All aboard the summer drug pricing roller coaster
The CLIFF NOTES
The last several months have been nothing short of an up and down roller coaster ride in the world of drug pricing. In June, we talked about rising prices of generic drugs with very few brand list prices increasing. In July, we cheered the return of generic drug deflation and discussed how, with the steady pace of brand list price increases in 2021, we were now on pace to surpass the 2019 total number of brand list price increases (having already past 2020’s totals). Yet, despite all that brand price increase activity, the degree of those list price hikes were at their lowest rates in over a decade.
Now that we’ve arrived in August, we’re here to report that generic drugs have climbed back up to a net increase of prices (as measured by Medicaid drug utilization trends, it equates to $39 million in annual inflation) and a whole bunch of brand list price increases reared their head last month such that we are actually trending in line with where we were three years ago in 2018 (more on that later).
If you’re keep track, that is up ⬆️ - down ⬇️ - up ⬆️ on the generic drug pricing roller coaster over the last three months (enough to make us old guys at 46brooklyn a little nauseous), and little bump ↗️ - bigger bump ↗️ - bigger(er) bump ↗️ with brands over the same time frame.
On the generic side, this pricing behavior is not something we’ve seen since before the pandemic; when we started to wonder if generics might start going on an inflationary upswing. Of course, it didn’t play out that way because once the pandemic hit, it was surprisingly all generic deflation nearly all the time. On the brand side, we keep sliding further and further from recent trends established over the last five years. All this pricing movement has us wondering, how do we stop the ride – because we want to get off and return to some drug pricing normalcy (if such a thing ever existed).
For more details on the specifics from this month’s 46brooklyn drug pricing report and what we make of all of this movement, read on.
Brand Name Medications
1. A high number of list price increases for brand drugs
There were a total of 85 brand-name medications that saw wholesale acquisition cost (WAC) price increases in July, which are all featured and contextualized in our Brand Drug List Price Change Box Score.
Price increases this month ranged from 0.7% to 62.5% (no that is not a typo) and impacted $1.5 billion in prior year gross Medicaid expenditures (a much higher number than last month’s $400 million). As a reminder, brand price increases in Medicaid are largely held in check thanks to the Medicaid Drug Rebate Program (MDRP), which includes rebate penalties for drug price increases. This is one of a number of reasons that solely analyzing brand list price changes provides an incomplete picture of what’s really happening with brand manufacturer economics, thanks to the growing lot of opaque rebates, discounts, and giveaways that drugmakers shave off those list prices. But alas, until PBMs, insurers, and rebate aggregators make more granular data on net prices public, we’ll continue working with what we’ve got.
And in case if you’re wondering allowed, “With everyone so angry about high prescription drug prices, if the sticker prices are so inflated, why wouldn’t we do something to deflate them?” Well, if you care about working to lower the brand drug prices that we are highlighting here and each month, we recommend that you get used to that annoying clanking sound as we continue to ascend up the drug pricing roller coaster, since the feds have signaled that they are more than happy to trade lower drug prices for lower insurance premiums, roads, and bridges.
Always remember, when experts say that “everyone wins when drug prices go up,” they mean it in more ways than most will ever know.
2. Brand price trends over time
To help contextualize brand name drug list price increase behavior, we find it beneficial to review past trends. One of the topline trends worth keeping tabs on in our view is the number of price increases week-over-week. When we check Stat Box #1 of our Box Score for this information, we see that we have surpassed the number of brand list price increases in 2020, are at the number of price increases in 2019 (technically 1,069 in 2021 vs. 1,070 in 2020), and appear to be trending in line with what we saw – in terms of number of list price increases – in 2018 [pink = 2018; red =2021] (Figure 1):
Figure 1
Source: 46brooklyn Research, derived from Elsevier Gold Standard Drug Database (GSDD) on 8/9/2021
For us, one could argue that this highlights in part how bad of pricing prognosticators we are. When we launched our brand pricing box score this year, we concluded our write-up by congratulating efforts over the last couple years to curb prescription drug prices. This was because all the charts we had cleverly devised demonstrated that the number of price increases had generally trended down, year-over-year, since 2013. Since that time, we have done nothing but report data that suggests that celebration may have been premature. Particularly as the median pre-rebate cost per claim of a brand drug with a WAC price increase has never been higher ($950 – thank you compound growth; you’re so helpful).
Of course, it is not all bad news, as although there are more price increases, the average and median price increase has largely been in line or below our expectations over the last decade (see Stat Boxes 3 & 4 of the box score).
3. Brand drug list price changes worth taking note of in July (continued)
Because of the large number of price increases this month, we will spare you and ourselves from reviewing each of them individually as we’ve done in month’s past months. Plus, we already snuck a peak on 78 of these 85 price increases in our July 12th article, which discussed some of the historical significance around midyear brand price increases. The only additional price changes of note, then-to-now, were on:
Lenvima (lenvatinib), an anticancer medication, which took a 3.4% price increase, impacting $55.7 million dollars in prior year gross Medicaid spend,
Tudorza (aclidinium), a respiratory medication for chronic obstructive pulmonary disease, which took an astronomical 62.5% price increase! Fortunately, this medication has almost no utilization in Medicaid; and
Zovirax (acyclovir), a topical medication for herpes, saw a 76% price decrease. This price increase impacts $6.5 million in prior year Medicaid expenditures.
