Acurity, Inc. projects a 5.1% spend inflation rate for member Rx purchases in 2020

Oct. 4, 2019

Acurity, Inc., a group purchasing organization and supply chain improvement company for hospitals and health systems, has released an inflation projection for non-340B pharmaceutical spend of 5.1% for its member hospitals. This combined weighted inflation rate was determined using the Acurity pharmacy team’s current understanding of new drug approvals, upcoming generics, biosimilars, impending price hikes, and incremental new spend leads.

To get to this estimate, Acurity projected an increase in contracted items for a net weighted change of 0.7% and a 1.8% increase in non-contracted drug prices. It input a savings factor for near-term projected generic and biosimilar entrants, and calculated a blended, weighted price inflation of 1.1% for 2020. The effect of impending new drug approvals on pharmaceutical spend is estimated at 2%. Moreover, observing the impact of increased use of recently approved drugs, Acurity included an additional 2% to account for adoption of these drugs and their associated price spikes.

Acurity’s inflation rate methodology this year involved calculating over 3,300 line items, amounting to 95% of its membership’s aggregated distributor purchases (both contract and non-contract), including specialty medications distributed through the wholesaler, albumin, IVIG, as well as purchases made through a contracted 503B outsourcing facility. The 12-month (July 1, 2018, to June 30, 2019) member spend information is exclusive of purchases made under the 340B program. In 2018, Acurity projected an inflation rate of 3%. Its analysis of the 12-month spend resulted in a lower than projected rate at 1.4%.

“Despite the low price inflation over the past 12 months, many pharmacy administrators are nevertheless grappling with their ever-increasing pharmaceutical budgets,” states Acurity Executive Vice President and Chief Pharmacy Officer William Larkin, Jr. “This disparity between the relative lack of price inflation but high overall spend indicates the impact of the use of high-cost drugs and new, first-in-class therapies, which are having a more significant impact than price inflation in health systems. The explosion in spend growth for the hospital pharmacy enterprise is also due to multipronged efforts to enhance patient and employee safety, manage ongoing critical drug shortages, mitigate drug diversion, invest in ambulatory care and population health initiatives, maintain regulatory compliance, and explore revenue generation opportunities.”

Acurity’s Pharmacy Program offers its members unparalleled expertise in pharmacy procurement, contract management, advocacy support, and an array of value-added services. As part of its value-added service, Acurity offers an annual, in-depth analysis of aggregate member pharmacy spend. This year it published a nine-month prorated memo as a reference for institutions looking to submit their pharmacy budgets earlier in the year.