Auditing the prescription drug consumer price index in a changing marketplace.

Changes in the dynamics of prescription drug markets have raised issues regarding whether the United States Bureau of Labor Statistics' (BLS') Prescription Drug Consumer Price Index (CPI-Rx) has adequately kept up with the evolving marketplace. The CPI-Rx limits its sampling frame to retail outpatient outlets and excludes prescription pharmaceuticals dispensed in non-retail settings such as hospitals, physician/clinic outpatient facilities, and nursing homes. Thus, the CPI-Rx overlooks the increasingly important specialty pharmaceuticals dispensed in non-retail settings, whose transactions are instead captured in the overall hospital and professional services component of the medical care CPI. Specialty drugs now account for about 55% of all U.S. drug spending, double the share of a decade earlier. To the extent specialty drug price growth differs from that of traditional pharmaceuticals, the CPI-Rx could provide an inaccurate measure of overall drug price inflation. We calculate a chained Laspeyres CPI using data from the Merative™ MarketScan® Databases for the years 2010-2019 and IQVIA-designated specialty drugs and offer evidence showing that by not sampling specialty drugs in non-retail settings, the CPI-Rx has understated overall U.S. prescription drug inflation by just under 75 basis points annually. We discuss implications for health care policy and suggest the BLS examine the feasibility of publishing an overall pharmaceutical price index incorporating both traditional and specialty pharmaceuticals dispensed in retail and non-retail settings.

Biosimilars And Follow-On Products In The United States: Adoption, Prices, And Users.

Biologic drugs account for a disproportionate share of the increase in pharmaceutical spending in the US and worldwide. Against this backdrop, many look to the expanding market for biosimilars-follow-on products to biologic drugs-as a vehicle for controlling pharmaceutical spending. This study explores the early years of entry of biosimilars and related follow-on products in the US. Using monthly sales data from the period 2005-19 for ten drug classes, we examine how quickly biosimilars/follow-on products gained market share and the subsequent trajectory of prevailing (national average invoice) prices. Our analysis suggests that although uptake has been slower than what is typically seen in generic drug markets, the most recent entrants have captured market share more rapidly than comparable earlier biosimilars/follow-on products. We also document that from biosimilar/follow-on products' time of entry, their lower prices help offset the overall trend in average annual reference-product price increases. Our findings can provide insight into future policy reforms aimed at increasing competition and use of biosimilars, leading to expanded patient access and significant cost savings.

The geography of prescription pharmaceuticals supplied to the USA: levels, trends, and implications.

Prescription pharmaceuticals are frequently used consumer products whose manufacturing location is commonly held as a trade secret by firms and US regulatory agencies. Here we use previously non-publicly available data to describe levels and trends in the manufacturing locations of the most commonly used prescription pharmaceuticals, off-patent generic drugs, intended to be consumed by Americans. We find that the base ingredients required for the manufacturing of these prescription drugs are overwhelmingly and increasingly manufactured in non-domestic locations, specifically India and China. The manufacturing of finished prescription drugs for the American market is more equally split between domestic and foreign locations, but is increasingly foreign as well. The American reliance on non-domestic manufacturing of prescription drugs is important for stakeholders to appreciate, given current quality and pricing concerns and their potential susceptibility to interruptions in supply due to natural disasters, pandemics, and international trade negotiations. We discuss implications of these levels and trends for current domestic and international policy discussions.

The Price to Consumers of Generic Pharmaceuticals: Beyond the Headlines.

Generic drug prices have received a great deal of attention in the past few years. Many agencies have conducted investigations into the pricing patterns for generic drugs. Price spikes for several specific generic drugs have also been widely reported in the media. Today, 90% of all retail prescriptions sold in the United States are generic drugs. Thus, these prices affect affordability of prescription drugs. We construct two Laspeyres chained price indexes for generic prescription drugs. The first reflects direct out-of-pocket payments by consumers to pharmacies for dispensing generic prescription drugs. The second measures the total price received by the pharmacy (the direct out-of-pocket payment plus the price paid to the pharmacy by the insurer). The chained direct out-of-pocket consumer price index we construct shows a roughly 50% decline for generic prescription drugs between 2007 and 2016. The total consumer price index for generic prescription drugs fell by nearly 80%.

