The highs and lows of the final drug price changes of 2021
The CLIFF NOTES
Before we begin our monthly ritual of providing an overview of drug pricing data over the last month, we need to start by acknowledging that this month’s update is a little lacking because some of the underlying public data we rely upon is not getting updated like it used to. To be clear, we have all the pricing data we need to report on drug price changes, but the ability to weight the data and tell the more nuanced story (which as we say every month is what matters arguably more then the price) is not getting routinely updated by the Centers for Medicare and Medicaid Services (CMS). Whether it is related to the roll over to the new vendor, the great resignation, or something else, the utilization data from Medicaid has not been updated in awhile, and Medicare finally just got updated yesterday. Compare January 2022 to January 2021, last year CMS updated Part D and Part B data in December 2020, we spent about a month playing with the data and published the report mid-January 2021.
Along with the Medicare delays, similarly, it has been almost a year since the State Drug Utilization Data (SDUD) has been refreshed by CMS (the most recent data is from Q1 2021) . The SDUD enabled key research and reports into “spread pricing” just a few years ago that has led to a national reckoning on opaque arbitrage in the drug supply chain. We used to eagerly await the passing of each quarter as new Medicaid data let us update many of our models such as the annual generic drug deflation or annualized prior year Medicaid expenditures (PYME). Those are now relying upon one quarter of data multiplied 4x to get an annual figure (i.e., it’s not as good as it use to be, having to use less data points). We hope to see an update to these databases soon, as they are critical to our understanding of what is actually going on with drug prices in the U.S. Show us the data!
Alrighty, with that mini-rant over, let’s dive into our monthly update.
December saw a few brand list price increases (n=28 net) and continued generic drug deflation. The most notable brand price increases were Adcetris (brentuximab vedotin), which saw a 4.6% price increase and impacts $60 million in prior year gross Medicaid drug expenditures (PYME). Vascepa (icosapent ethyl), which saw a 3% price increase impacting $27 million in PYME, Santyl (collagenase) which saw a 5% increase impacting $32 million in PYME, and Ingrezza (valbenazine) which saw a 4.3% increase impacting $235 million in PYME. Bear in mind that this is the price before drugmaker rebates and discounts, which as we know are growing significantly over time and are at their largest amounts in the Medicaid programs.
On the generic side of the coin, year-over-year (YoY) generic oral solid price deflation eased slightly to 13.5%. And while we still see some drugs creeping up in price, none would suggest broad supply chain issues related to drug prices at this point (though we are relying upon lagging indicators).
Read on to unpack more of what we see in regards to U.S. drug prices to wrap up 2021 and set us up for exploring the pricing dynamics in 2022.
Brand Name Medications
1. A small number of list price increases for brand drugs in December
There were a total of 29 brand-name medications that saw wholesale acquisition cost (WAC) price increases in December and one that took a price decrease, which are all featured and contextualized in our Brand Drug List Price Change Box Score.
Price changes this month ranged from -15% to 9.5% and impacted approximately $407 million in PYME. This is a significantly larger amount than last month’s $9 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 that occur faster than the rate of inflation.
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.
2. Brand price trends over time
To help contextualize brand name drug list price increase behavior, we find it beneficial to review past trends. In comparison to prior years, this past month saw roughly the same number of December price increases. In December 2020, there were a net (combined increases and decreases) of 19 brand price increases, 29 in December 2019, and 39 in December 2018. We do notice a trend that more of the price increases appear to be shifted toward the end of the month, perhaps to avoid the usual January scrutiny of new price increases (Figure 1).
Figure 1
Source: Elsevier Gold Standard Drug Database, 46brooklyn Research
3. Brand drug list price changes worth taking note of in November
We identify drugs worth taking note of in a couple different ways. Primarily, we look for medications with a lot of prior gross Medicaid expenditures. We next look for drugs with large pricing changes (+/- approx. 10%). And finally, we look for drugs that are interesting for us either because we’ve previously written on them or because we find them of unique clinical value. This month, when looking for these drugs in the brand arena, we see a few worth mentioning:
Ingrezza (valbenazine) is a medication to treat repetitive muscle movements associated with the movement disorder tardive dyskinesia. This medication took a 4.3% WAC price increase in December, which impacts $235 million in gross prior year gross Medicaid expenditures (PYME).
Adcetris (brentuximab vedotin) is a medication used to treat certain cancers such as Hodgkin lymphoma that saw a 4.6% price increase, which impacts $60 million in PYME.
Vascepa (icosapent ethyl) is a medication used to manage cholesterol, which saw a 3% price increase impacting $27 million in PYME.
Santyl (collagenase) is a medication to promote wound healing that saw a 5% increase impacting $32 million in PYME.
Generic Medications
4. A mixed 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 exactly what happened this month. In fact, at first glance, the month-to-month changes don’t look all that favorable, driven by the significant decrease in the number of drugs that declined in price by 0-10%. However, take a look at the number of drugs that decreased by more than 10%. There were 65% more drugs that had a decrease greater than 10%. That’s a lot of meaningful deflation on generic drugs, which makes generic drugs about the only product where you’ll find this sort of deflation nowadays.
