PRESENTED BY: Patrick Lupinetti, JD, Julie Suko, PharmD, Travis Johnson, Karl Matuszewski, PharmD
IN SEARCH OF LOST COSTS:­The Implications for
Cost-Effectiveness Research When the Price Isn’t Right
OBJECTIVES
DEFINITIONS
DRUG COST-EFFECTIVENESS ANALYSES HAVE TRADITIONALLY BEEN BASED ON TWO KEY
COMPONENTS: efficacy, measured by clinical endpoints reported in product labeling or biomedical
TRADITIONAL MEASURES OF COST HAVE RELIED ON PUBLISHED BENCHMARKS such as
literature; and cost, obtained from available pricing sources. While the former is a relatively well-defined
value derived from pivotal trials and subsequent studies, the latter has often not been well-defined or
rigorously assessed and has frequently been based upon manufacturer-reported pricing information
shown to be inaccurate and unreliable. This study examines existing benchmarks against newly available
sources of pharmaceutical pricing, describes their interrelationships and assesses their relative reliability.
Average Wholesale Price and Wholesale Acquisition Cost or on reimbursements based on them. However,
as revealed in numerous government pricing investigations, these manufacturer-reported values are
not accurate indicators of true market prices. Consequently, efforts have been undertaken to develop
alternative pricing standards based on acquisition cost data obtained through pharmacy surveys.
Wholesale Acquisition Cost (“WAC”)
• Manufacturer-reported list price to wholesalers not including discounts
Average Wholesale Price (“AWP”)
• Generally reported as WAC + 20%
METHODS
Average Acquisition Cost (“state AAC” or “CMS NADAC”)
USING PUBLICLY AVAILABLE COST DATA FOR A VARIETY OF PUBLISHED PRICE TYPES,
pricing values were determined for a broad range of pharmaceuticals by trade classes (brand vs. generic),
compared and analyzed for trend and consistency patterns.
•B
ased on pharmacy reports, generally voluntary, not volume-weighted, and
exclusive of discount or rebates
•D
etermined by six state Medicaid programs and by the Centers for Medicare and Medicaid Services
(National Average Drug Acquisition Cost or “NADAC”)
New York Average Acquisition Cost (NYAAC)
TRUE MARKET COSTS
• Distinguished by a calculation methodology involving mandatory participation, volume-weighting
and inclusion of discounts and rebates
WACs Show No Consistent Pattern
A comparison of manufacturer-reported WACs to pharmacy-reported acquisition cost pricing (in the following
examples the CMS NADAC) exhibits a highly inconsistent correspondence. The differences are most notable
for generic products, both among therapeutic equivalents and between different generic drugs, but brand
products’ WACs also vary unevenly from their AACs.
National Average Retail Prices (NARP)
• Derived from electronic pharmacy claim and payment data, reported by payer class and as overall
average (publication of NARP was suspended in June 2013)
*O
ther available prices exist, including Average Manufacturer Price and Average Sales Price, but issues of
comprehensiveness and regularity render their application too limited for general use.
No Identifiable Ratio Between WACs and Acquisition Costs —
BETWEEN DIFFERENT GENERIC DRUGS
OR WITHIN A GENERIC DRUG CLASS
Comparison of Various WACs to NADAC Prices
Comparison of Different Generic Amoxicillin WACs to NADAC Prices
as of 2/28/2014
as of 2/28/2014
$0.20
Vit D2 1.25 mg (50,000 Unit)
$0.18
Tramadol HCI 50 mg Tablet
$0.16
Sulfamethoxazole-TMP DS Tablet
$0.14
Mupirocin 2% Ointment
$0.12
Ibuprofen 800 mg Tablet
$0.10
Hydrocodone-Acetaminophen
5 mg-500 mg Tablet
$0.08
Gabapentin 300 mg Capsule
$0.06
Folic Acid 1 mg Tablet
$0.04
Fluticasone Prop 50 mcg Spray
WAC
NADAC
$0.02
Fluconazole 150 mg Tablet
0% 50% 100% 150% 200%250% 300%350% 400%450%500%
$0.00
Each point represents one generic manufacturer of amoxicillin
WAC/NADAC
Brands are More Stable, but Still Show Variability
NADAC Methodology Makes It Better than AWP/WAC, but Still Open to Question
While the CMS form of AAC, NADAC, provides a more stable foundation than WAC, its underlying
methodology raises questions about its reliability and future viability. The NADAC is based on voluntary
responses, does not take purchase volumes into account and excludes any off-invoice discounts or
rebates. Contrasted with the New York Medicaid AAC, which is based on a mandatory, volume-weighted
and net-of-discount calculation, the NADAC also shows strong variability.
