New Vizient Drug Price Forecast Estimates 3.59% Increase for 2020-2021

Vizient, Inc. released its Winter 2020 Drug Price Forecast projecting that health systems, including inpatient and non-acute environments, can expect a 3.59% increase for pharmaceutical purchases made from July 1 to June 30, 2021. While the forecasted percentage is lower than previous projections, the influence of expensive biologic therapies, oncology and oncology-related drugs, disease-modifying antirheumatic drugs (DMARDs), and immunomodulators on overall spend by health systems remains quite substantial. The Drug Price Forecast can be accessed here.

“Over the last three forecasts, we have seen a trend toward price increases that are meaningful but smaller. Still, we don’t want to minimize the impact that continued price increases have on providers and patients,” said Dan Kistner, group senior vice president, pharmacy solutions for Vizient. “We believe that the lower rate of price inflation can be attributed to advocacy work by industry groups, including Vizient, and improved transparency in the supply chain for pharmaceuticals. We can’t take our eye off the issue of rising drug prices yet, and we support the continued scrutiny of drug prices by the public and legislators.”

Kistner also noted that increased competition in some of the expensive biologic therapies is also helping lower costs. “One of the keys to managing costs for health systems is the adoption of biosimilars as they come on the market. There are now 12 biosimilars available and where there are two or more competitors, we have seen prices as much as 30% lower than the branded product. Providers and payers must now become better aligned to realize the full benefit that competition can offer in driving down the cost of care.”

Although biologic drugs dominate many aspects of spend, the forecast also notes that certain small-molecule medications will have a substantial cost impact on health systems. Two of these are intravenous (IV) acetaminophen and vasopressin. For IV acetaminophen, market exclusivity and patent protection are expected to expire in December 2020, and there will likely be numerous abbreviated new drug applications (ANDAs) and 505(b)(2) versions of this product entering the market. This level of competition should bring meaningful pricing relief in 2021. In the case of vasopressin, while market exclusivity has expired for this drug, numerous patents could protect it from competition until 2035.

Highlights from the forecast report include:

• The publication of the FDA’s Drug Shortages Task Force report in late 2019 may have been a turning point. As documented in our 2019 survey, the labor cost incurred for management of drug shortages is an estimated $359 million annually. By identifying meaningful steps to address the fundamental issues that contribute to supply interruptions, the industry can begin to take action. At Vizient, we are already implementing solutions, which align with the FDA’s recommendations, through our private label program, Novaplus®. Through agreements within the Novaplus Enhanced Supply program, contracted manufacturers are held to standards of accountability and transparency and will increase available supply based on historical Vizient member utilization, which currently equates to a potential supply of 31 million additional vials of 11 essential medicines.
• Payers’ formulary decisions and their impact on reimbursement continue to be the biggest hurdle to an even stronger adoption of biosimilars. While these therapies can offer savings approaching 30%, variations in payer formularies are requiring providers in multiple care settings to stock several versions of the same product (originator and biosimilar) to ensure reimbursement, which is definitely not the intention of manufacturers.
• Specialty pharmaceuticals continue to dominate all aspects of drug approvals and purchasing and are having a disproportionate impact on pharmaceutical costs. The forecast notes a 3.36% increase for specialty drug price inflation rates for biologic and non-biologic products. The analysis was based on review of 108 unique drugs and 270 national drug codes (NDCs) that have either an orphan designation or would cost at least $4,000 per month per patient. Although they only account for 2.2% of total prescription volume, specialty drugs now account for 49.5% of total spending by institutional and retail pharmacy settings.
• Pediatric pharmaceutical costs are rising as a result of the targeting of rare diseases that require specialty or orphan drugs. The forecast anticipates a 3.45% weighted average increase. Approvals of drugs for the pediatric population have been primarily in three categories: specialty drugs, gene therapy and chimeric antigen receptor T-cell (CAR-T) treatments.
• Recent regulatory, reimbursement and drug shortage policy changes will have a significant impact on acute care providers. Specific changes health systems must focus on include antimicrobial stewardship policies, the Drug Supply Chain Security Act, compounding standards established by the U.S. Pharmacopeia and new requirements for pharmacy technicians.

“The pharmacy landscape continues to be extremely complex — regulatory issues, financial pressures and clinical requirements. We must also consider the potential impacts of the upcoming election, which could accelerate or curtail current initiatives aimed at increasing competition and market transparency that can address drug shortages and lower drug costs overall.” said Kistner. “It will be important for health systems to stay vigilant in managing cost as we continue to navigate a very turbulent marketplace.”

The Vizient Drug Price Forecast reflects the collective expertise of over two dozen employees of the Vizient pharmacy sourcing, analytics, clinical and consulting teams along with external resources, including its members. It is based on the analysis of data from Vizient’s Pharmacy Program, which compiles member participants’ purchases (price and volume) in hospital and non-acute care settings. Vizient bases inflation estimates on price change history during the last 36 months, as well as current knowledge of contract allowances and marketplace factors such as expiring patents and anticipated new competition.

The forecast is an important resource for pharmacy leaders in developing annual budget projections for their health systems. Vizient conducts the pricing analysis biannually to provide insight on factors driving pricing and practice changes in the pharmaceutical industry. The forecast may be accessed here: http://bit.ly/37BdcTs

Vizient, Inc. provides solutions and services that improve the delivery of high-value care by aligning cost, quality and market performance for more than 50% of the nation’s acute care providers, which includes 95% of the nation’s academic medical centers, and more than 20% of ambulatory providers. Vizient provides expertise, analytics and advisory services, as well as a contract portfolio that represents more than $100 billion in annual purchasing volume, to improve patient outcomes and lower costs. Vizient has earned a World’s Most Ethical Company designation from the Ethisphere Institute every year since its inception. Headquartered in Irving, Texas, Vizient has offices throughout the United States. Learn more at www.vizientinc.com.

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