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 deflation ratchets up again to $138 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 effect 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 December, there was just over $73 million worth of inflationary drugs, way more than offset by $211 million of deflationary generic drugs, netting out to a whopping $138 million of deflation for Medicaid.
6. Year-over-year generic oral solid deflation eases gradually to 13.5%
Ever since June 2020, we have been tracking year-over-year (YoY) 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 eased to 13.5% and 9.9%, respectively (Figure 4). If you are a purchaser of generic drugs, a decline in this metric is not ideal as it means costs are declining at a less rapid pace.
Figure 4
Source: Data.Medicaid.gov, 46brooklyn Research
7. Notable generic drug price increases this month
On the flip side, there are several clear contenders for most meaningful generic price increases this months as there are some obviously large orange bubbles in Figure 3 above. Some of these are familiar names, like methylphenidate ER 18 mg & 36 mg tablets (generic Concerta), and some of them are newer agents of note like sevelamer 800 mg tablets and venlafaxine ER 150 mg tablets.
The gallery below shows the price trends for these agents over time.
8. Notable generic drug price decreases this month
Unlike prior months, this month, the decreases in generic prices were across large groups of products and not concentrated in a few large buckets as is often the case (see the distribution in green bubbles in Figure 3 above). From a percentage change, and not necessarily an impact to Medicaid drug expenditures point of view, the biggest swings in generic prices occurred in the following products:
Ethosuximide 250 mg capsules, a medication used to treat seizures, saw a 55% decrease
Perphenazine 2 mg tablets, a medication used to treat schizophrenia, saw a 54% decrease
Celecoxib 50 mg capsules, a medication used to treat inflammation, saw a 52% decrease
The gallery below shows the NADAC price trends for these agents over time.
9. Entecavir NADAC is largely unchanged, but still of interest
The final drug price behavior we’ll discuss this month is in regards to generic Baraclude (entecavir). Entecavir is a medication that went generic back in 2014 after a battle with brand manufacturer Bristol Myers Squibb, and while its NADAC movement this month was not particularly noteworthy, it is worth reviewing that since 2014, the price has crated by 97% – from approximately $30 per bill to approximately $0.75 per pill – as shown in Figure 5 below. Said differently, if entecavir’s NADAC price was a rollercoaster, we’d likely find the drop an incredible ride.
Figure 5
Source: Data.Medicaid.gov, 46brooklyn Research
Which brings us to a point we often make, but perhaps fail to emphasize. The pricing movement we track in these reports are, for many, meaningless measures of the cost of a drug. This is because they do not measure prices patients pay for drugs nor even prices employers or other sponsors of health insurance can expect to bear. Sure, they have some bearing on the drug’s price to those groups, but it is an increasingly arbitrary relationship. An entecavir study recently published in JAMA Network Open that we at 46brooklyn participated in highlighted this exact point when the study noted that despite the changes in NADAC, patient cost share did not change to the same degree. Returning to our previous analogy, patient’s got to ride the ‘kiddie coaster’ while NADAC rode the Millennium Force.
So although we’ve said it before, it bares emphasizing now – the purpose of this monthly ritual is to hopefully spur those of us purchasing drugs to ask a relatively simple question, are we getting a fair price?
The first of the year brand drug price increases drew the eyes of many this month. If you’re interested in checking out the most recent updates, check out our Brand Drug List Price Change Box Score. Shout-outs to Ed Silverman at STAT News, Bob Herman at Axios, Alex Keown at BioSpace, Zachary Brennan at EndPoints, Jonathan Gardner at BioPharma Dive, Paul Brandus at MarketWatch, and John Wilkerson at Inside Health Policy for highlighting our price tracking and analyses. Additional shout-out to Brian Reid for chatting through the nuance on his Redeeming Value podcast.
With the big news that CMS was finally addressing the out-of-whack inflated costs at the pharmacy counter due to the much-maligned “DIR fees,” 46brooklyn CEO Antonio Ciaccia provided some insights on the policy proposal and its implications on patient cost sharing with Darrel Rowland at the Columbus Dispatch and Eleanor Laise at MarketWatch. Thanks to Terry Wilcox for featuring some of our analyses in her write-up in The Hill on the proposal as well.
If you’re looking for another lengthy discussion on how PBMs impact the prices we pay for prescription drugs, check out Ciaccia’s interview with KSL News Radio’s Heather Kelly on the Money Making Sense show.
Finally, as we mentioned above, we were super excited for the release of the study on entecavir pricing and patient out-of-pocket costs in JAMA Network Open. Tremendous appreciation to Jonathan D. Alpern, Heesoo Joo, William M. Stauffer, Nathan C. Bahr, and Thomas M. Leventhal for inviting us to collaborate on the research.