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The American Journal of Managed Care July 2019
Changing Demographics Among Populations Prescribed HCV Treatment, 2013-2017
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Number of Manufacturers and Generic Drug Pricing From 2005 to 2017
Inmaculada Hernandez, PharmD, PhD; Chester B. Good, MD, MPH; Walid F. Gellad, MD, MPH; Natasha Parekh, MD, MS; Meiqi He, MS; and William H. Shrank, MD, MSHS
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Number of Manufacturers and Generic Drug Pricing From 2005 to 2017

Inmaculada Hernandez, PharmD, PhD; Chester B. Good, MD, MPH; Walid F. Gellad, MD, MPH; Natasha Parekh, MD, MS; Meiqi He, MS; and William H. Shrank, MD, MSHS
Regardless of the number of manufacturers, generic drug prices presented double-digit average increases from 2012 to 2015.
ABSTRACT

Objectives: To evaluate how changes in generic drug prices and the incidence of abrupt price increases varied with the number of manufacturers supplying each drug.

Study Design: Analysis of 2005 to 2016 monthly wholesale acquisition costs (WACs) and University of Pittsburgh Medical Center Health Plan counts of pharmacy claims for National Drug Codes (NDCs) for generic drugs.

Methods: Each year, NDCs were categorized according to the number of manufacturers offering each combination of active ingredient and dosage form: 1 to 3, 4 to 7, and more than 7. For every month from January 2006 to January 2017, we estimated the 12-month change in WAC (eg, 12-month change in January 2006 was calculated as the difference in WAC between January 2006 and January 2005, divided by the WAC in January 2005), before and after weighting each NDC by counts of pharmacy claims. We evaluated the proportion of NDCs that had large price increases, greater than 20%, 50%, 100%, and 500% within a year.

Results: Before 2010, price changes were higher for drugs supplied by a lower number of manufacturers; however, after 2010, prices increased sharply, and drugs supplied by 4 to 7 manufacturers showed increases similar to or higher than those supplied by 1 to 3. In 2013, prices increased by an average of 29% for drugs supplied by 1 to 3 and 4 to 7 manufacturers, and 10% for more than 7. Price changes increased after weighting by counts of pharmacy claims, demonstrating that price increases disproportionately affected widely used drugs. The proportion of NDCs from drugs supplied by 1 to 3 manufacturers that doubled in price within a year was 3.6 times higher in 2012 to 2015 than in 2005 to 2009 (4.6% vs 1.3%, respectively).

Conclusions: Increases in generic drug prices are concerning because they affected widely used drugs and suggest that generic drug prices may be increasingly insensitive to competition.

Am J Manag Care. 2019;25(7):348-352
Takeaway Points
  • Before 2010, changes in prices of generic drugs were higher for drugs supplied by a lower number of manufacturers. However, after 2010, price changes increased abruptly, and drugs supplied by 4 to 7 manufacturers showed increases similar to or even higher than those supplied by 1 to 3 manufacturers.
  • In 2013 and 2014, price changes averaged 29% and 24%, respectively, for drugs supplied by 1 to 3 manufacturers, 29% and 28% for 4 to 7 manufacturers, and 10% and 15% for more than 7 manufacturers.
  • Recent increases in generic drug prices are concerning because they affected multisource, widely used drugs. Rising generic drug prices may be due not only to insufficient market competition but also to the increasing insensitivity of prices to competition.
Several studies have quantified drug price inflation over the past decade, finding that although brand name and specialty drugs experienced the largest price increases, generic prices also increased over time.1,2 Rising generic drug prices have been attributed to the relatively low competition present in most generic markets—the average generic is only supplied by 2 manufacturers,1 and generic drug prices are not responsive to competition until at least 3 manufacturers have entered the market.3-5 However, prices of widely used generic drugs supplied by numerous manufacturers have recently experienced abrupt increases, in some cases triggering allegations of price fixing.6,7

We quantified how 12-month changes in prices of all generic drugs available from 2005 to 2016 changed with the number of generic manufacturers supplying each drug, and we also evaluated the incidence of abrupt price increases across the study period. We hypothesized that price increases would be higher for generic drugs supplied by a lower number of manufacturers.

METHODS

Data Sources

We obtained monthly wholesale acquisition costs (WACs) for all National Drug Codes (NDCs) available from 2005 to 2016 from AnalySource (reprinted with permission by First Databank, Inc) and annual counts of pharmacy claims from the University of Pittsburgh Medical Center (UPMC) Health Plan over the same time frame. WACs represent the list price from a manufacturer to a wholesaler or a direct purchaser and do not account for any type of manufacturer rebate or discount. An NDC is a unique and universal 10-digit number that identifies human drug products in the United States. UPMC Health Plan is a health insurer offering a variety of insurance products to more than 3.2 million members in Pennsylvania and parts of Ohio, West Virginia, and Maryland. Consequently, UPMC Health Plan offers a representative expression of medication use in an insured population. We standardized annual counts of pharmacy claims for each NDC, as if enrollment had remained constant since 2005.

Study Sample

Using data provided by First Databank, we identified all NDCs for generic drugs with WAC information available any time from 2005 to 2016. Generics entering the market within this time frame were included in the study sample starting the first year when their list price was available. The sample included 24,944 NDCs representing 1851 combinations of active ingredient and dosage form. Each year, NDCs were categorized according to the number of generic manufacturers—1 to 3, 4 to 7, and more than 7—offering each combination of active ingredient and dosage form in January. For example, flecainide tablets were supplied by 3 manufacturers in 2006 to 2008, 4 in 2009 to 2011, 6 in 2012 to 2014, 8 in 2015, and 9 in 2016. Consequently, NDCs for flecainide tablets were categorized under the 1 to 3 manufacturer group in 2006 to 2008, the 4 to 7 group in 2009 to 2014, and the more than 7 group in 2015 and 2016. We selected 3 as a cutoff because the FDA expedites review of generic drug applications in markets served by 3 or fewer manufacturers.8,9

Analysis

For every month from January 2006 to January 2017, we estimated the 12-month change in WAC for each NDC. For example, the 12-month change measured in January 2006 was calculated as the difference in WAC between January 2006 and January 2005, divided by the WAC in January 2005. This is the reason why, although we had 2005 to 2016 data, we report 12-month changes in WAC for 2006 to 2016. Because our results could be disproportionately affected by rarely used drugs with large price increases, we further calculated the average 12-month change after weighting each NDC by the count of pharmacy claims from UPMC Health Plan in the respective year. Finally, we calculated and reported the average of the 12-month change in WAC for every year of the study period.


 
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