On August 19, CMS published its latest update to the National Average Drug Acquisition Cost (NADAC) database. For the uninitiated, NADAC is the best national public database of surveyed pharmacy invoice costs to acquire prescription drugs. In other words, if you are looking to understand what pharmacies are paying to purchase drugs from their wholesalers each month (before rebates), and you don’t want to cough up a boat load of money to pay for it, NADAC is where you must go.

As we’ve discussed at length in recent months, NADAC is lagged by roughly two months. So the survey prices we just received last week reflect pharmacy invoice costs from June.

We’ll cut straight to the chase, sparing you of the verbosity for which we are becoming well known. In the aggregate, this was a “ho-hum” month. Weighted monthly deflation based on Medicaid’s drug utilization was $13 million, which for a program the size of Medicaid is a rounding error. Meanwhile, year-over-year generic deflation stepped down a touch, but against all odds continues to hover in the low-teens (at least for oral solids). Meanwhile, our Abnormal Drug Price Increase Tracker (ADPIT) flagged a few new generic drugs experiencing abnormal price increases, but none to the extent of sertraline, whose price increase stole the show last month.

If we just focused on aggregates, that would be the end of this report. If that’s your focus, you can close out and get back to whatever else you were doing. But you know us by now… we’re pretty fond of the details. If you are as well, please read on.

1. Another mixed unweighted generic drug price change picture

Each month, we first look at how many generic drugs went up and down in the latest month’s survey of retail pharmacy acquisition costs, and compare that to the prior month (Figure 1).

Basically, the quick way to read Figure 1 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.

That sort of happened this month. When we look at drugs that moved one way or another by single-digit percentages, there were 4% more drugs that decreased in price by 0-10% and 5% less drugs that increased by 0-10%. That’s good … until you start looking at the drugs that moved one way or another by double-digit percentages – 31% less drugs decreased by more than 10% while 43% more drugs increased by more than 10%. Not so good.

2. Weighted Medicaid generic deflation moderates to $13 million

As we’ve written in prior updates, knowing the price changes alone are not enough. We need to apply utilization (drug mix) to the price changes, which is the purpose of the NADAC Change Packed Bubble Chart (Figure 2). We use Medicaid’s Q4 2018 through Q3 2019 drug mix to arrive at an estimate of the total dollar impact of the latest NADAC pricing update. This helps quantify the real impact of those price changes from a payer’s perspective.

The green bubbles on the right of the Bubble Chart viz (screenshot below in Figure 2) are the generic drugs that experienced a price decline 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 drug in the most recent trailing 12-month period. Stated differently, we simply multiply the latest survey price changes by aggregate drug utilization in Medicaid over the past year, add up all the bubbles, and get the total inflation/deflation impact of the survey changes.

Figure 2 Source: Data.Medicaid.gov, 46brooklyn Research — **Figure 2**
*Source:* *Data.Medicaid.gov, 46brooklyn Research*

Overall, in August there was $119 million worth of deflationary drugs, offset by $106 million of inflationary generic drugs, netting out to just $13 million of deflation for Medicaid. While this is not much of a story in the aggregate, we still (two years into our monthly coverage of NADAC price updates) find it fascinating that the prices of thousands of generic drugs are, in many cases, wildly fluctuating yet somehow all netting out.

3. Year-over-year generic deflation climbs back into the double-digits

Ever since June 2019, we have been tracking year-over-year generic deflation for all generic drugs that have a NADAC. We once again weight all price changes using Medicaid’s drug utilization data. Over the past year, we have been seeing a gradual compression in deflation. But oddly enough, as the pandemic started, this trend started to reverse. This month, year-over-year (YoY) generic deflation on oral solids stepped down to 11.9%, falling back below the trailing 24-month average. Meanwhile, after crossing above the 10% mark for the first time in 11 months last month, deflation on all generics backtracked to 8.8% this month (Figure 3).

4. ADPIT flags two more abnormal generic drug price increases

Let’s check in on our Abnormal Drug Pricing Increase Tracker (ADPIT) and see what it has to say about this month’s data. As a reminder, ADPIT takes all of the NADAC prices for one drug over any given 52-week period, ranks them, finds the 90th percentile for the price, and then compares the current price to that 90th percentile price. If the current price is above the 90th percentile, we consider the current week’s price to be “abnormal” and add it to the list for you to peruse. Then we do this for another 20,000 or so drugs for good measure to complete the list, shown in Figure 4 below.

If this is the first time you are seeing this, we include the number of annual Medicaid prescriptions for each of these abnormally priced drugs, and then two metrics we created – one called Relative Impact Ratio (RIR) and another called Relative Impact Score (RIS). RIR simply tells you how far above the 90th percentile a drug’s price currently is (i.e. sertraline HCL 50 MG MG Tablet at 1.40 means its 40% above its T-52 week 90th percentile price). RIS multiplies the number of annual Medicaid prescriptions by (RIR - 1) to size the impact of the “pricing abnormality” (for sertraline, 40% x 3,173,444 prescriptions = 1,280,044). Add up all the RIS for all of the drugs each week, take the four-week moving average, and you get the chart in bottom right of the tool (which sizes the aggregate weighted impact each week). We then divide the bottom right chart into drugs with active ingredients in ongoing COVID-19 clinical trials, and all other drugs. Check out our interactive ADPIT tool here, and find more information on how to use it here and here.

