Premier Inc. Projects 4.2 Percent Price Inflation for Pharmaceuticals

Prices projected to increase over previous estimates, driven by newly released products such as cellular and gene therapies

CHARLOTTE, N.C.–(BUSINESS WIRE)–Premier Inc. (NASDAQ: PINC), a leading healthcare improvement company, today released updated inflation estimates for contracted and non-contracted pharmaceutical pricing for fiscal year 2020 (July 2019 – June 2020), projecting a 4.2 percent increase in total pharmaceutical costs for non-disproportionate share (DSH) hospitals and 3.8 percent for DSH-eligible facilities. DSH-eligible hospitals are those that serve a significantly disproportionate number of low-income patients and receive discounted pricing on drugs to cover the costs of providing care to uninsured patients.

This 4.2 percent inflation rate is approximately 0.4 percent higher than previous projections. The majority of the overall pharmaceutical inflation comes from new drugs (2.8 percent), including cellular and gene therapies.

“Pharmaceuticals are responsible for a large and growing share of the total hospital budget,” said Michael J. Alkire, President, Premier. “New drugs, while offering tremendous potential to cure or curb the spread of disease, are often introduced at price points that can have an adverse effect on health system margins. As one of the nation’s leading group purchasing organizations, our contracting team has been relentless in working to hold these costs down, putting manufacturers in head-to-head competition with one another to win our business, using technology and 100 billion data points to assure value and smart decisions. We have also been actively pursuing value-based contracts with manufacturers, which would hold drug makers accountable for delivering the outcomes promised in their marketing.”

Premier conducted the inflation analysis using its Drug Budget Development tool. The tool provides pricing information on health system pharmaceutical purchases and can be used by pharmacists to develop accurate forecasts and budgets for the coming year using their facility-specific purchasing information.

Premier has been actively working with Congress and the White House to advance common-sense principles that would foster a more competitive marketplace and prevent gaming to extend the life of patents or thwart new entrants, including:

• Lowering the barriers to market entry, making it easier for new generics and biosimilar manufacturers to compete;
• Eradicating drug shortages to prevent price spikes that can occur when there is a surge in demand;
• Prohibiting pay-to-delay practices that compensate generic and biosimilar manufacturers to delay the entry of a lower-cost alternative into the market;
• Preventing “evergreening” or “patent hopping” whereby manufacturers make slight changes, such as moving from a twice-a-day to a once-a-day formulation, to file a new patent and extend market exclusivity;
• Altering the Orphan Drug Act to ensure it is meeting its original intent of fostering the development of innovative drugs for rare conditions and not being abused to treat non-orphan indications once approved by the U.S. Food and Drug Administration (FDA);
• Creating stronger rules around citizen petitions to ensure that they have real merit and are not used as a tool to restrict new entrants;
• Removing legislative barriers to the movement from volume to value and the adoption of value-based contracts for drugs;
• Preventing abuse of the risk evaluation and mitigation strategy (REMS) requirements that some may use to deny providing samples needed by generic and biosimilar manufacturers to prove therapeutic equivalence, thereby delaying their market entry; and
• Creating transparency to help generic and biosimilar manufacturers understand when certain patents and exclusivity periods expire to encourage the entry of cost-saving medications into the marketplace.

“Premier is committed to addressing the rising cost of pharmaceuticals and strongly supports steps to create a more competitive marketplace to lower drug prices,” Alkire added. “We believe that even though drug inflation is on the rise industry-wide, Premier continues to provide best-in-class pricing for our members. We will continue to foster competition and build on the work we have already done to reduce healthcare spending. And we’ll continue to push for policy solutions that are attainable, practical and sustainable to achieve better results for our members.”