As financial pressures intensify across health systems, Renton, Wash.-based Providence is grappling with the combined strain of high-cost therapies, slow biosimilar uptake, shrinking reimbursement and increasing supply chain instability with current geopolitical factors.
“We are experiencing lots of challenges with a barrage of new and more expensive therapies in the market and in the pipelines,” Mike Skafi, assistant vice president of pharmacy for the health system, told Becker’s. “Some of those treatments run in dollar ranges of hundreds of thousands, and some of them in the millions.”
Biosimilar roadblocks
Even with cheaper alternatives such as biosimilars, Mr. Skafi said Providence has faced roadblocks in getting them into patients’ hands. This is often due to payer and pharmacy benefit manager restrictions that favor more expensive, brand-name drugs.
“This prevents us from using those medications because if you don’t have payers paying for these biosimilars, then we are forced to use whatever that payer wants us to use,” he said. “There’s a lot of work nationwide to try to mitigate these delays, but so far we still experience them quite a bit.”
Reimbursements and 340B pressures
These challenges are magnified, Mr. Skafi said, by declining reimbursements and the lack of direct payment for inpatient drug therapies where in many cases, Providence ends up covering the costs of medications for which it cannot bill.
“In addition, having access to some of the largest payers is very hard,” he said. “But once we get access, we’re often offered reimbursement rates that are not viable and below our costs. We can’t even recover our costs, which is not good for healthcare organizations and jeopardizes access for patients.”
Providence is also feeling the pinch from constraints around the 340B drug pricing program, which has long supported safety-net care for vulnerable patients and those without insurance. Mr. Skafi said recent efforts by some drug manufacturers to add restrictions that require rebate-based models instead of up-front discounts will introduce delays and funding uncertainty.
“For example, some drug manufacturers are litigating in courts their decision to move to rebate programs instead of offering discounts at the point of purchase,” he said. “This creates a lot of bureaucracy and extra steps to get the 340B price, meaning we don’t have the up-front money to use for serving more patients, especially those in underserved populations. It’s impactful because if we have to buy at the higher wholesale price instead of the 340B price, we’re left waiting for rebates, and we don’t know when or if we’ll actually get them.”
Tariffs and supply chain uncertainty
Drug shortages, especially for the traditionally low-cost, generic medications, continue to create unpredictability in budget planning and care delivery.
“Sometimes we have to seek more expensive alternatives to treat our patients, because those generics are not available,” Mr. Skafi said.
Tariffs on Chinese-made pharmaceuticals and medical supplies pose another emerging threat to costs. Providence is preparing for an influx in cost across a range of items, including medications (even if indirectly), gloves, gowns and basic compounding supplies.
Starting April 5, the Trump administration imposed a 10% baseline tariff on all imports. In addition, the U.S. has imposed a 30% tariff on all Chinese imports.
“We’re watching that closely,” he said. “We’re using a supply chain management platform that gives us intelligence around where the vulnerabilities are and which medications or supplies might be impacted. It helps us evaluate where we might need redundancy or additional stock.”
