IRVING, Texas (BUSINESS WIRE), February 26, 2020 - Analysis by Vizient, Inc. of four drugs that have been consistently used in hospitals in some cases for more than 50 years, shows manufacturers are choosing to take significant price increases after receiving formal approval by the Food and Drug Administration (FDA). The effect is an estimated $20.25 billion increase in U.S. health care spending over the course of their periods of market exclusivity. With 19 additional drugs poised to go through this approval process, the cost to the U.S. health care system could be an additional $8.75 billion over five years. See analysis here.
The increases in costs are an unintended consequence of the FDA’s Unapproved Drugs Initiative (UDI) launched in 2006. The agency’s intent was to require manufacturers of these drugs, which have been marketed for decades, to gain FDA approval or remove them from the market. This approval gives patients and providers confidence that the pharmaceuticals they are using have been shown to be safe and effective. While that goal is appropriate, the pricing behavior of certain manufacturers of these now formally licensed drugs is creating negative financial consequences for provider institutions.
“There are multiple options for manufacturers when they submit these well-established drugs to FDA for approval. Depending on the approval, manufacturers receive periods of exclusivity ranging from three to seven years. If a patent is awarded, the manufacturer could have market exclusivity for 20 years,” said Dan Kistner, PharmD, group senior vice president, pharmacy solution for Vizient.
“Our analysis shows that the market has already experienced significant increases after approval of the four drugs we reviewed. If the other 19 drugs follow similar approval paths, and manufacturers take similar price increases, the additional cost could reach $8.75 billion over five years. The combined impact of the higher costs for these 23 drugs could be $29 billion,” said Kistner.
As part of its analysis, Vizient reviewed the pricing history of four drugs that have been approved by the FDA through the UDI process since 2013.
- Neostigmine Methylsulfate, commonly used to reverse the effects of paralytics used during anesthesia. During its period of market exclusivity, wholesale acquisition cost (WAC) increased by as much as 525% and annual U.S. health care spend increased from $60.6 million to an average of $205.8 million annually. Market analysis estimates the total increase in U.S. health care spend was $871 million.
- Vasopressin to Vasostrict, a medication to treat critically low blood pressure. Received patent approval with market exclusivity currently projected to last through 2035. WAC has increased as high as 1487% and the estimated U.S. health care spend increased from $30.8 million annually to $510 million in 2019. Market analysis estimates an increase in U.S. health care spend of $17.8 billion over the life of the patent.
- Selenium to Selenious Acid, a trace mineral used to treat nutritional deficiency. Approved as a 5-year New Chemical Entity (NCE) with market exclusivity until April 30, 2024. WAC has increased 1190% and U.S. health care spend is estimated to increase from $8.52 million annually to an estimated 2020 spend of $110 million. Market analysis estimates an increase in U.S. health care spend of $503 million over the remaining exclusivity period.
- Dehydrated alcohol, used to relieve intractable chronic nerve pain. Received a seven year orphan indication exclusivity to treat severe heart disease. WAC has increased 668% and the U.S. health care spend is estimated to increase from $28 million annually to an estimated 2020 spend of $215 million. Market analysis estimates an increase in U.S. health care spend of $1.1 billion over the next five years of the exclusivity period.
“Our concern is not in the intent of the UDI, but with its unintended consequences. Manufacturer’s pricing choices after receiving approval are creating challenges for providers and patients alike in terms of egregious price increases and more vulnerability to supply disruptions,” said Kistner. “We hope that by increasing public awareness of the impact to our health care system and patients, manufacturers will reconsider these predatory pricing strategies.”
About Vizient, Inc.
Vizient, Inc. provides solutions and services that improve the delivery of high-value care by aligning cost, quality and market performance for more than 50% of the nation’s acute care providers, which includes 95% of the nation’s academic medical centers, and more than 20% of ambulatory providers. Vizient provides expertise, analytics and advisory services, as well as a contract portfolio that represents more than $100 billion in annual purchasing volume, to improve patient outcomes and lower costs. Vizient has earned a World’s Most Ethical Company designation from the Ethisphere Institute every year since its inception. Headquartered in Irving, Texas, Vizient has offices throughout the United States. Learn more at www.vizientinc.com.