What’s happening to generic drug prices? February 2019 NADAC Survey Update

It’s that time of the month again: NADAC survey results week. There was a lot of movement on drug prices last week, so be sure to click through our new updated visualizations (NADAC Change Packed Bubble Chart and Drug Pricing Dashboard) to see the impact.

As a reminder, each month retail pharmacies across the country are surveyed by Myers Stauffer (on behalf of the Centers for Medicare and Medicaid Services) on their wholesaler invoice prices. The results are then compiled and released either the third or fourth week of the following month. This week, survey results were released that reflect National Average Drug Acquisition Cost (NADAC) price changes from January. Here are our top takeaways on the results:

1. February 2019 was the most significant month of generic drug price increases since we started tracking this back in August 2018 😲

After yet another month of meaningful deflation in the January survey update, February swung to a net inflationary impact, and a decent amount of inflation at that. In February, for every generic drug that experienced a price decline, there were 1.13 generic drugs that experienced a price increase. That’s up from a ratio of 0.79 last month. Figure 1 shows the full histogram comparing this month to last month. There were 15% more generic drugs that experienced a 0-10% price increase, and 39% more generic drugs that experienced a price increase of more than 10%. On the other hand, there were 15% fewer drugs that experienced a 0-10% price decrease, and 18% fewer drugs that experienced a price decrease of more than 10%.

Figure 1
Source: Data.Medicaid.gov, 46brooklyn Research

2. Medicaid’s drug mix showed meaningful net inflation

As we’ve written in prior updates, knowing the price change alone is not enough. We need to apply utilization to the price changes, which is the purpose of the NADAC Change Packed Bubble Chart. We use Medicaid’s first half 2018 drug mix and annualize it to arrive at an estimate of the total dollar impact of the latest NADAC pricing update. After doing all the math, we get this latest round of price changes to increase Medicaid’s annualized generic costs by $79 million.

Of course this is all hypothetical, because most state Medicaid managed care programs don’t pay for generic drugs based on actual costs, but rather based on subjectively-set PBM rates that are in some way (directly or indirectly) related to AWP. And we’ve already established how meaningless AWP is as a generic drug cost benchmark. So let’s rephrase… If all of Medicaid actually bought drugs based on what they cost pharmacy, this month’s increase in pharmacy acquisition cost would have had a $79 million unfavorable impact on U.S. Medicaid drug expense. At least for one month, managed care programs can celebrate that they are paying for generic drugs based on uncompetitively set, meaningless benchmark prices!

Anyway, hover over any bubble in the viz below to see how it all adds up.

3. Methylphenidate price fluctuation continues to drive spending impact

As you’ll see above in the chart, one of the drugs making the biggest impact on the price increases is generic Concerta (Methylphenidate), but if you’ve read our previous updates, you know that this high-utilization drug has been bouncing up and down for years. We’ll spare the explainer, but you’ll see from the big bubbles, that a lot of the spending impact is coming from different strengths of Methylphenidate. We have no idea why the price continues its zig-zag pattern.

4. Valsartan quality issues continue to drive prices up

Back in our October 2018 NADAC update, we highlighted some of the ongoing quality issues impacting generic Diovan (Valsartan). Those quality issues resulted in recalls from the FDA, which eventually pressured supply and drove prices upwards. This opportunity for new margin on the decades-old drug was seized by the marketplace, and according to an FDA official, there could be more shoes to drop on the Valsartan recall. In an interview with CNN last week, Dr. Janet Woodcock, director of the FDA's Center for Drug Evaluation and Research, revealed that their investigation was not through yet, and they expect to uncover more tainted pills.

This ongoing controversy with Valsartan has continued to push prices higher on this previously cheap drug. To give you some context, in September 2018, the four strengths of Valsartan Tablets ranged from $0.07 per unit to $0.14 per unit. By last month’s check-in, those same drugs had hit a range of $0.24 per unit to $0.35 per unit. In this month’s NADAC update, Valsartan prices increased yet again (see Figures 2 and 3).

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

Figure 3
Source: Data.Medicaid.gov

In total, since September 2018, each strength of Valsartan has increased by 300% or more, and with continued scrutiny from the FDA, we do not anticipate pricing relief anytime soon.

5. Tetracycline prices continue to baffle

Pricing controversy has followed antibiotic Tetracycline since its initial launch decades ago. Back in 2015, the Boston Globe reported that in two years, the price of Tetracycline Hydrochloride 250 mg Capsules had jumped 7,567 percent, from $0.06 per unit in 2013 to $4.60 per unit in 2015. The price continued to grow from there. The drug’s pricing movement came up in a roundtable discussion on drug prices this month hosted by Senator Amy Klobuchar. Interestingly, this month showed the 250 mg strength moving in one direction and the 500 mg strength moving in the other.

