As Maryland’s hospitals begin in earnest their preparations to rein in health care costs ahead of the inception of the Total Cost of Care Model, there’s one factor that has long escaped any meaningful constraints: drug prices.
How bad are things? Approximately 6 percent of hospital spending on care is attributed to pharmaceuticals. And while overall hospital spending growth in Maryland has been held to barely more than 2 percent annually over the past four-and-a-half years, drug costs are climbing far more quickly. A year ago, the group purchasing organization Vizient projected hospitals’ costs of pharmaceuticals would grow by almost 8 percent in the coming year.
A few weeks ago, I met (unofficially) with an old friend who holds a senior position with PhRMA in Washington, D.C. I expressed our concern. She argued that hospitals deserve blame for marking up drug prices as much as 400 percent. I explained how that isn’t so in Maryland and suggested PhRMA needs to rethink that argument when it comes to our state.
Because Maryland’s hospitals operate under fixed global budgets, and are tasked with reducing growth in health care costs in all settings, they have scant wiggle room to absorb costs that are spiraling out of control. Success under the Total Cost of Care Model demands that every facet of health care cost growth be suppressed.
The out-of-control growth has led the American Hospital Association to enter the national fray, joining the Campaign for Sustainable Rx Pricing. There are also state-level efforts, including Maryland’s passage of a law in 2017 that would have curbed sharp increases in the price of generic medicines. That law was ruled unconstitutional by the 4th Circuit Court of Appeals in April and on Tuesday the court declined to rehear the case. Nevertheless, the issue will return in the coming General Assembly session.
Maryland’s hospitals are arming themselves with many new tools to hold costs in check: care redesign initiatives, bundled payments, primary care coordination incentives, and more. Control of input prices, drugs among them, is crucial to the success of those measures. We must continue to push back on the pharmaceutical industry and seek appropriate regulatory relief.
No matter what form that takes, the goal is to strengthen access to affordable treatments and cures for patients.