FOUR FACTS CONCERNING COMPETITION IN U.S. GENERIC PRESCRIPTION DRUG MARKETS.

We establish four facts concerning competition among U.S. generic drug suppliers, using IQVIA's National Sales Perspective™ 2004Q4 - 2016Q3 data. We define a unique product market ("molform"), consisting of the combination of a molecule active ingredient and a route of administration formulation, aggregated over different dosages and strengths. We find: (i) supply exhibits substantial churning in entrants and exits; (ii) volume-weighted use concentrates in older generic molform cohorts; (iii) the extent of competition is greatest for the oldest molform cohorts and is smallest for the youngest molform cohorts. With a median of one competitor, the extent of competition in the youngest molform cohort is very limited; and (iv) supplier-molform annual revenues are typically small, are largest for relatively young drugs, but are heavily right skewed. These four facts provide an empirical platform on which to construct and empirically evaluate hypotheses regarding generic drug market structure, performance, and possible policy reforms.

The generic drug user fee amendments: an economic perspective.

Since the vast majority of prescription drugs consumed by Americans are off patent ('generic'), their regulation and supply is of wide interest. We describe events leading up to the US Congress's 2012 passage of the Generic Drug User Fee Amendments (GDUFA I) as part of the Food and Drug Administration Safety and Innovation Act (FDASIA). Under GDUFA I, generic manufacturers agreed to pay approximately $300 million in fees each year of the five-year program. In exchange, the US Food and Drug Administration (FDA) committed to performance goals. We describe GDUFA I's FDA commitments, provisions, goals, and annual fee structure and compare it to that entailed in the authorization and implementation of GDUFA II on October 1, 2017. We explain how user fees required under GDUFA I erected barriers to entry and created scale and scope economies for incumbent manufacturers. Congress changed user fees under GDUFA II in part to lessen these incentives. In order to initiate and sustain user fees under GDUFA legislation, FDA requires the submission of self-reported data on generic manufacturers including domestic and foreign facilities. These data are public and our examination of them provides an unprecedented window into the recent organization of generic drug manufacturers supplying the US market. Our results suggest that generic drug manufacturing is increasingly concentrated and foreign. We discuss the implications of this observed market structure for GDUFA II's implementation among other outcomes.

Has The Era Of Slow Growth For Prescription Drug Spending Ended?

In the period 2005-13 the US prescription drug market grew at an average annual pace of only 1.8 percent in real terms on an invoice price basis (that is, in constant dollars and before manufacturers' rebates and discounts). But the growth rate increased dramatically in 2014, when the market expanded by 11.5 percent-which raised questions about future trends. We determined the impact of manufacturers' rebates and discounts on prices and identified the underlying factors likely to influence prescription spending over the next decade. These include a strengthening of the innovation pipeline; consolidation among buyers such as wholesalers, pharmacy benefit managers, and health insurers; and reduced incidence of patent expirations, which means that fewer less costly generic drug substitutes will enter the market than in the recent past. While various forecasts indicate that pharmaceutical spending growth will moderate from its 2014 level, the business tension between buyers and sellers could play out in many different ways. This suggests that future spending trends remain highly uncertain.

Regional Variation in Physician Adoption of Antipsychotics: Impact on US Medicare Expenditures.

