By John Strong, Co-founder and Chief Consulting Officer, Access Strategy Partners Inc
August 2023- The Journal of Healthcare Contracting
Drug Shortages Cost Billions, Upend Patients’ Lives
17 additional drugs went into shortage in May 2023.1 Active drug shortages now total more than 320 through the first two quarters of the year.
(Chart goes here)
A recent Premier survey of 233 hospital and health system staff showed more than
75% were spending at least 10 hours per week trying to mitigate supply shortages.2
Taxpayers could save $228 Million to $2.15 Billion if Medicare bought 7 generic oral oncology drugs from The Mark Cuban Drug Company.3
More than 100 million lives are covered under Synergie Medication Collective, the new independent company formed from a coalition of Blue Cross Blue Shield carriers. Almost all Blues plans are participating and have invested in the company. Synergie is looking to disrupt the growing specialty drug market which represented a spend of $407 billion in 2021.4
Pharmaceutical manufacturer’s industry average effective tax rate is a low 11.6%. This is a 40% decrease from the tax rate before the 2017 tax law.8
(Civica logo here)
Civica Rx, the nonprofit generics drug company owned by healthcare systems, is 5 years old.
To date, they have:
Produced 60 generic medications in 80 SKUs
Delivered 120 million vials of product.5
Drug shortages in the U.S. are costing facilities at least $359 million annually, and a report in the Annals of Internal Medicine from 2019 estimates that the prices of drugs under shortage increased more than twice as quickly as they would if they were not in short supply. This adds an additional $230 million annually to U.S. drug costs.6
500,000
is the number of patients whose cancer therapy may be interrupted by drug shortages. The chemotherapies that are in short supply are “cheap generic drugs that don’t make much profit — and few companies want to manufacture them.”7
Need no-risk spare change to reach your savings target this year?
Vendor Activity Audits are a great way to recover working capital and review your procurement processes at the same time. “We’ve seen a tremendous increase in recoveries per-bed, post-COVID” said Chris Ahlgrim, principal of Archstone, a healthcare focused supply chain audit firm. “Staff turnover and shortages as well as remote work has probably contributed to this increase, especially in areas such as waste management and service contracts.”
Archstone Average Recoveries per Bed9:
} Pre-COVID: $650/per bed increase
} Post-COVID: $975/per bed
50% increase
Operating Room minutes are up 33% through May 2023 versus the same month in 2020. On a year-over-year basis, they are up 5%.
Supply expenses are up 5% in May 2023 versus May of 202210. Although inflationary pressures still exist, perhaps price increases are starting to flatten out a bit as the result of longer-term contracts and aggressive supply chain intervention against further increases.
5.8% is the CMS estimate of average hospital spending growth 2022-2031. However, in 2023, CMS is estimating faster spending growth of 9.3%, followed by a “normalization” of growth around 6.1%.11
Is there hope for trading partner collaboration in healthcare?
In most U. S. industries, trading partner collaboration is the norm, resulting in reduced expenses, faster development of technology, and true partnership. A recent report from The Advisory Board Company, revealed that in healthcare technology
50% to 70% of provider-vendor partnerships fail when it comes to SaaS (versus HER).12
The arms race for Pulsed Field Ablation (PFA) is on and coming for the $8 billion electrophysiology market.13
Here is a brief rundown of some of the major and minor players in the American market.14
The Big Guys New to the Game
Boston Scientific (Farapulse) Actus Medical (AcQBlate)
J & J Biosense Webster (VARIPULSE) Field Medical (FieldForce)
Medtronic (Sphere-9) Galvanize Therapeutics (CENTAURI)
Energy Costs Can Yield Big Savings
according to Dr. Jeff Thompson, CEO emeritus and executive advisor at Gunderson Health System in La Crosse Wisconsin. Gunderson Health invested about $2 million in replacing pumps, motors and other parts of their heating and cooling systems that now generate about $1.2 million in annual savings.15
C. difficile infection (CDI) is responsible for:
223,000 Healthcare-associated infections (HAIs) annually
12,000 deaths annually
$6.3 billion in healthcare costs annually.16
While hand washing and disinfection are important, it tells us that other actions, like disinfecting stethoscopes and other patient contact items, may lead to a reduction in the spread of HAIs.
1 www.ashp.org/drug-shortages/shortage-resources/drug-shortages-statistics.
2 Kacik, Alex, “Supply Chain Shortages to Persist through 2024, Premier Says”, “Modern Healthcare”, June 15, 2023.
3 ”Healthcare Purchasing News”, June 2023.
4 Tepper, Nona, “Blues Plans Launch Synergie to Cut Costs for the Priciest Drugs”, “Modern Healthcare”, January 6, 2023.
5 Comer, Ben, “Civica Takes on the Insulin Market, Opens Manufacturing Facility”, Flifescienceleader.com, July 2023, pp17, 18.
6 Company website.
7 Abbott, Brianna, “Cancer-Drug Shortages Upend Patient’s Care”, The Wall Street Journal, June 30, 2023, p.A1,A7.
8 Senate Finance Committee Democratic Staff Memorandum, May 11, 2023.
9 https://archstonemgmt.com data, April 2023.
10 Kaufman Hall, “National Hospital Flash Report”, June 2023, p10.
11 Keckley Report, “The Glaring Disconnect between the Fed and CMS”, June 19, 2023, p4.
12 Advisory Board Company, “Making vendor-provider partnerships work” on Radio Advisory with Rachel Woods, sourced April 11, 2023.
13 Reuter, Elise, “Medtronic’s pulsed field ablation device meets safety, efficacy metrics in trial”, MedTech Dive, March 7, 2023.
14 MedTech Strategist, April 2023, p25.
15 Modern Healthcare, July 3, 2023, p22.
16 Healthcare Purchasing News, “Nurse-initiated C. diff testing could reduce infection spread”, July 2023, p7.