Generic Medications
4. An unfavorable unweighted price change picture
Each month, we look at how many generic drugs went up and down in the latest month’s survey of retail pharmacy acquisition costs (based on National Average Drug Acquisition Cost, NADAC), and compare that to the prior month (Figure 2).
Basically, the quick way to read Figure 2 is to look for blue bars that are taller than orange bars to the left of the dotted line, and exactly the opposite to the right of the dotted line. That would indicate a good month – more generic drugs going down in price compared to the prior month, and less drug prices going up.
Figure 2
Source: Data.Medicaid.gov, 46brooklyn Research
That’s not what happened this month. For every drug that increased in price this month, only 0.87 decreased in price. That’s a stark contrast from last month, where that same ratio was a whopping 1.39. The story gets even more disappointing when drilling into the double-digit price moves – this month, there were 38% fewer drugs that decreased in price (vs. last month) by 10% or more, and 32% more drugs that increased in price (again, vs. last month) by 10% or more.
But as usual, take this unweighted price change analysis with a grain of salt. To really make heads or tails of all of these pricing changes, let’s weight these changes.
5. Weighted Medicaid generic inflation comes in at $39 million
The purpose of our NADAC Change Packed Bubble Chart (Figure 3) is to apply utilization (drug mix) to each month’s NADAC price changes to better assess the impact. We use Medicaid’s 2020 drug mix from CMS to arrive at an estimate of the total dollar impact of the latest NADAC pricing update. This helps quantify what should be the real affect of those price changes from a payer’s perspective (in our case Medicaid; individual results will vary).
The green bubbles on the right of the Bubble Chart viz (screenshot below in Figure 3) are the generic drugs that experienced a price decline (i.e. got cheaper) in the latest survey, while the yellow/orange/red bubbles on the left are those drugs that experienced a price increase. The size of each bubble represents the dollar impact of the drug on state Medicaid programs, based on utilization of the drugs in the most recent trailing 12-month period (i.e. bigger bubbles represent more spending). Stated differently, we simply multiply the latest survey price changes by aggregate drug utilization in Medicaid over the past full year, add up all the bubbles, and get the total inflation/deflation impact of the survey changes.
Figure 3
Source: Data.Medicaid.gov, 46brooklyn Research
Overall, in July, there was $120 million worth of inflationary drugs, offset by $81 million of deflationary generic drugs, netting out to $39 million of inflation for Medicaid, a stark reversal from last month’s $130 million in deflation.
6. Year-over-year generic oral solid deflation sinks to 15%
Ever since June 2020, we have been tracking year-over-year generic deflation for all generic drugs that have a NADAC price. We once again weight all price changes using Medicaid’s drug utilization data. This month, deflation on oral solid generics and all generics sunk down from the stratosphere to 15% and 10%, respectively.
Figure 3
Source: Data.Medicaid.gov, 46brooklyn Research
7. Top/notable generic drug decreases this month
While the overall Medicaid mix identifies generic drug inflation this month, there are several generic drug price decreases worth noting. The most interesting, at least in our opinion, are tacrolimus 5 mg capsule (47% decrease on 1.8 million doses), guanfacine ER 2 mg tablets (30% decrease on 24 million doses), and fluphenazine 10 mg tablets (15% decrease on 2.5 million doses).
8. Top/notable generic drug increases
On the increase side of things, the most impactful increases were paliperidone ER 3mg tablets (62% increase on 2.1 million doses), buprenorphine-naloxone 8-2mg tablets (8.5% increase on 55.4 million doses), montelukast 10mg (18.7% increase on 185.9 million doses), and gabapentin 300mg capsules (9.6% increase on 552 million doses).
Note that with all these generic price increases, the overall trend for these medications has been largely deflationary, and unless they keep this trend going, these are more likely than not going to be one-time blips on the generic deflationary pricing journey.
With that said, one drug we can’t help but check in on is generic Truvada. Generic Truvada actually saw a price uptick in NADAC to $1.51 per unit (from a low of $1.18). See Figure 4 below:
Figure 4
Source: Data.Medicaid.gov, 46brooklyn Research
This is surprising to us given what we’ve already researched in regards to generic Truvada.
And while we love NADAC, this generic Truvada pricing behavior is perhaps becoming the reminder that NADAC isn’t perfect. In fact, the nearly decade-old pricing benchmark that is NADAC (in case you didn’t know, NADAC was first published in November 2013) would benefit from some much-needed love and attention to modernize it.
Tip of the cap to Deborah Abrams Kaplan at Managed Healthcare Executive for referencing our price tracking in her recent piece highlighting the variety of dynamics that can lead to spikes in generic drug prices.
Thanks to Mari Devereaux at Modern Healthcare for featuring our comments and perspectives on the market reaction to the approval of Aduhelm, as well as discussion on brand drug prices trends in light of the recent release of Vizient’s Pharmacy Market Outlook.
Additional thanks to Modern Healthcare’s Nona Tepper for chatting with us about Cigna’s recent move to compensate patients as an enticement for them to go back to their doctor and ask for a prescription that differs from what they originally prescribed.
Kudos to David Hogberg at Washington Examiner for doing a great job capturing a good share of nuance in his piece about changes in brand drug list price trends in 2021 relative to recent years. Major credit for providing great detail for what is happening below the list prices.
Thanks to Maia Anderson at Becker’s Hospital Review for highlighting some of the details from our July drug pricing report.
Lastly, be sure to check out 46brooklyn CEO Antonio Ciaccia’s op-ed in the Erie News-Times that calls out costly PBM spread pricing practices that are directly undermining health equity efforts.