Hospitals get creative to cut drug costs

Hospitals are looking for ways to fight back when drugmakers sudden jump up prices.

When Valeant jumped up the price of heart drug Isuprel by 500% last year, MedStar Washington Hospital Center started repackaging ampules, most of which used to be wasted, into 5 doses. It is saving $1.7 million a year. Another hospital group is getting 8 doses from an ampule for similar savings.

The repackaging is just one of the ways hospitals have gotten creative to get more from their drug spending in the face of dramatic price hikes on some essential drugs, The Wall Street Journal reports.

Sudden and significant price hikes on many older drugs that lack competition has caught the attention of patients, payers and politicians in the last year and the backlash has prompted some drugmakers to react. Take Mylan as an example. This week it will roll out its own generic version of its dominant EpiPen, at less than half the price, after being publicly savaged for price increases on the treatment for anaphylactic shock.

The newspaper points to a report that found hospital pharmacy costs hit $33.6 billion in 2015, up about 11%, and most of that was attributable to high drug prices, not more use of drugs. But the newspaper points out that  hospitals are particularly vulnerable to price jumps because they are often paid by insures for treating a condition, and so can’t pass along drug price increases.

Some hospitals are taking obvious steps, like MedStar which moved to a cheaper generic drug after Valeant jumped up the price of heart drug Nitropress by 200%. But other hospitals are finding more sophisticated methods to fight back. The Cleveland Clinic developed algorithms that analyze wholesale prices for 38,000 medications each week, Jeffrey Rosner, the senior director of pharmacy sourcing and purchasing, told the WSJ. The computer program can pinpoint unexpected price hikes that before might not be noticed for months, allowing its hospitals to make changes quickly to save money.

For example, the algorithm quickly spotted a doubling of the price of Mylan’s gout treatment Aloprim allowing it to change to a cheaper approach. That saved the group, and cost the drugmaker, $80,000 a year. 

According to a survey conducted by price-comparison software provider DRX, Mylan's Aloprim was among the products that saw the biggest jack-ups. The cost for a vial of that drug, which treats cancer complications, increased more than twofold. And the group said hospitals and patients can expect more to come. 

"The data shows that price increases are an integral part of the business plan," Jim Yocum, EVP at DRX, said at the time.