The California Office of Statewide Health Planning and Development (“OSHPD”) recently released a report detailing mandatory reporting of information about increases in the wholesale acquisition cost (“WAC”) of certain prescription drugs. The data show that the three-year median increase was 25.8%, with generic drugs experiencing the largest increase. More than two-thirds of manufacturers did not provide reasons for the WAC increases.
As we previously reported, in 2017, California passed a new bill into law requiring pharmaceutical companies to report certain information on price increases. Specifically, prescription drug manufacturers are required to report, beginning January 1,2019, quarterly WAC increases of more than 16% over two years. The manufacturers are also required to provide reasons for the increase, if those reasons are publicly available.
The findings of the report include the following:05
- The 3-year median percent increase in WAC was 25.8%. This suggests an approximate 8% increase in WAC, compounded annually from 2017 through Q1 2019. In comparison, the annual rate of inflation was 2% for that time period.
- The least expensive prescription drugs (WAC < $100) experienced the largest increase of 37.6%, while prescription drugs with a WAC > $10,000 experienced the smallest increase of 23.3%.
- More than 93% of reports experienced a mean increase roughly equal to the 25.8% rate for all reported drugs.
- Generics experienced the largest WAC increase of 37.6%, including an increase of 156.4% for WAC < $100.
- Brand drugs with a WAC > $10,000 experienced an increase of 30.4%.
Only about one third of manufacturers provided reasons for the increase. Some of the reasons include manufacturing process improvements, changing market dynamics, increasing active pharmaceutical ingredient (“API”) costs, increases in the cost of distribution, increases in marketing costs, new serialization/ software costs, increases in the inflation rate, pharmacovigilance costs, and enhanced discounting in the managed care and Medicaid markets.
Amgen took a different approach to the WAC increase justification by providing something akin to a policy statement. Specifically, Amgen said that their “sense of overall societal responsibility shapes our pricing decisions, which are guided by four principles of responsible pricing … [which are] captur[ing] the value of the product … fund[ing] continued scientific innovation … ensur[ing] patient access … [and] reflect[ing] market dynamics.” Astrazeneca, Biogen and Lundbeck provided similar policy statements in their responses.
While the federal government is debating the merits of various bills to rein-in prescription drug prices, an increasing number of states have already passed new laws directed to drug pricing and reporting. These laws are intended to highlight price increases, and to provide data that may lead to policy changes to combat such increases.