BACKGROUND: Regional variation in US Medicare prescription drug spending is driven by higher prescribing of costly brand-name drugs in some regions. This variation likely arises from differences in the speed of diffusion of newly-approved medications. Second-generation antipsychotics were widely adopted for treatment of severe mental illness and for several off-label uses. Rapid diffusion of new psychiatric drugs likely increases drug spending but its relationship to non-drug spending is unclear. The impact of antipsychotic diffusion on drug and medical spending is of great interest to public payers like Medicare, which finance a majority of mental health spending in the US. AIMS: We examine the association between physician adoption of new antipsychotics and antipsychotic spending and non-drug medical spending among disabled and elderly Medicare enrollees. METHODS: We linked physician-level data on antipsychotic prescribing from an all-payer dataset (IMS Health's XponentTM) to patient-level data from Medicare. Our physician sample included 16,932 US. psychiatrists and primary care providers with > 10 antipsychotic prescriptions per year from 1997-2011. We constructed a measure of physician adoption of 3 antipsychotics introduced during this period (quetiapine, ziprasidone and aripiprazole) by estimating a shared frailty model of the time to first prescription for each drug. We then assigned physicians to one of 306 U.S. hospital referral regions (HRRs) and measured the average propensity to adopt per region. Using 2010 data for a random sample of 1.6 million Medicare beneficiaries, we identified 138,680 antipsychotic users. A generalized linear model with gamma distribution and log link was used to estimate the effect of region-level adoption propensity on beneficiary-level antipsychotic spending and non-drug medical spending adjusting for patient demographic and socioeconomic characteristics, health status, eligibility category, and whether the antipsychotic was for an on- vs. off-label use. RESULTS: In our sample, mean patient age was 62 years, 42% were male, and 86% had low-income. Half of antipsychotic users in Medicare had an on-label indication. The weighted average propensity to adopt the three new antipsychotics varied four-fold across HRRs. For every one standard deviation increase in the propensity to adopt there was a 5% increase in antipsychotic spending after adjusting for covariates (adjusted ratio of spending 1.05, 95% CI 1.01-1.08, p = 0.005). Physician propensity to adopt new antipsychotics was not associated with non-drug medical spending (adjusted ratio 0.96, 95% CI 0.91-1.01, p < 0.117). DISCUSSION: These findings suggest wide regional variation in physicians' propensity to adopt new antipsychotic medications. While physician adoption of new antipsychotics was positively associated with antipsychotic expenditures, it was not associated with non-drug spending. Our analysis is limited to Medicare and may not generalize to other payers. Also, claims data do not allow for the measurement of health outcomes, which would be important to evaluate when calculating the value of rapid vs. slow technology adoption.

Patterns of Antipsychotic Prescribing by Physicians to Young Children.

OBJECTIVE: Antipsychotic use among young children has grown rapidly despite a lack of approval by the U.S. Food and Drug Administration (FDA) for broad use in this age group. Characteristics of physicians who prescribed antipsychotics to young children were identified, and prescribing patterns involving young children and adults were compared. METHODS: Physician-level prescribing data from IMS Health's Xponent database were linked with American Medical Association Masterfile data and analyzed. The sample included all U.S. psychiatrists and a random sample of 5% of family medicine physicians who wrote at least ten antipsychotic prescriptions per year from 2008 to 2011 (N=31,713). Logistic and hierarchical binomial regression models were estimated to examine physician prescribing for children ages zero to nine, and the types and numbers of ingredients used for children versus adults ages 20 to 64 were compared. RESULTS: Among antipsychotic prescribers, 42.2% had written at least one antipsychotic prescription for young children. Such prescribing was more likely among physicians age ≤39 versus ≥60 (odds ratio [OR]=1.70) and physicians in rural versus nonrural areas (OR=1.11) and was less likely among males (OR=.93) and graduates of a top-25 versus a lower-ranked U.S. medical school (OR=.87). Among physicians who prescribed antipsychotics to young children and adults, 75.0% of prescriptions for children and 35.7% of those for adults were for drugs with an FDA-approved indication for that age. Fewer antipsychotic agents were prescribed for young children (median=2) versus adults (median=7). CONCLUSIONS: Prescribing antipsychotics for young children was relatively common, but prescribing patterns differed between young children and adults.

The clinical benefits, ethics, and economics of stratified medicine and companion diagnostics.

The stratified medicine companion diagnostic (CDx) cut-off decision integrates scientific, clinical, ethical, and commercial considerations, and determines its value to developers, providers, payers, and patients. Competition already sharpens these issues in oncology, and might soon do the same for emerging stratified medicines in autoimmune, cardiovascular, neurodegenerative, respiratory, and other conditions. Of 53 oncology targets with a launched therapeutic, 44 have competing therapeutics. Only 12 of 141 Phase III candidates addressing new targets face no competition. CDx choices might alter competitive positions and reimbursement. Under current diagnostic incentives, payers see novel stratified medicines that improve public health and increase costs, but do not observe companion diagnostics for legacy treatments that would reduce costs. It would be in the interests of payers to rediscover their heritage of direct investment in diagnostic development.