Comparison of Various Brand WACs to NADAC Prices
as of 2/28/2014
Zetia 10 mg Tablet
Zestril 10 mg Tablet
Comparison of Various NADACs to NYAAC Prices
Xanax 1 mg Tablet
as of 10/31/2013
Selzentry 300 mg Tablet
Paxil 20 mg Tablet
Symbicort 160-4.5 mgc Inhaler
Imitrex 20 mg Nasal Spray
Pentasa 500 mg Capsule
Gleevec 100 mg Tablet
Omeprazole Dr 20 mg Capsule
Depo-Medrol 80 mg/mL Vial
Nilandron 150 mg Tablet
Cardizem CD 180 mg Capsule
Eliquis 2.5 mg Tablet
Bactroban 2% Cream
Doxazosin Mesylate 8 mg Tab
Avapro 300 mg Tablet
Amoxicillin 400 mg/5 mL Susp
Aricept 5 mg Tablet
0%
0%
20% 40%
60%
80%
100%
120%
20% 40%
140%
60%
80%
100%
120%
NYAAC/NADAC
VALID STANDARD FOR COMPARISON
Use of AWP/WAC Benchmarks Can Skew Comparisons Drug comparisons incorporating a financial component may lead to misleading conclusions when the chosen price benchmark does not
reflect true costs. However, it is also true that some benchmarks inflate or reduce the relative costs of drugs more than others. The choice between a standard that represents Drug X to be several times
the price of Drug Y, and one that represents them as much closer in cost, can materially change the assessment of their relative value.
Irbesartan 150 mg to Diovan 80 mg
Simvastatin 20 mg to Atorvastatin 10 mg Tablet
as of 10/31/2013
20
...or six times?
...or eighteen times?
18
6
16
5
Diovan / Irbesartan
Atorvastatin / Simvastatin
7
as of 10/31/2013
Is Atorvastatin
two times
the price of
Simvastatin…?
4
3
2
14
Is Diovan eight
times the price
of Irbesartan…?
12
10
8
6
4
1
WAC
0
NYAAC
2
WAC
0
NYAAC
Payment Amounts Fluctuate Substantially Among Different Payers Through April 2013, CMS published “National Average Retail Prices” (“NARPs”), values derived from electronic pharmacy
claim and payment data, both as overall averages and in values broken down by payer class. Such reimbursement figures can be affected by a variety of factors, e.g., preferred formulary rules, and
do not include any rebates or discounts provided outside the claims transaction.
Atorvastatin 10 mg
as of 4/30/2013
$1.20
Simvastatin 20 mg
$0.50
$0.45
$1.00
$0.80
NDC 1
$0.40
NDC 2
$0.35
NDC 3
$0.30
$0.60
as of 4/30/2013
MFR 1
MFR 2
MFR 3
$0.25
$0.20
$0.40
$0.15
$0.10
$0.20
$0.05
$0.00
NARPNARP-NARP-NARP- WACNYAAC
Medicaid
Third Party
Cash
$0.00
NARP
NARP-
Medicaid
NARP-
Third Party
NARP-
Cash
WAC
NYAAC
CONCLUSIONS
Average acquisition cost pricing has presented the first generally available means of testing existing drug pricing benchmarks. Both manufacturer-reported values and data derived from
reimbursement prices provide inconsistent measures of actual cost when compared to AAC data. Manufacturer reported AWPs or WACs that vary by highly different percentages from AACs, and
payer reimbursement models influenced by formulary standards, plan coverage and payer class, exhibit similar disparities. Given its underlying basis­—surveys of pharmacy purchases by government
agencies—the AAC model presents stronger indicia of reliability, and by its design, provides a closer relationship to actual market transactions.
Consequently, to ensure that a fair comparison of true costs is made in relative value assessments, researchers should look to publicly available AAC-based prices, particularly those that employ a
well-designed statistical methodology.
REFERENCES: Centers for Medicare and Medicaid Services (CMS, formerly HCFA) supplied National Average Drug Acquisition Cost (NADAC) prices. http://www.medicaid.gov/Medicaid-CHIP-Program-Information/By-Topics/Benefits/Prescription-Drugs/Survey-of-Retail-Prices.html
DISCLOSURES: Authors of this presentation have the following to disclose concerning possible financial or personal relationships with commercial entities that may have a direct or indirect interest in the subject matter of this presentation: Patrick Lupinetti: Employee, First Databank, Inc.; Julie Suko: Employee, First Databank, Inc.; Travis Johnson: Employee, First Databank, Inc.; Karl Matuszewski: Employee, First Databank, Inc.
© 2014 First Databank, Inc. Part of the Hearst Health network. All trademarks mentioned herein belong to their respective holders.