What’s happening to generic drug prices? January 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, 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 December. Here are our top takeaways on the results:

1. Deflation picks up again in January

After a forgettable December survey update in which we saw only very modest deflation, deflation accelerated in January. Recall in December, for every generic drug that experienced a price decline, there were 1.14 generic drugs that experienced a price increase. This month, for every drug that experienced a price decline, only 0.79 generic drugs experienced a price increase. Figure 1 shows the full histogram comparing this month to last month. There were 17% more generic drugs that experienced a 0-10% price decrease, and 22% more generic drugs that experienced a price decrease of more than 10%. On the other hand, there were 14% fewer drugs that experienced a 0-10% price increase, and 32% fewer drugs that experienced a price increase of more than 10%.

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

2. Medicaid’s drug mix showed meaningful net deflation

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 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 be worth $126 million in annualized savings to Medicaid. Hover over any bubble in the viz below to see how it all adds up.

3. Generic Gleevec took a favorable tumble

In our very first drug pricing report, we focused on generic Gleevec (Imatinib Mesylate) for a number of reasons. It was one of the first oral specialty oncology drugs to go generic, it was expensive, and supply chain markups were absurdly high. Bloomberg’s Robert Langreth highlighted this markup phenomenon in September 2018.

If you recall back in 2017, a year’s supply of Gleevec could run a patient $140,000. At that time, Dr. Hagop Kantarjian of the University of Texas MD Anderson Cancer Center, predicted that two years later, “the price of generic imatinib in the United States (or purchased from abroad) will be significantly lower, hopefully less than $1,000/year.”

The curious case of Gleevec pricing continues as middleman markups continue to plague state Medicaid programs, but if we put these supply chain distortions off to the side and just check the NADAC, it appears that we’re getting closer to Dr. Kantarjian’s prediction after Dr. Reddy’s entered the generic Gleevec marketplace in October 2018.

With this month’s survey results, we see that generic Gleevec (Imatinib Mesylate 400 MG TAB) dropped 33% last month to its new NADAC of $13.67 per tablet, which brings the annual price tag to under $5,000. Not necessarily $1,000, but incredible progress for this crucial leukemia drug. You can track the drug’s progress in Figure 2 below or on our Drug Pricing Dashboard. We’ll see if middlemen are gracious enough to pass along the savings that the marketplace is providing.

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

4. The Methylphenidate roller coaster ride continues

One of the biggest oddities we find in the monthly NADAC updates are the ongoing dips and spikes in generic Concerta (Methylphenidate). As we discussed in October and December, the prices are fluctuating seemingly randomly, with some strengths jumping and other strengths falling.

If you look at Figure 3, you’ll see that some of the biggest bubbles - on both sides - are different strengths of Methylphenidate ER. On the increase side, the drug with the highest annualized Medicaid cost growth was Methylphenidate ER 36 MG Tab, but this was more than offset by the the pricing declines in Methylphenidate ER 18 MG Tab and Methylphenidate ER 54 MG Tab. 🤔. We feel the same.

Figure 3
Source: Data.Medicaid.gov, FDA.gov, 46brooklyn Research

The best news coming out of this exercise is that we had to add a highlight feature to the dashboard in order to create Figure 3. Now if you are looking for a specific drug, just start typing the name of the generic drug into the “Highlight NDC Description” section and the viz will start to filter. No more Where’s Waldo!

A quick additional tip on using this feature. As you type the generic name into the highlight bar the filtered list will stay on the screen, which could block the bubble chart. To make the list go away without removing the highlight filter just click in the blank white space toward the bottom of the “Highlight NDC Description” section.

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.

Some housekeeping news to share…

This week, 46brooklyn Research officially filed as a non-profit in our home state of Ohio. We are currently undergoing the process to become formally registered as a 501(c)3 organization. Our goal from the start has been to help make public drug pricing data more accessible, understandable, and digestible. We will continue to provide our work for free as a public service, and because we apparently have nothing better to do with our time.

Yesterday, Eric and Antonio formally launched 3 Axis Advisors, a private consulting firm that aims to partner with private and government sector organizations to solve complex, systemic problems and propel industry reform through data-driven advocacy. With a primary focus on identifying and analyzing U.S. drug supply chain inefficiencies and cost drivers, we hope to offer unparalleled expertise in project design, data aggregation and analysis, government affairs and media relations. 3 Axis Advisors will arm clients with independent data analysis needed to spur change and innovation within their respective industries. For more on our first project, check out Bloomberg and STAT News.