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How hospital drugs have been driving up the cost of MN healthcare

There has been a huge growth on drug spending in medical settings between 2009 and 2013.
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When Minnesota consumers see their medical costs rise, it's easy to point fingers at increasing drug prices.

Costs are rising and so is the amount of spending associated with prescriptions, according to a joint study of medication costs conducted by the Minnesota Department of Health and the University of Minnesota.

When you think about prescriptions, you think about the medication you pick up from the pharmacy and not the drugs given to you in hospitals or clinics, but it's the rising costs of the latter that may be making your premiums pricier.

Using insurance claims data, here's what the study found:

  • Spending on drugs administered in Minnesota medical settings (hospitals, clinics etc) grew by 35.5 percent between 2009 and 2013 -- almost triple the 13.5 percent increase seen for spending on drugs from pharmacies.
  • The costs of the pharmaceutical drugs themselves rose an average of 6.4 percent in that same four-year period – averaging $76.37 per prescription claim by 2013 – while in medical settings the costs rose 36.8 percent from $132.64 to $181.41.
  • Overall spending on drugs by Minnesota residents in both medical settings and pharmacies rose by 20.6 percent – twice the rate of inflation – in those four years, totaling $7.4 billion by 2013.
  • Minnesotans average 15 drug claims per year costing $90 each – 12 from pharmacies, 3 from medical settings.

The announcement comes amid concern about rising health premiums in Minnesota, with the price of health plans bought via the individual market rising by 59 percent on average in 2017.

While some criticize the Affordable Care Act, the figures released by MDH shows that drug costs were rising well before Minnesota's health insurance exchange was launched in 2013/14.

Why are hospital drugs more expensive?

The drugs given in medical settings typically treat more serious ailments such as cancer, MS, rheumatoid arthritis, and autoimmune disease.

Many people will still pick up medication for these illnesses from pharmacies, whereas drugs administered in hospitals/clinics are more often given as a single dose.

The lack of generic brands in hospitals is a major reason why medical setting costs are so much higher, MDH says.

"The faster growth for drugs in medical settings is largely due to high drug prices and faster cost growth than for drugs delivered by retail pharmacies. However, these medications are often newer, innovative drugs that are given by injection and do not have lower-cost generic alternatives," said State Health Economist Stefan Gildemeister in a press release.

The study says that most of the reporting on rising drugs costs tends to focus on pharmaceutical medication and not those given in hospitals. As such, prescription drugs account for a much higher percentage of total healthcare spending than previously thought, it says.

"Minnesota is one of the first states in the nation to show how drugs delivered in medical settings are increasingly important – and not well-understood – drivers of health care costs," said Minnesota Commissioner of Health Dr. Ed Ehlinger in the news release.

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