Hospital drug costs keep going up

September 4, 2009

Hospital drug costs will increase by up to 3 percent this year, but spending on anti-infective agents is nearly triple the overall increase. Hospitals with high infection rates should prepare for higher drug budgets.

Infection is bad news for hospital budgets as well as for patients. According to current projections, the overall drug expenditure at hospitals not in the federal system will increase by up to 3 percent this year. But spending growth for anti-infective agents is nearly triple the overall increase.

“You can’t take projections and simply mark up last year’s drug budget,” said Lee Vermeulen, director, Center for Drug Policy, University of Wisconsin Hospital and Clinics. “You have to focus on the key drivers of your drug spend. Between 60 and 80 products account for 80 to 90 percent of your drug spend. We have to do a better job of managing financial performance.”

For the past decade, Vermeulen has coauthored an annual projection of drug expenditures for the American Society of Health-System Pharmacists. On the basis of 2008 data, he expects hospital drug spending to grow by 1 percent to 3 percent in 2009. Early data from 2009 suggest similar growth in drug spending for 2010, he told a national Webinar audience recently.

Location, size, patient population, and acuity all make a difference in drug spending, Vermeulen said. Institutions with busy ambulatory cancer-care operations may see larger increases. Antineoplastic spending is growing by 6.7 percent annually. Hospitals with high infection rates can also expect bigger drug budgets.

Spending for the top 10 anti-infective agents is growing to 8.8 percent annually. Major cost drivers include meropenem (Merrem, AstraZeneca), up 54 percent; daptomycin (Cubicin, Cubist), up 39 percent; piperacillin-tazobactam (Zosyn, Wyeth), up 23 percent; and linezolid (Zyvox, Pfizer), up 21 percent. Nonfederal hospitals spent more than $500 million on piperacillin-tazobactam alone during the first nine months of 2008. Linezolid, the next most expensive anti-infective, cost hospitals $281 million.

Generics are a key component in inpatient drug spending. Vermeulen pointed out that half of the 10 most expensive anti-infectives have generic equivalents. Spending on agents with generic competitors fell by 10 percent compared to a 25 percent increase for brand-only agents.

Only one of the top five agents, levofloxacin (Levaquin, Ortho-McNeil-Janssen) is available as a generic. Spending on levofloxacin fell by 2.5 percent during the first nine months of 2008. Spending on other anti-infectives with generic formulations also fell, from 3.8 percent for ceftriaxone (Rocephin, Roche) to 39 percent for cefepime (Maxipime, Bristol-Myers Squibb).

Spending for imipenem-cilastatin (Primaxin, Merck) fell by 13 percent. While there is no generic equivalent on the U.S. market, Vermeulen said, the older agent faces growing competition from newer agents in the same class, including meropenem. A generic for Primaxin could become available later in 2009 or in 2010, driving spending even lower.

But 25 percent growth for branded anti-infectives leaves pharmacy directors in a bind. Vermeulen noted that the use of newer agents is driven by many causes, including greater effectiveness than that of older agents and worries about antimicrobial resistance. Two-thirds of respondents in a March 2009 survey told ASHP that their drug budgets have been cut, typically by 2 percent to 5 percent. And 25 percent of pharmacies were told to cut drug spending 6 percent to 10 percent. The most popular reduction strategies included formulary restrictions (80 percent), IV-to-oral conversions (79 percent), therapeutic substitution (78 percent), and possible participation in 340B programs (66 percent).

Anti-infective agents bear the brunt of formulary restrictions. Data released by Pharmacy OneSource in May 2009 showed that four of the top five restricted agents are anti-infectives. Of the top 30 restricted agents, nine are anti-infectives. All nine have been restricted to use by specialists in infectious disease or use against specific organisms. Linezolid, the drug restricted most often, is limited to ID-only use by 10 percent of formularies.

Among the 30 most common therapeutic interchanges, gastrointestinal agents lead the list with eight drugs, followed by cardiovascular, central nervous system, and metabolic agents with five drugs each. Only three anti-infectives make the top 30 list: ciprofloxacin (Cipro, Bayer), gatifloxacin (Zymar, Allergan), and moxifloxacin (Avelox, Bayer). All are routinely switched to levofloxacin.

The data for formulary restrictions and therapeutic substitutions encompass 522 active sites that manage 777 formularies.

Anti-infective stewardship can be extremely effective, Vermeulen said. Between 2005 and 2008, stewardship programs at his institution reduced anti-infective spending per admission by 12.9 percent. Anti-infectives decreased from 22.9 percent of total drug spending at UW hospitals in 2005 to 20.5 percent in 2008.

“Almost every hospital can have an effective anti-infective stewardship program,” he said. “And we are seeing lower drug-resistance levels than the national trend lines. You have to remember to measure factors beyond the purely economic.”