Hospitals suffer (and consumers pay the price) when drug companies price medications with usage targets and drug baskets. These techniques are euphemistically called “Guerrilla Marketing” but should be called ILLEGAL Pharmaceutical companies should be restricted to selling or pricing drugs one drug at a time.
What’s going on? The drug companies take advantage of the difficulty hospitals have to convince doctors to stick to a limited group of hospital drugs (a formulary). When the hospital convinces (by internal marketing) the staff to accept certain drugs it’s hard to reverse course.
- Usage Targets: a hospital gets a better price using one company’s drug 90% of the time. So good in fact, even if a less expensive competitor shows up hospitals don’t change — because the hospital pharmacy does not want to contradict the internal marketing they already did to reach that 90% target. And, when the usage falls below 90% a huge price increase hits. If they could totally stop using the drug things would be ok but they can’t.
- Drug Baskets: a hospital gets a sweet deal on a blockbuster drug by agreeing to exclusively use a few of that companies low cost drugs. Later, the drug company raises the wholesale price of the low cost drugs but still gives the hospital the same sweet deal. It looks like the whole basket of drugs is even a better deal. But, when the blockbuster drug goes generic it’s hard to figure out what to do. The basket deal seems good unless the hospital looks for substitutes to the formerly low cost drugs. Many hospitals stumble on the complexity. And the staff doctors complain about changes to several drug at once.
When hospitals stumble with these deals who do you think pays the price? Consumers (that means you). Guerrilla/Gorilla not much difference.