PHP30 - THE CONTRIBUTION OF NEW PRODUCT ENTRY VS EXISTING PRODUCT INFLATION IN THE RISING COSTS OF PRESCRIPTION DRUGS IN THE UNITED STATES

Abstract

To quantify the contribution of existing drug inflation versus the market entry of new drug products in the rising costs of prescription drugs in the United States. We obtained monthly wholesale acquisition costs (WACs) for all national drug codes (NDCs) available in 2005-2016 for oral (n=24,877) and injectable drugs (n= 3,049) and annual counts of pharmacy claims from UPMC Health Plan. We categorized NDC codes into new and existing products; oral and injectable drugs; and brand-name, specialty, and generic drugs. Each year, new drug products were defined as those becoming available within the last 3 calendar years, existing drugs were those available before then. We calculated the average costs of drugs each year, weighting each NDC by counts of pharmacy claims. We calculated annual changes in average weighted costs of all drugs available every year and quantified the contribution of existing versus new drug products in such changes. Increases in average weighted costs exceeded general inflation across all drug classes. Average weighted costs of oral brand-name drugs increased annually by 6.8% on average, with 72.4% of this increase being attributed to existing drugs, and 27.6% to new drugs. Average weighted costs of injectable brand-name drugs increased annually by 14.8% on average, also driven by existing drug inflation. For oral and injectable specialty drugs, average weighted costs increased annually 27.4% and 13.1%, respectively, largely attributed to entry of new drugs (88.8% and 74.5%, respectively). Average weighted costs of oral and injectable generics increased by 3.9% and 7.3%, respectively, and were also driven by the entry of new drug products. Drug costs increased considerably faster than inflation across all classes. Rising costs of generic and specialty drugs were driven by the entry of new drug products, whereas rising costs of brand-name drugs were due to existing drug inflation