What appears to be happening,according to researchers, is “manufacturers see the mismatchbetween supply and demand and increase the price of the drug in anopportunistic manner.” (Photo: Shutterstock)

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Drug prices increased at roughly twice theirusual rate after shortages developed, a study found, suggestingthat pharmaceutical companies may be reapingadditional profits when urgently needed medicines becomescarce.

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Researchers at the University of Pittsburgh and Harvard MedicalSchool examined the prices of 617 dosages and formulations of 90different drugs that went in short supply between December 2015 andDecember 2016. They found that prices rose a cumulative 16 percent,on average, in the 11 months after the shortage began, comparedwith 7.3 percent in the prior 11 months.

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Related: Pharmaceutical industry takes aim at hospital drugmarkups in new study

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The study is among the first to quantify a phenomenon that U.S.hospitals have observed for years: mysterious jumps in the prices of vitalmedicines once those drugs become harder to find. More thantwo-thirds of the medicines analyzed were drugs that are injectedby health-care providers in the hospital. The researchers' datalicense didn't allow them to disclose price increases for specificmedications.

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The price spikes were particularly acute for 77 drugs with threeor fewer suppliers. Prices of those medicines jumped by an averageof 27.4 percent in the 11 months after a shortage hit, higher thanthe 12.1 percent rate in the preceding 11-month period, accordingto the results being published in the Annals of InternalMedicine.

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The magnitude of the price increases “was stronger than Iexpected,” said Inmaculada Hernandez, lead author on the study anda pharmaceutical health services researcher at the University ofPittsburgh. What appears to be happening, she said, is“manufacturers see the mismatch between supply and demand andincrease the price of the drug in an opportunistic manner.”

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Drug shortages, especially for medicines administered at thehospital, have risen in recent months. There were 224 activeshortages in the second quarter of this year, up from 174 a yearearlier, according to data compiled by the drug information serviceat the University of Utah.

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Shortages and price increases are so pervasive that severallarge hospital chains, including Intermountain Healthcare and theMayo Clinic, are banding together to form their own drug-making venture, anot-for-profit called Civica Rx. The hospitals said this month thatthey'd tapped a former Amgen Inc. executive to run it.

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“There aren't a lot of industries where if a manufacturerbotches the production of a product and is responsible for areduction in supply that they are able to profit from that,” saidWilliam Shrank, a study author and chief medical officer forUniversity of Pittsburgh Medical Center's health plan. “It is thefederal government, underinsured, and uninsured patients that arepicking up the tab.”

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One solution, the researchers said in the study, would be forgovernment payers to cap payments for drugs that are in shortsupply to no more than the price increases that would have beenexpected without a shortage.

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Read more about the problem of sky-rocketing drugprices:

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