Naughty or nice? Here are the drug price changes we found in our stockings.

 

The CLIFF NOTES

A lot has happened with drug pricing since our last monthly update. First, we migrated the 46brooklyn server, which resulted in some noticeable delays to us getting this monthly report out. Also noticeable was that attempts to update federal policy on drug pricing seem to be going in reverse as evidenced by the lack of action on Build Back Better. But what does that mean for current U.S. drug pricing trends? Well they continue on their normal path, under their existing market, even while the rest of the world seems caught up with price increases and inflationary pressures.

By this, we mean that the story this month related to U.S. drug pricing was largely in line with our past tellings of the tale. November saw very few brand price increases and continued generic drug deflation. There were a net number of three brand drug list price increases in November (four increases and one decrease). The most notable in these was Ilumya (tildrakizumab), which saw a 6% price increase and impacts $7 million in prior year gross Medicaid drug expenditures. Bear in mind that this is the price before drugmaker rebates, 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 held steady at 14%. 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).

So as you begin sorting through the holiday messes in your house and preparing for the New Year, think of today’s drug pricing report findings as the last few presents that nobody noticed tucked away behind the tree. Will it be the coveted Red Ryder or will it be a deranged Easter Bunny? Let’s unwrap and unpack to find out.

Brand Name Medications

1. A small number of list price increases for brand drugs

There were a total of four brand-name medications that saw wholesale acquisition cost (WAC) price increases in November 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 -66% to 9.9% and impacted approximately $9 million in prior year gross Medicaid expenditures (PYME). This is a significantly smaller amount than in the past two months, which was in the hundreds of millions of dollars. 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 the fewest net (combined increases and decreases) branded price increases in November over the last decade. The highest number occurred back in 2014 when there were 93 net November brand list price increases.

Moreover, when further examining our brand drug box score visualization, we continue to see the degree of increases at some of the lowest levels in recent history. Of the drugs that took increases so far this year, the median price increase has been 4.8% – the lowest percentage in over a decade. And when weighting the list price increases using Medicaid drug utilization data, 2021’s brand increases amount to a weighted average of 3.8%, which is a rounding error away from the smallest degree of increases in over a decade as well. All of these are consistent with the last several months we’ve monitored.

To help contextualize this learning a little further, consider what this pricing behavior suggests in terms of broader supply chain issues and inflation concerns. Much has been made of inflationary pricing pressures in many U.S. markets; however, the brand pricing market does not appear to be experiencing this once-in-a-decade pricing behavior. Rightly or wrongly, when talking about pricing in the U.S. we generally measure these with the consumer price index (CPI). The CPI is defined as a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. Over the last decade, the same timeframe we measure brand price increases over, the annual inflation for the CPI was never greater than 3.2%. In comparison to our historical view of brand drug price changes, this knowledge can give us an appreciation for why drug prices have historically received so much attention – they have traditionally grown faster then the rate of inflation every year over the last decade (Figure 1).

Figure 1
Source: Data.Medicaid.gov, 46brooklyn Research, Consumer Price Index*
*An estimate for 2021 is based on the change in the CPI from second quarter 2020 to second quarter 2021 per source

All things being equal, this makes drug affordability more challenging year-over-year as their costs rise to a greater degree than the cost of other goods. However, this year may break the mold as seen in the figure above. Drug pricing, depending upon whether we measure it (across all drugs or just the basket of drugs taking a price increase) are not facing the same kind of pricing pressures as perhaps the broader market is (we phrase it this way as 2021 has not yet concluded and the estimate of the annual inflation we are relying upon may ultimately be mistaken). This has several implications not the least of which is that Medicaid, the program which has relied upon its CPI-penalty-based price protection rebates, may actually experience brand-name price increases this year (as the price behavior is less than the rate of inflation for the first time in a decade). As we have observed before, drug pricing does appear to follow its own path, which makes analogies so challenging.

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 (+/- 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 have really only one worth mentioning:

  • Ilumya (tildrakizumab-asmn) is a medication to treat plaque psoriasis. This medication took a 6% WAC price increase in November, which impacts $7.2 million in gross prior year gross Medicaid expenditures (PYME).

