Can A Consortium of Hospitals Help To Reduce Drug Prices?

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To help curb drug prices, a consortium of hospital groups recently announced plans to form their own nonprofit drug company.
To help curb drug prices, a consortium of hospital groups recently announced plans to form their own nonprofit drug company.

As the often astronomical cost of cancer treatment is forcing a growing number of patients and their families into financial ruin, a diverse cadre of health care providers — practitioners, associations, and hospitals — are mustering their forces to devise innovative ways to reduce the burden.

Most recently, a consortium of hospital groups announced plans to form their own nonprofit drug company. The goal: to give them control over production, allowing them to avoid shortages and more directly govern price escalations.

“For people in the United States, there is a dangerous gap today between the demand and supply of affordable prescription drugs,” Richard J. Gilfillan, MD, CEO of Trinity Health in Livonia, Michigan, said in a press release.1 “If the only way to provide our communities with affordable drugs is to produce them ourselves, then that is what we will do.”

Led by Salt Lake City–based nonprofit Intermountain Healthcare, the group includes the nation's largest Catholic nonprofit hospital group, Ascension, as well as SSM Health and Trinity Health, with the US Department of Veteran Affairs weighing in as an interested observer.

The project is still in its preliminary stages, with the group still considering whether to manufacture generic drugs itself or work with third-party drug makers. But the savings the nonprofit strategy could realize, the press release announcing the group said, are stunning.

“Research into the actual costs of manufacturing and distributing generic drugs suggests that, in many instances, generic drug prices can be reduced to a fraction of their current costs, saving patients, and the healthcare systems that care for them, hundreds of millions of dollars each year,” the press release stated. 

The collaboration is just the latest in a broad range of initiatives focused on finding ways to alleviate the financial burden of cancer therapy. The issue of financial toxicity — affecting patients and their families — have been the focus of multiple studies, policy papers, and calls to action.

“In the United States, the average price of new cancer drugs increased 5- to 10-fold over 15 years, to more than $100,000 per year in 2012,” a nationwide coalition of physicians wrote in 2015.2 “The cost of drugs for each additional year lived (after adjusting for inflation) has increased from $54,000 in 1995 to $207,000 in 2013. This increase is causing harm to patients with cancer and their families.”

One consequence of the increasing financial burden, a number of studies found, is that patients are choosing to skip doses to save money.

“Evidence indicates that once cost sharing exceeds $100, adherence to prescribed medications begins to drop off significantly, likely due to the trade-off between paying for medical care and the prospect of damaging the family's financial stability,” according to an article by the Leukemia & Lymphoma Society.3 “Data also show that decreases in adherence correspond to worse outcomes and increases in costly medical interventions that, in many cases, could have been avoided with proper adherence.”

It's a reality that weighs on practitioners.

“Part of the job of the oncologist is not only just writing a prescription for medication but ensuring that a patient will be able to receive the medication,” said Adam Olszewski, MD, an assistant professor at the Alpert Medical School of Brown University in Providence, Rhode Island. “Once we prescribe these medications, we need to set in motion a wheel to try to find financing to cover the cost, which comes within days to several thousand dollars.”

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