Health spending as % of GDP
Healthcare spending in June 2017 was 18.2% of the GDP, or about $3.51T.2
Spending on hospital care
Spending on hospital care grew 4.2% between June 2016 and June 2017, representing 32% of total health spending.3
Prescription drug spending
Prescription drug spending grew 6.1% between June 2016 and June 2017, representing 10% of total health spending.4
The uninsured rate has risen from 10.9% in the fourth quarter of 2016 to 11.7% in the second quarter of 2017.5
Debate over the future of 340B
About 40% of hospitals nationwide participate in the 340B Drug Pricing Program. However, an uncertain political climate has raised concerns about the future of the program.
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About 40% of hospitals nationwide participate in the 340B Drug Pricing Program, which was created to help health systems stretch their federal resources by purchasing drugs for qualified outpatient services at highly discounted prices.6 However, an uncertain political climate has raised concerns about the future of the program.
Advocates of the program assert that the discounts are necessary to combat high drug prices and provide care for indigent patients. However, federal reports in recent years have raised concerns about oversight and abuse of the 340B program.7 In July 2017, the Center for Medicare and Medicaid Services (CMS) proposed a $900 million cut to the program and said it would redistribute the savings by increasing Medicare payments to participating hospitals by 1.4% next year. If finalized, the change would become effective on January 1, 2018.8 CMS is taking comments on this proposal through September 11, and it is an issue that is sure to remain a part of the conversation throughout the ongoing healthcare debate.
Rise in generic drug approvals
As of July 2017, the U.S. Food and Drug Administration (FDA) had approved 633 generic drugs compared with a total of 651 approvals in 2016, putting the FDA on track to approve the most generics ever in one fiscal year.
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As of July 2017, the U.S. Food and Drug Administration (FDA) had approved 633 generic drugs in FY2017 compared to a total of 651 approvals in FY2016, putting the FDA on track to approve the most generics ever in one fiscal year.10 FDA commissioner Scott Gottlieb has made increased competition a key part of his policy platform.11 He places an emphasis both on innovation in pharmaceutical development but also on access to lower-cost alternatives in the form of generics, recognizing that both are imperative to maintaining a successful healthcare ecosystem.
Some generic manufacturers worry that the competition that spurs the lower prices may in turn put extensive pressure on profits and force consolidation, once again narrowing the competition and leading to higher prices.12 The generic drug segment is an area that healthcare providers must continue to watch, especially as prescription drug spending continues to rise.
Three strategies to improve supply chain efficiency
As health systems strive to decrease costs, the supply chain is often the first place that administrators look to make cuts. However, improvements to the supply chain could increase profitability by 20%.
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As health systems are looking to decrease costs, especially as a greater emphasis is being placed on quality performance, supply chain is often the first place that administrators look to make cuts since supplies and labor account for some of the greatest expense drivers.
However, making improvements to the supply chain has the potential to increase profitability at a hospital by 20%.9 Enhancing the healthcare supply chain could also give patients access to safer and more affordable healthcare. Supply chain managers may want to consider these three best practices to improve supply chain efficiency:
- Since all departments in a health system are engaged in supply chain, partner with clinical staff to help establish cost-saving habits
- Increase cost transparency by capturing demand and consumption data to better track and manage inventory
- Collaborate with supply chain partners across the continuum of care and jointly manage and measure performance
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1 Key facts about the uninsured population, The Henry J. Kaiser Family Foundation, September 29, 2016
2 Insights from monthly national health spending data through June 2017, Altarum Institute, August 2017.
5 U.S. uninsured rate rises to 11.7%, Gallup, July 10, 2017.
6 Congressional hearing examines concerns about oversight, abuse of 340B drug discount program, Healthcare Finance, July 2017.
7 Action needed to reduce financial incentives to prescribe 340B drugs at participating hospitals, United States Government Accountability Office, June 2015.
8 Hospitals question feds’ proposed $9 million IOU tied to 340B cuts, Modern Healthcare, July 2017.
9 Strengthening healthcare’s supply chain: A 5-step plan, McKinsey & Company, September 2013.
10 Generic drugs in 2017: FDA on track for most approvals ever, Regulatory Affairs Professionals Society, August 2017.
11 FDA working to lift barriers to generic drug competition, U.S. Food & Drug Administration, June 2017.
12 Generic drug prices are falling, but are consumers benefiting?, The New York Times, August 2017.
*The information provided here is for reference only and does not constitute legal advice. We make no representations with regard to the content’s comprehensiveness. You are solely responsible for investigating and complying with all applicable laws that govern the operation of your business. The results of parties herein depend on a variety of factors that are unique to their business. There is no guarantee that your results will be similar. Each party’s results will depend on the factors of its business. Their success cannot be used as an indication of future success with these programs.
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