Figure 4 Source: Data.Medicaid.gov, ClinicalTrials.gov, 46brooklyn Research — **Figure 4**
*Source:* *Data.Medicaid.gov, ClinicalTrials.gov, 46brooklyn Research*

There are a few takeaways from this month’s ADPIT updates:

First, sertraline still dominates the leaderboard. It didn’t experience much of a price increase compared to last month, but remains at highly “abnormal” levels, cementing its place at the top of the list until its trailing 52-week 90th percentile price can catch up to this new reality.
Due to its heavy utilization, sertraline’s price increase is now starting to pull up Medicaid’s overall RIS to levels not seen since earlier this year. But we can’t stress this enough, this material increase in our aggregated abnormal price measurement metric is primarily being driven by this one anti-depressant drug.
The price reported for the 40 mg strength of Famotidine (generic Pepcid) popped this month by 49% after several years of relative stability (Figure 5). This drug is listed on shortage by both the FDA and ASHP.
The price reported for orphenadrine ER tablets (generic Norflex) increased by 70% this month after several years of steady decline (Figure 6). This drug is not listed on shortage by the FDA or ASHP.

5. Generic Ampyra decreases by 50% per pill; returns to pre-July levels

Dalfampridine ER (generic for Ampyra) is a medication that is used to improve walking in people who have multiple sclerosis. A relatively new generic (first generic launched in September 2018), the medication saw a $0.62 price per pill increase in July taking it from below a dollar a pill to just over a dollar and a half per pill. In August, this price increase corrected and now a person can get a pill of generic Ampyra for a new all-time low price of $0.85 (Figure 7). This should be welcome news for the M.S. community, particularly as they face potential challenges with cost due to medications like Copaxone. For more information on Copaxone, see last week’s report.

6. Generic Suboxone tablets keep getting cheaper

As we’ve written about previously, there are two forms of the medication Suboxone: an oral tablet, and a film. Both forms can be used to help treat people for opioid addiction. While the film is the much more common dosage form, it’s also the more expensive one. This month, the gap between the cost of the two generic dosage forms continued to widen, owing to another 11% monthly drop in the tablet’s cost (see Figure 8 below).

A lot has been done to increase access to opioid addiction treatment, but in a time of challenging state budgets due to COVID-19, we urge prescribers to strongly consider how much farther treatment dollars could go if the generic Suboxone tablet is used over the generic (or branded) film. State Medicaid programs should also check the net cost differential being charged to them on the generic films relative to the tablets from their managed care organization (MCO) partners as the MCOs are offering better pricing on the tablets relative to the film as well (i.e. less potential spread pricing). See the data in Figures 9 & 10 from our Medicaid Drug Pricing HexMap, which shows the reported costs from Medicaid managed care organizations in each state. Nevada, Arizona, and Virginia might want to start looking under the hood.

7. Generic Abilify prices take another tumble

Speaking of spread pricing, it looks like one of the most overpriced medications in state Medicaid managed care programs has seen its prices take another step closer to zero – generic Abilify (aripiprazole).

Longtime readers of 46brooklyn should be well versed on some of the wild pricing distortions we’ve seen on generic Abilify over the last couple years.As one of the most commonly dispensed behavioral health medications, this drug has done a number on prescription drug budgets over the years. We first highlighted some of the big Medicaid markups back in October 2018. We also crossed the billion-dollar threshold in Medicare Part D from our March 2019 report. Using data from Ohio, we hypothesized in April 2019 that generic Abilify was a big spread pricing target for PBMs. We also focused on it at length in our July 2019 Medicare Part D Ski Slope report. If you’ve not read those works, we highly recommend it.

Because we have deduced that this seriously overpriced generic has been so highly targeted for PBM spread, it’s always noteworthy when the NADAC drops. For the uninitiated, spread pricing occurs when a PBM pays a pharmacy one rate for a drug, but then the PBM bills an entirely different rate back to the plan sponsor. The difference (called the spread) is retained by the PBM. This previously hidden revenue stream has been found to be a major budget buster for payers. In our home state of Ohio, then-state auditor Dave Yost found PBMs charged the state Medicaid program a spread of more than 31 percent for generic drugs. The findings set off a national reckoning on the practice.

This trip down 46brooklyn memory lane is relevant because of the recent drops in aripiprazole prices. When pharmacy acquisition costs drop, PBMs can lower reimbursements to pharmacies, but can continue to “play the float,” charging the same old, pre-price-drop rates back to plan sponsors. This month the six different aripiprazole strengths all dropped anywhere from 2 to 29 percent, shaving more than $4 million off annualized state Medicaid drug ingredient costs (Figure 11).

Figure 11 Source: Data.Medicaid.gov, 46brooklyn Research — **Figure 11**
*Source:* *Data.Medicaid.gov, 46brooklyn Research*

So for the remaining payers who have not cleansed spread pricing from their PBM contracts, we regret to inform you that this month’s aripiprazole windfall is just a fake lottery ticket.

Thanks to Mike Koelzer, host of The Business of Pharmacy Podcast, for a fun, informative interview with 46brooklyn president Eric Pachman. If you have ever wondered how we got our start and what drives our work, you can get the story here.

COVID-era generic drug price changes: No news is good news