Generic Medications

4. A favorable 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

Lo and behold, that’s exactly what happened this month. For every generic drug that increased in price this month, 1.37 decreased in price, considerably higher than the 1.02 ratio last month.

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 ramps up to $92 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 November, there was just over $61 million worth of inflationary drugs, way more than offset by $153 million of deflationary generic drugs, netting out to a Turbo Man-sized $92 million of deflation for Medicaid.

6. Year-over-year generic oral solid deflation holds steady at ~14%

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 held steady at 14.4% and 10.2%, 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

So again, as we’ve been concerned with the trend of drug prices over time, the facts are generic drug prices continue to decline. Over the last decade, the yearly CPI number we looked at earlier is approximately 2%. From the perspective of a cost-of-living adjustment, generic drug prices seemingly always outperform. Of course, the cost we measure here is the drug’s actual acquisition cost – not necessarily its cost to consumers, which we’ve shown can be significantly higher than these costs in certain circumstances.

There are many benefits tied in some way, shape, or form to inflation. Whether it is year-end salary increases, which hopefully keep pace with inflation, or Medicare premiums, an oft-focused area of drug pricing research as drug rebates are claimed as tools used to control Medicare premiums. Of course, this year was particularly notable for premiums as the Medicare Part B premium was increased by the largest amount in the program’s history (in terms of dollars). A large portion of this increase was due to the federal government setting aside money to cover Aduhelm, the controversial new Alzheimer’s drug. Of course, Biogen just announced a pricing decrease (a decline of roughly half) for that drug – so that increased premium looks a lot higher than it needs to be and demonstrates how hard drug pricing calculations and predictions can really be.

That’s all for this month. We hope you all had a happy and healthy New Year.

This month, 46brooklyn CEO Antonio Ciaccia participated in two podcasts that honed in on prescription drug prices, PBM practices, and issues in the pharmacy marketplace. The first was a conversation with Sally Greenberg with the National Consumers League, and the other was with Mike Koelzer at the Business of Pharmacy Podcast in a joint conversation with American Pharmacists Association CEO Scott Knoer.

Thanks to Nona Tepper at Modern Healthcare for chatting with Ciaccia about Centene’s latest settlement with another state over alleged PBM spread pricing misbehavior – this time in Kansas.

Another shout-out to investigative reporter Katie Wedell at the USA Today for her deep-dive into insulin pricing distortions and the perverse incentives that drive prices far beyond reality, putting many patients in the precarious position of paying far more than they should for their life-saving medications. Appreciate Katie for featuring our work and for embracing the necessary nuance of the insulin debacle.

In other news, our Wreck-fidera research piece apparently created quite a stir this month. Eleanor Laise at MarketWatch and Marty Schladen at the Ohio Capital Journal both did terrific work distilling the complex issue in ways that made it more readily digestible and understandable for the public. Ultimately, the research was not exactly warmly embraced by the Pharmaceutical Care Management Association and America’s Health Insurance Plans. We’ll see if they can offer some substantive critiques of the research before the close of the year.

Lastly, we were pretty pumped to see our work cited and referenced in a number of important government mediums this month. On December 10, the United States House of Representatives Committee on Oversight and Reform’s majority and minority parties released dueling investigative reports on prescription drug pricing. Both the majority report that was targeted at drug manufacturers and the minority report that was targeted at PBMs referenced research from 46brooklyn. In addition, on December 14, US Senator Dick Durbin (D-IL) included Katie Wedell’s USA Today story that featured our work in his remarks on the Senate floor. Also, on December 15, the Oregon Department of Consumer and Business Services released their Prescription Drug Price Transparency Results and Recommendations report, which featured data from two different 46brooklyn dashboards. One of the main reasons we painstakingly build and update all of our drug pricing visualizations is so we can better bridge the divide that exists between the public and industry truths. We are glad to see them being put to good use.

 
Ben LinkNADAC, Medicaid, Generic, Brand drugs, List prices, WAC, CPI, Rebates, Ilumya