The work in progress that is U.S. drug pricing
The CLIFF NOTES
As a non-profit, we at 46brooklyn have made it our goal to provide insights into U.S. drug pricing data available in the public domain based upon the figures we’ve gathered over the prior month. This month is of course no different, except that we’re getting our analysis out a little later then normal, because the Centers for Medicare and Medicaid (CMS) elected to change their data management infrastructure, which broke a lot of the tools we’ve built up over the last three years! Somehow we slept on the fact that this change was coming, but hey, even the #2 team in the nation can get slapped silly from time to time. And as we’ve learned through the years, success is all about how you overcome adversity. With that, we rolled up our sleeves, dusted off our laptops, and reformatted our dashboards to accommodate the new CMS drug price data inputs.
Fortunately for us, the story this month related to U.S. drug pricing was largely muted. As we predicted last month, September was a slow month for drug pricing stories. There has been little movement at the federal level that might shake up the drug pricing world, and so the status quo seems to have held true for September.
There were the fewest number of brand price increases last month than in any month of September over the last decade. That said, Keytruda was a brand medication of note that took another 2% price increase in September (having already taken a 2% price increase in April of this year).
On the generic side of the coin, our year-over-year (YoY) generic price deflation continues to remain relatively flat at 15% with a slight increase in the generic deflation value this month compared to last. And while we still see some drugs creeping up in price, none that would suggest broad supply chain issues related to drug prices at this point (though we are relying upon lagging indicators).
So as the feds continue their tangled, multidirectional attempts at drug pricing reform, we again try to offer a bit of clarity and context to the discourse. Read on to arm yourselves with the details as it relates to September’s brand and generic drug pricing changes.
Brand Name Medications
1. A small number of list price increases for brand drugs
There were a total of 10 brand-name medications that saw wholesale acquisition cost (WAC) price increases in September and three 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 -70% to 9.9% and impacted $475 million in prior year gross Medicaid expenditures. 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 then 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 September net (combined increases and decreases) branded price increases over the last decade (i.e. 7). The highest number occurred back in 2012 when there were 83 net September brand 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.
3. Brand drug list price changes worth taking note of in September
Despite the relative few number of price increases, there is one worth taking note of this month. As we previously identified, the brand price increases this month impact $475 million in prior gross Medicaid drug expenditures. However, almost all of that amount (i.e., $405 million, 85%) is related to one drug – Keytruda (pembrolizumab). Keytruda is a monoclonal antibody indicated for skin, lung, head, neck, blood, stomach, and a variety of other cancers (a total of 31 indications appear on its current labeling).This past month, Keytruda took a 2% price increase. If this drug sounds familiar, you may recall Keytruda as it has already taken a price increase (also 2%) this year, back in Week 14 (April 1st).
There were three drugs, all under the Johnson & Johnson company, that took brand price decreases in September. Those medications are all antipsychotic medications – Invega ER tablets (-70%), Risperdal tablets (-57%), and Risperdal oral solution (-57%). While each of these medications now has a generic alternative, it is odd to see these medications take a price decrease. While we can only speculate as to what may be leading these prices down, we know that changes are coming to CMS’ definition of line extension for the purposes of the MDRP, and these price changes may be anticipatory of that change. We are already seeing more of these “line extension” products take price decreases into October, which may support our otherwise baseless speculation as to what is going on here.
Generic Medications
4. An unchanged 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 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.
Figure 1
Source: Data.Medicaid.gov, 46brooklyn Research
This month’s chart is pretty neutral. For every generic drug that increased in price this month, 1.21 decreased in price, the exact same ratio as last month. Drilling into the groups a bit deeper, when compared to last month a few more drugs increased by single-digit percentages, while a few less drugs decreased by single digits this month. That’s not ideal… but at least was offset by more favorable month-to-month comparisons on the drugs with double digit percent changes.
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 comes in at $72 million
The purpose of our NADAC Change Packed Bubble Chart (Figure 2) 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 2) 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 2
Source: Data.Medicaid.gov, 46brooklyn Research
Overall, in September, there was just $43 million worth of inflationary drugs, more than offset by $115 million of deflationary generic drugs, netting out to $72 million of deflation for Medicaid, surpassing last month’s $23 million in deflation.
6. Year-over-year generic oral solid deflation holds steady at ~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 held steady at 15.4% and 11.8%, respectively (Figure 3). If you are a purchaser of generic drugs, these numbers going up is good as it means costs are going down (deflating).
Figure 3
Source: Data.Medicaid.gov, 46brooklyn Research
7. Top/notable generic drug decreases this month
There are several generic drug price decreases worth noting this month. The most interesting, at least in our opinion, are oseltamivir 75 mg capsule (37.2% decrease), mycophenolic acid DR 360 mg tablet (34.6% decrease), and zonisamide 100 mg capsule (28.6% decrease). These medications represent 1.2 million prescriptions dispensed in Medicaid last year, accounting for approximately $10.6 million in generic Medicaid deflation as measured in Figure 2.
Oseltamivir is notable as it is a medication used to treat and prevent the flu, which as we are now well into the start of flu season is a welcome sight (as a reminder, get your flu shot!). Mycophenolic acid is a medication used in the treatment of some autoimmune diseases as well as to prevent rejection in organ transplant. Zonisamide is an anticonvulsant used to treat seizures. The NADAC pricing behavior of these drugs is shown in the gallery below:
8. Top/notable generic drug increases
On the increase side of things, the most impactful increases were alogliptin 25 mg tablets (4.4% increase), methylphenidate ER 27 mg & 72 mg tablets (14.8% and 21.5% increase respectively), and metformin 1,000 mg gastric tablets (21.3% increase).
If you’ve followed these monthly reports with any granularity, you know that price changes on the ADHD medication methyphenidate should come as no surprise. Alogliptin; however, is noteworthy because it is an antidiabetic medication that is the only generic in the DPP-4 class (making one of the most affordable options a little less so).The NADAC pricing behavior of these drugs is shown in the gallery below:
Of course, we hold our collective breath as to whether the supply chain issues currently plaguing many industries will catch up with drug pricing. Tune in next month to see if any changes of note took place.
Thanks to Zach Bruhl at KMVT 11 in Twin Falls for chatting with 46brooklyn CEO Antonio Ciaccia about current federal proposals aimed at prescription drug pricing reform and their lack of focus on some of the broken fundamentals that exacerbate pricing dysfunction.
Additional thanks to Nona Tepper at Modern Healthcare for her piece on start-up pharmacy benefit manager (PBM) disruptors, who despite their stated goals to topple the biggest market players, also end up relying on those competitors for some of the core functions of their business models.
Lastly, shout out to Michael Schulson at Undark Magazine for including our thoughts about the the concept of physician dispensing, some of the problems with the ways that medications are priced in the drug channel, and the inevitable conflicts that arise when prescribers, dispensers, and other intermediaries are compensated based upon a percentage of list prices.