Analysis of Pharmaceutical Products with Large Price Changes in a Regional Hospital System

PURPOSE: Large price swings for individual drugs complicate the hospital purchasing process, both increasing costs and adversely affecting patient treatment therapy. The objectives for this study are, for a large regional hospital buyer, to describe price changes for individual drugs, therapeutic classes, and drug companies, and to determine factors associated with large price swings. METHODS: We constructed monthly transaction prices for over 5,000 individual drug products purchased by the Buyer during 2000 and 2001. Of those, we were able to determine annual price changes for 3,085 products, which we describe in detail. 319 products with annual price swings of 20 percent or more between 2000 and 2001 were selected for further analysis. Percentage change in price was regressed on patent expiration (whether a patent expired during the time period), drug shortage (whether one occurred during the time period), whether the drug was branded or generic, and Buyer expenditure on the drug over the study period. RESULTS: Out of those companies and therapeutic classes, respectively, which accounted for over $1 million in expenditures for the Buyer over 2000–2001, GlaxoSmithKline and sympathomimetics exhibited the highest upswings, while TAP Pharmaceuticals and quinolones were responsible for the largest downswings. Regression results revealed that drug shortages beginning in 2000 (t=2.25, p<0.05) and 2001 (t=3.91, p<0.01) were statistically associated with large upward price swings; large downswings were observed for generic drugs whose branded counterpart had a patent expiration in either 1999 (t=–2.88, p<0.01) or 2000 (t=–1.66, p<0.10). Price swings were significantly smaller for heavily purchased drugs (t=–2.74, p<0.01). CONCLUSION: Underlying the overall drug price inflation rate are many different individual price changes. Upswings are associated with drug shortages, while downswings are caused in part by patent expiration. Generally, with some notable exceptions, high-budget items are not characterized by the largest swings.