FREQUENTLY ASKED QUESTIONS
Abnormal Drug Price Increase TRACKER (ADPIT)
1) Why do no search results appear when I type my drug into the search bar (NDC Description)?
The two most common reasons a drug search in the 46brooklyn Abnormal Drug Price Increase Tracker (ADPIT) fails to find the requested product are either:
1) the product in question does not have National Average Drug Acquisition Cost (NADAC) pricing available; or
2) the product in question did not experience a price change that was over 5% greater than the trailing 52-week 90th percentile price (i.e. highest price point in the last year).
2) What is "NADAC"?
NADAC is National Average Drug Acquisition Cost. It is what the average pharmacy is invoiced for a drug, based on a monthly survey of (primarily) independent and chain pharmacies.
3) Does NADAC include pharmacy rebates?
Based on CMS' reported methodology, it is highly unlikely that NADAC includes the rebates that some wholesalers will remit to pharmacies based on volume discounts. While these rebates are not guaranteed and not used by every wholesaler in the marketplace, the timing of how those rebates are collected would make it extremely hard to track in conjunction with these data, even if that rebate data was publicly available (which it isn't). Thus, we simply could not account for after-the-fact rebates on generic drugs that pharmacies may be getting from their wholesalers. So, we think it's safe to assume that NADAC represents the average pharmacy's invoice price, not the average pharmacy's net price.
4) Does NADAC represent the cost I can expect to pay at the pharmacy counter?
No, NADAC represents the approximate cost the pharmacy incurred to acquire the drug to dispense to you. Even if you were to purchase the drug at cash, without insurance, you should expect to pay an amount over the cost of the drug to cover the pharmacies expenses – such as the cost of pill bottles, pharmacist time, electricity, etc. The typical cost to dispense a prescription is approximately $10 above acquisition cost. If you have insurance, your cost for a medication can vary significantly depending upon your employer, health plan and/or PBM.
5) What is the significance of the relative impact ratio (RIR)?
The relative impact ratio (RIR) is a calculation of the NADAC price per unit reported in the date selected, divided by the 90th percentile of the NADAC price per unit of that same product over the trailing 52-weeks (or one year) from the selected date. Because the tool only displays those products that are 5% or more above this trailing 52-week price, the ratio represents how much higher the current price of the product is relative to its approximate highest price point (i.e. 90th percentile price) in the previous year. For this reason, we termed the field RIR, as it is only a meaningful ratio for the singular drug product in question. See equation below for details:
6) What is the rationale behind capturing a year of Medicaid prescription claims data?
Beyond a measure of individual drug product trends, such as what are observable with the relative impact ratio, we wanted to include a measure of the relative significance of a medication to the drug supply chain and/or US healthcare system. As Medicaid covers approximately 1 in 5 Americans, we believe it represents a good approximation of product significance to the drug supply chain and US healthcare system. We elected to use one year of Medicaid data to have as complete a picture of drug significance (including any seasonal variability) as we could. Because of the way Medicaid prescription information is collected, we elected to lag the prescription count by one quarter from the most recent available data. For example, at the time this visualization was first published, CMS had published Medicaid claim data through Q3 2019; however, our year range is Q3-2018 to Q2 2019. We elected to lag the data by one quarter, as we have often noticed significant differences and corrections in the data from the first time a new quarter’s worth of data is available compared to the data for that same quarter in subsequent updates.
7) What is the significance of the relative impact score (RIS)?
We utilized Medicaid prescription claim data to weight the relative impact ratio by multiplying the number of prescriptions for a product by the percent growth of the current NADAC over the trailing 52-week 90th percentile price. In this way, we can weight the growth in price proportionally to the number of prescriptions of that product in Medicaid. This in turn allows us to compare each product to one another in terms of both its price increases and its prescription volume. We add up the total RIS for all products in a given week and trend them over time in the lower right hand side of the tool as a means of measuring price trends over time. See equation below for more details:
Note that the drug mix for Medicaid utilization is fixed to the drug marketplace over the last year, so it does not accurately reflect the dynamic of price trends for Medicaid over time. Rather, the trend in the lower right of the ADIPT tool reflects the dynamics around price increases for products utilized over the last year.
8) How does your ADPIT tool predict drug shortages reported by the FDA?
This tool is not designed to do this. Drug prices may change for any number of reasons including, but not limited to: increases or decreases in competition (i.e. loss of exclusivity periods, labelers entering or existing the marketplace, etc), seasonal price changes (i.e. annual or semi-annual planned price increases), or due to supply and demand (i.e. drug shortages raising prices on remaining inventory). As a result, drug price is only one potential signal of a drug shortage that requires additional investigation to rule out other causes. Said differently, any analysis of drug shortages based solely on the price trends for a product will be flawed.
To demonstrate this, we analyzed over 700 products within the FDA drug shortage database to see how reference drug prices – specifically average wholesale price (AWP), wholesale acquisition cost (WAC), and NADAC – change following the product being initially posted in the FDA shortage database. Our first observation was that 7 out of every 10 (or 70%) of the NDCs analyzed actually had a price change occur on or after the initial posting date of the shortage by the FDA (i.e. the effective date of the price benchmark was greater than or equal to the initial posting date within FDA’s shortage database). This suggests that in 3 out of every 10 instances of a FDA-reported drug shortage, no common drug price signal would exist to identify the shortage. This observation may be explainable by the fact that the NDCs within the FDA drug shortage database that we assessed are not always associated with significant market share. To demonstrate this, we used 2018 Medicaid data to assess how much utilization was associated with products within the FDA database. We found that 2% of all prescriptions in Medicaid were for products within the FDA shortage database; however, nearly all of that utilization (1.4% out of the 2%) were for just 50 unique NDCs. This suggests that the utilization is highly concentrated to specific products. We went on to assess how frequently AWP, WAC, and/or NADAC pricing changed following a shortage. What we found is that for the NDCs with a price change, AWP had a price change occur on or after the initial shortage date on 1% of the NDCs, WAC had a price change occur on 38% of the NDCs, and NADAC had a price change occur on 60% of the NDCs.
We believe that a couple of considerations can help explain these observations. First, the FDA’s own methodology indicates that it does not post shortage information for all products. We conducted a cursory review of the FDA database to confirm that most products on the list are institutional or provider administered drugs and not typical retail drugs. Because NADAC is a survey of retail drugs, there is an inherent difference in the ability of NADAC to signal a drug shortage that the FDA or the American Society of Health-System Pharmacists (ASHP) would appear willing to post on their drug shortage lists. Second, because NADAC is a survey of retail drugs, it may not be able to signal a price change if significant distribution challenges occur. For example, if theoretically all inventory for a product were to vanish overnight, there would be no invoices generated for that product, and NADAC would be unable to signal that the invoice price had changed (even though the supply chain may be willing to pay a significant mark-up at that point to acquire the product). Lastly, the fact that the NADAC represents a sampling of pharmacies who are willing to share invoice prices (as opposed to all pharmacies) can further make the ability of the benchmark to identify shortages difficult, as a product in shortage may not be a product commonly used by participating NADAC pharmacies.
Nonetheless, we hope that the transparency around drug price changes and significant price increases are useful to persons seeking to navigate, investigate, and understand our drug supply chain.