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

The 250 mg strength of Tetracycline Hydrochloride dipped around 34% and the 500 mg strength increased by about 55%. The resulting annualized impact to state Medicaid programs was a net increase of more than $670,000 in just one month of pricing changes.

The important thing to note on these Tetracycline pricing changes is that despite being just $0.06 per unit back in 2013, you can see what happens once the price of a drug increases. Despite hitting pricing peaks in 2016 and 2017, the price of Tetracycline remains stubbornly high and inconsistent even today. As we alluded to above with Valsartan, and as we demonstrated with Hydroxychloroquine last year, even brief pricing disruptions can be felt for years to come.

6. Generic Valcyte (Valganciclovir) prices took a major dive

If you’ve spent time poking around any of our markup visualizations, you probably have noticed generic Valcyte (Valganciclovir). Over the last year and half, Valganciclovir 450 mg Tablets have routinely had some of the highest markups in Medicaid managed care programs across the country. As a recap, we define “markup” as the the difference between NADAC and the prices reported back to CMS via state Medicaid managed care plans and their pharmacy benefit managers (PBMs). So essentially, the “markup” is the margin shared by pharmacies and PBMs.

Of the generic drugs that decreased in price this past month, Valganciclovir was one of the most meaningful ones. The price dropped from $8.10 per unit to $5.11 per unit – a 36.9 percent drop in just one month. As we mentioned above, because most state Medicaid programs don’t pay for drugs based on their true costs, it is likely that many states will not realize these new savings. That’s because the price they pay is set by PBMs via their Medicaid managed care plans. This issue is a source of growing controversy, as more states look into PBM pricing practices. In fact, just this past week, Kentucky became the latest state to reveal Medicaid spending disconnected from actual drug costs, after their Medicaid program showed nearly a 13 percent PBM spread on prescription drugs.

If you check out our Medicaid Markup Universe visualization or our new Medicaid Markup Galaxies visualization, you can get a general feel for where that $123 million in spread comes from. In Kentucky, one of the highest marked-up drugs was Valganciclovir. In 2017, despite this important HIV/AIDS treatment costing pharmacies an average of $13.07 per tablet, state Medicaid managed care plans and their PBMs were charging $30.56 per tablet. That’s a markup of $645.51 per prescription. While we have no way of determining whether it was pharmacies or PBMs capturing the majority of that markup, what we do know is that it’s the PBM that controls both ends, so perhaps Valganciclovir was one of the targeted drugs for spread. It’s tough to know for sure due to the purposeful secrecy embedded in these transactions. Regardless, it will be interesting to see if months from now, this 36.9 percent drop in price manifests itself in savings on the other end.

7. Generic Frova (Frovatriptan Succinate) saw a massive spike

Last month, Endo Pharmaceuticals continued its annual tradition of raising its list price of its migraine treatment Frova by 9.9 percent. This time, they raised the sticker price from $77.21 per unit to $84.85, an increase of $7.64 per unit. You can track the pricing movement over time using our Brand Drug List Price Change Box Score. We’ve highlighted Frova below.

Figure 5
Source: Data.Medicaid.gov, 46brooklyn Research

While this 9.9 percent increase does not account for any possible rebates that Endo may be passing along to PBMs and health plans, it’s a noteworthy increase nonetheless, especially when we check out what happened to the generic Frova (Frovatriptan Succinate) this past month.

In this week’s update, we see that a month after Frova jumped over $7 per unit, the NADAC for Frovatriptan Succinate also jumped over $7 per unit. With last month’s price at $17.28 per unit, this month’s increase to $24.42 per unit represents a 41.3 percent increase. Here’s the both the brand and the generic added together from our Drug Pricing (NADAC) Dashboard.

Figure 6
Source: Data.Medicaid.gov, 46brooklyn Research

What are you seeing?

While we spend more time than we’d like to admit studying the pricing changes during each NADAC Survey Results Week, we don’t always catch every story worth noting. If you’re seeing any interesting movement on drugs in the dataset, let us know.


As we put a bow on the final brand drug price increases from January 2019, we noted an out-of-place price increase on Egalet Corporation’s newly-acquired anti-inflammatory, Zorvolex. Bob Herman at Axios deserves some serious credit for catching it in our report and doing some quick digging and prodding to get a more complete picture of what’s going on with that increase. Be sure to check out Bob’s piece here. There was also some great follow-up coverage from Politico, Fierce Pharma, and STAT News.

Lastly, thanks to John Rusell at Indianapolis Business Journal and Ned Pagliarulo at BioPharma Dive for the recent plugs. We’re glad we’re not the only people using these tools.