Acurity offers 2019 pharmaceutical price inflation rate/2020 budget projection for its members
Acurity’s Pharmacy Program offers members unparalleled expertise in pharmacy procurement, contract management, advocacy support, and an array of value-added services. As part of our value-added service, we offer an annual, in-depth analysis of aggregate member pharmacy spend. This year we published a nine-month pro-rated memo as a reference for institutions looking to submit their pharmacy budgets earlier in the year.
Our inflation rate methodology this year involved calculating over 3,300 line items, amounting to 95% of our membership’s aggregated distributor purchases (both contract and non-contract), including specialty medications distributed through the wholesaler, albumin, IVIG, as well as purchases made through a contracted 503B outsourcing facility. The 12-month (July 1, 2018 to June 30, 2019) member spend information is exclusive of purchases made under the 340B program. In 2018, we projected an inflation rate of 3%. Our analysis of the 12-month spend resulted in a lower than projected rate at 1.4%.
It is important to note that despite the low price inflation over the past 12 months, many pharmacy administrators are nevertheless grappling with their ever-increasing pharmaceutical budgets. This disparity between the relative lack of price inflation but high overall spend indicates the impact of use of high-cost drugs and new, first-in-class therapies, which are having a more significant impact than price inflation in health systems. The explosion in spend growth for the hospital pharmacy enterprise is also due to multipronged efforts to enhance patient and employee safety, manage ongoing critical drug shortages, mitigate drug diversion, invest in ambulatory care and population health initiatives, maintain regulatory compliance, and explore revenue generation opportunities.
Acurity Projection for 2020 Price Inflation for Members
For 2020, we are projecting an increase in contracted items for a net weighted change of 0.7% and a 1.8% increase in non-contracted drug prices. We input a savings factor for near-term projected generic and biosimilar entrants and calculated a blended, weighted price inflation of 1.1% for 2020. The effect of impending new drug approvals on pharmaceutical spend is estimated at 2%. Moreover, observing the impact of increased use of recently approved drugs, we are including an additional 2% to account for adoption of these drugs and their associated price spikes. Our current understanding of new drug approvals, upcoming generics, biosimilars, impending price hikes, and incremental new spend leads us to project a combined weighted inflation rate of 5.1% for Acurity members’ non-340B pharmaceutical spend for 2020.