fox, di­rec­tor of the school’s Drug In­for­ma­tion Cen­ter.

In­pa­tient drug spend­ing has been ris­ing by an av­er­age of 23.4% an­nu­ally, ac­cord­ing to Moody’s. Re­searchers said they ex­pect that in­cline to soften with the grow­ing scru­tiny of drug com­pa­nies’ pric­ing strate­gies and in­creased com­pe­ti­tion from generic drugs.

“Still, prices are ris­ing way ahead of in­fla­tion,” said Scott Knoer, chief phar­macy of­fi­cer at the Cleve­land Clinic.

If the 340B drug dis­count pro­gram is rolled back, the con­se­quences would be par­tic­u­larly dev­as­tat­ing for safety-net providers, ex­perts said.

“The deep cuts pro­posed for the 340B pro­gram will have a sig­nif­i­cant im­pact on those fa­cil­i­ties that treat low-in­come pa­tients and may im­pact their abil­ity to pro­vide other safety-net ser­vices if more re­sources need to be al­lo­cated to­ward drug costs,” Mon­tague said.

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