Antipsychotic prescribing: do conflict of interest policies make a difference?

BACKGROUND: Academic medical centers (AMCs) have increasingly adopted conflict of interest policies governing physician-industry relationships; it is unclear how policies impact prescribing. OBJECTIVES: To determine whether 9 American Association of Medical Colleges (AAMC)-recommended policies influence psychiatrists' antipsychotic prescribing and compare prescribing between academic and nonacademic psychiatrists. RESEARCH DESIGN: We measured number of prescriptions for 10 heavily promoted and 9 newly introduced/reformulated antipsychotics between 2008 and 2011 among 2464 academic psychiatrists at 101 AMCs and 11,201 nonacademic psychiatrists. We measured AMC compliance with 9 AAMC recommendations. Difference-in-difference analyses compared changes in antipsychotic prescribing between 2008 and 2011 among psychiatrists in AMCs compliant with ≥ 7/9 recommendations, those whose institutions had lesser compliance, and nonacademic psychiatrists. RESULTS: Ten centers were AAMC compliant in 2008, 30 attained compliance by 2011, and 61 were never compliant. Share of prescriptions for heavily promoted antipsychotics was stable and comparable between academic and nonacademic psychiatrists (63.0%-65.8% in 2008 and 62.7%-64.4% in 2011). Psychiatrists in AAMC-compliant centers were slightly less likely to prescribe these antipsychotics compared with those in never-compliant centers (relative odds ratio, 0.95; 95% CI, 0.94-0.97; P < 0.0001). Share of prescriptions for new/reformulated antipsychotics grew from 5.3% in 2008 to 11.1% in 2011. Psychiatrists in AAMC-compliant centers actually increased prescribing of new/reformulated antipsychotics relative to those in never-compliant centers (relative odds ratio, 1.39; 95% CI, 1.35-1.44; P < 0.0001), a relative increase of 1.1% in probability. CONCLUSIONS: Psychiatrists exposed to strict conflict of interest policies prescribed heavily promoted antipsychotics at rates similar to academic psychiatrists and nonacademic psychiatrists exposed to less strict or no policies.

Decline in economic returns from new drugs raises questions about sustaining innovations.

The sales and financial returns realized by pharmaceutical companies are a frequent topic of discussion and debate. In this study we analyzed the economic returns for four cohorts of new prescription drugs launched in the United States (in 1991-94, 1995-99, 2000-04, and 2005-09) and compared fluctuations in revenues with changing average research and development (R&D) and other costs to determine patterns in rewards for pharmaceutical innovation. We found that the average present values of lifetime net economic returns were positive and reached a peak with the 1995-99 and 2000-04 new drug cohorts. However, returns have fallen sharply since then, with those for the 2005-09 cohort being very slightly negative and, on average, failing to recoup research and development and other costs. If this level of diminished returns persists, we believe that the rewards for innovation will not be sufficient for pharmaceutical manufacturers to maintain the historical rates of investments needed to sustain biomedical innovation.

The heterogeneity of concentrated prescribing behavior: Theory and evidence from antipsychotics.

We present two new findings based on annual antipsychotic US prescribing data from IMS Health on 2867 psychiatrists who wrote 50 or more prescriptions in 2007. First, many of these psychiatrists have prescription patterns that are statistically significantly different than random draws from national market shares for prescriptions by psychiatrists. For example, many have prescription patterns that are significantly more concentrated than such draws. Second, among psychiatrists who are the most concentrated, different prescribers often concentrate on distinct drugs. Motivated by these two findings, we then construct a model of physician learning-by-doing that fits these facts and generates two further predictions: both concentration (on one or a few drugs) and deviation (from the prescription patterns of others) should be smaller for high-volume physicians. We find empirical support for these predictions. Furthermore, our model outperforms an alternative theory concerning detailing by pharmaceutical representatives.

The hidden cost of low prices: limited access to new drugs in India.

