Hospital Drug Spending Trends During the COVID-19 Pandemic

Eric Tichy, PharmD, MBA, vice chair, Mayo Clinic, discusses a Mayo Clinic report on drug spending during the COVID-19 pandemic, highlighting which drugs saw dramatic increases or decreases in spending, as well as how providers can use spending data to impact the future of care.

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Welcome back to PopHealth Perspectives, a conversation with the Population Health Learning Network where we combine expert commentary and exclusive insight into key issues in population health management and more.

Today, we are joined by Dr Eric Tichy, vice chair at the Mayo Clinic. He discusses the Mayo Clinic report on drug spending during the COVID-19 pandemic, highlighting which drugs saw dramatic changes in spending as well as how providers can use spending data to impact the future of care. Dr Tichy?

Hi. My name is Eric Tichy. I'm a division chair of supply chain management at Mayo Clinic. I am a pharmacist by background. I'm responsible for pharmaceutical contracting and the pharmaceutical formulary for the entire Mayo Clinic enterprise.

I've worked in health care for approximately 20 years. I've been at Mayo Clinic for two years. I worked for Yale New Haven Health prior to that, where my last role was director of clinical pharmacy for the Yale New Haven.

Can you briefly talk about your recent report and the findings? Were you surprised by any of these findings?

The recent report that I was involved with is the annual analysis of drug expenditures in the United States for 2020. Then the author team works to develop projections for 2021.

This is a project that has been done and supported through the American Society of Health-System Pharmacists for over 20 years. I've been part of this author team for the past three years. I've been the lead author for the past two years.

The report has had a lot of very interesting findings. A lot of it was driven by changes in practice related to the COVID-19 pandemic. Some of the interesting things were the dramatic shifts in the sites of care. We actually saw decreases in drug expenditures in the hospital setting. That's only occurred three times in the last 20 years.

This decrease was almost a 5% decrease. A lot of that occurred because at the beginning of the pandemic, hospitals were completely shut down. A lot of us have to recall in our memories that this was done because hospitals didn't have enough protective equipment to do all the things that we want to be able to do and do them in a safe way.

Hospitals stopped doing all kinds of care, elective care especially. That caused a drop-off in certain care. Then it did pick up dramatically later on. Even by the end of it, it actually exceeded what we had typically expected to see.

Some of the specific findings that were interesting is that decrease that I mentioned in the hospital sector, the dramatic increase in home care. A lot of care was pushed out of the hospitals into the clinics and then from the clinics into the home setting.

Long-term care facilities also saw big drop-offs in care because of the high death rates. People tried to avoid long-term care facilities as much as possible, again pushing things into the home sector.

Remdesivir was very interesting. That's the antiviral drug that's used for treating patients with COVID-19. That drug only became commercially available in October of 2020. In just three months, it was the number one spend drug for hospitals for the whole year.

We had not seen something like that, where a brand-new drug, in such a short period of time, became such a large expense. Of course, that makes it very difficult to predict what your expenditures are going to be, when something like that comes out of left field and dramatically changes your spending.

Another very interesting finding was that there were things that dropped off dramatically that you wouldn't expect to be influenced by the pandemic. Drugs used to treat stroke, like alteplase, dropped off pretty significantly. We don't think that the pandemic would have stopped people from having strokes. Those are just some of the interesting findings of our analysis.

Did you have any other major trends identified in the study? How can they be used to determine future drug spending?

Another important trend that we noticed is the uptake of biosimilars. Biosimilars are essentially generic drugs for the complex proteins such as antibody therapies. That's where a lot of the more recent drug spending has occurred in that field of drugs.

There was not a process for having competition for those drugs until the Affordable Care Act that was passed in the previous decade. It took several years for that process to really ramp up, where drugs are now becoming available.

We finally saw that organizations and providers are really embracing the use of biosimilar drugs. That is another reason why expenses in the hospitals and clinics slowed compared to what we had seen in previous years, because that's finally causing some deflation in the drug market.

Overall, how has COVID-19 impacted drug spending?

I would say overall, COVID-19 has decreased certain health care utilization, especially in the beginning of the pandemic. Once we got through that initial phase, then it started to increase drug utilization. What I've said is that we're experiencing drug expenditure whiplash. It dropped off dramatically. Then, it increased dramatically.

Now, we're seeing a drop-off again. Depending on where the pandemic takes us, it could level off, or it could increase again. If we see variants that evade the vaccines and we see big surges similar to what they had seen in the upper Midwest recently, that could accelerate expenditures again.

What do you hope health care professionals take away from this information? Again, how can they help impact the future of care?

A couple things. One is there's a big priority in society, I think, to control drug costs. We see that this is a very popular topic even just with the lay public.

Maximizing the use of generic drugs whenever possible and using these biosimilars, which are now competition for some of these very high-cost branded drugs, those are very tangible ways of bringing down the cost of drugs pretty quickly.

We've learned that we don't always need to give a drug in a doctor's office, that it can be done in the home setting. People can self-administer medications. That helps bring down the cost of health care and of drug care specifically. Those are some tactics that any of us in health care can take home and implement.

Then, just overall, Dr Tichy, is there anything else you'd like to add?

I would say that I was really impressed with the number of new drugs that the FDA approved in 2020, given all that was going on with the pandemic and the attention that the FDA had to pay to new therapeutic drugs to treat COVID-19. There was a lot of concern that that could slow down the drug approval process.

The FDA has really done a remarkable job of continuing to approve drugs at a high rate. The number of drugs approved in 2020 was the second highest all-time. We're looking at 2021 to see if there are new drugs that end up being game-changers that change care for specific diseases. That's the last thing that we're keeping our eye out for, is new drugs that might drive new spending.

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