Drug prices, 340B cuts put pressure on capital spending
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.