The pricing and accessibility of patent-protected drugs in low- and middle-income countries is a contentious issue in the global context. But questions about price have little meaning if a drug is not available for purchase, and the extent to which patent policy affects when (and if) new drugs become available in these countries has largely been overlooked. We examined data on the sales of 184 drugs approved by the US Food and Drug Administration between 2000 and 2009. We found that 50 percent of those 184 drugs went on sale in India only after lags of more than five years from their first worldwide introduction. More than half of the drugs that became newly available in India during the study period were produced and sold by multiple manufacturers in the country within one year of their introduction. The presence of multiple manufacturers indicates sharp competition and weak patent protection--factors that are disincentives to manufacturers to incur the costs of gaining access to the market. We conclude that modest patent and regulatory reform could bring the faster availability of a wider range of new drugs in India with limited impact on prices--a trade-off that merits greater policy attention.

Changes in physician antipsychotic prescribing preferences, 2002-2007.

OBJECTIVE: Physician antipsychotic prescribing behavior may be influenced by comparative effectiveness evidence, regulatory warnings, and formulary and other restrictions on these drugs. This study measured changes in the degree to which physicians are able to customize treatment choices and changes in physician preferences for specific agents after these events. METHODS: The study used 2002-2007 prescribing data from the IMS Health Xponent database and data on physician characteristics from the American Medical Association for a longitudinal cohort of 7,399 physicians. Descriptive and multivariable regression analyses were conducted of the concentration of prescribing (physician-level Herfindahl index) and preferences for and likelihood of prescribing two first-generation antipsychotics and six second-generation antipsychotics. Analyses adjusted for prescribing volume, specialty, demographic characteristics, practice setting, and education. RESULTS: Antipsychotic prescribing was highly concentrated at the physician level, with a mean unadjusted Herfindahl index of .33 in 2002 and .29 in 2007. Psychiatrists reduced the concentration of their prescribing more over time than did other physicians. High-volume psychiatrists had a Herfindahl index that was half that of low-volume physicians in other specialties (.18 versus .36), a difference that remained significant (p<.001) after adjustment for physician characteristics. The share of physicians preferring olanzapine dropped from 29.9% in 2002 to 10.3% in 2007 (p<.001) while the share favoring quetiapine increased from 9.4% to 44.5% (p<.001). Few physicians (<5%) preferred a first-generation antipsychotic in 2002 or 2007. CONCLUSIONS: Preferences for specific antipsychotics changed dramatically during this period. Although physician prescribing remained heavily concentrated, the concentration decreased over time, particularly among psychiatrists.

The impact of emerging safety and effectiveness evidence on the use of physician-administered drugs: the case of bevacizumab for breast cancer.

BACKGROUND: Spending on physician-administered drugs is high and uses not approved by the US Food and Drug Administration (FDA) are frequent. Although these drugs may be targets of future policy efforts to rationalize use, little is known regarding how physicians respond to emerging safety and effectiveness evidence. STUDY OBJECTIVE: We analyzed changes in bevacizumab (Avastin) use for breast cancer in response to its market launch (February 2008), 2 FDA meetings reviewing data suggesting that its risks exceed its benefits (July 2010 and June 2011), and the FDA's withdrawal of approval (November 2011). DATA: Data from a population-based audit of oncologists' prescribing (IntrinsiQ Intellidose) were used to measure the monthly number of breast cancer patients treated with bevacizumab (January 2008-April 2012). METHODS: The number of bevacizumab patients following each regulatory action was estimated using negative binomial regression, compared with patients before the first FDA meeting, adjusting for cancer stage, treatment line, patient age, and outpatient office affiliation. RESULTS: Bevacizumab use for breast cancer increased significantly after FDA approval. After all regulatory actions, there was a 65% decline (95% CI, 64%-65%) in use compared with the period before the first meeting. The largest decline was in the 6-month period after the first meeting (37%; 95% CI, 28%-47%). The rate of decline did not differ by patient or cancer characteristics and differed minimally by office affiliation. DISCUSSION: Bevacizumab use for breast cancer declined dramatically after FDA meetings and regulatory actions, a period without changes in guideline recommendations or insurance coverage. Physicians seem to be responsive to emerging evidence concerning physician-administered drug safety and effectiveness.