High drug manufacturing costs threaten hospital-led pharmacy expansion

Editor's Note

Hospitals are ramping up in-house pharmacy operations to boost revenue and improve care, but high US manufacturing costs continue to stall a broader federal effort to reshore drug production, Modern Healthcare June 5 reports.

As detailed in the article, an aging, medically complex population is driving demand for pharmaceuticals. Health systems are responding by investing in hospital-based pharmacies to better medication adherence, reduce admissions, and tap into new revenue streams. Leaders at systems like SSM Health and Intermountain Health report that specialty pharmacies offer both clinical and financial advantages—including better coordination of care and significant contributions to net patient revenue—if they can overcome the steep upfront investment.

Still, the outlet reports that federal initiatives under the Trump administration, including executive orders and public-private partnerships, have yet to meaningfully reduce reliance on foreign drug supply chains. While the intent to expand US manufacturing is strong, experts quoted argue that a more comprehensive, multipronged federal strategy is needed to meet that goal. The challenge, notes the article, lies in the cost disparity: American-made drugs are significantly more expensive than imports from countries like China and India, where prices remain “dirt cheap.”

Health systems with the resources to scale production could be early winners, particularly those able to manage pharmacy operations for others. Organizations with sufficient patient demand stand to gain the most, the article highlights. Examples cited include SSM’s partnership with Navitus Health Solutions and Lumicera Health Services, which allows for tailored treatment, improved financial access for patients, and reduced payer friction. At Intermountain, pharmacists support value-based care through hands-on medication training and collaborative care models, helping avoid hospitalizations.

However, systemic drug shortages remain a critical barrier. Despite the growth of in-house capabilities, many hospital leaders say they can’t solve access issues alone. An Intermountain leader stressed the need for broader policy levers and collaboration with nonprofit manufacturers like Civica, which both SSM and Intermountain helped found, to stabilize supply chains and protect patient care.