Generic Drug Prices are Rising, according to latest AMP data

In case you haven’t been paying attention, the Center for Medicare and Medicaid Services (CMS) continues to pump out monthly Average Manufacturer Price (AMP) data. The September 2011 data was just released.

The data confirm that generic drugs remain very inexpensive. More than half of generic drugs are sold by the manufacturer for less than 15 cents per unit. Remember, these are actual transactional prices, not list prices.

For fun, I created an index of generic prices. Based on the first three months of AMP data, this Index of Generic Weighted Average AMPs (IGWAAMPS, pronounced “igg-whamps”) rose by 4.9% from July to September.

Read on for the surprising details.

THE DATA

CMS has a new website, so some old links don’t work anymore. Bizarrely, the links are embedded within text paragraphs of this page—kind of like playing Where’s Waldo! If you don’t want to search, here are direct links to the zip files of data:

• July 2011 [ZIP]
• August 2011 [ZIP]
• September 2011 [ZIP]

For more background on these data, see my two previous posts: Hello, Transparency: CMS Publishes its First AMP Data and The Pharmacy Reimbursement Hit from AMP-Based FULs.

OBSERVATION #1: Most generic drugs sell for pennies per pill

The table below shows the distribution of WAAMPs for the 826 product groups included in the September 2011 data. Two-thirds of the products groups sell for less than 25 cents per unit (pill, tablet, capsule, etc.). More than half are less than 15 cents per unit.

Note that these data reflect prices paid to the manufacturer by: (1) wholesalers for drugs distributed to retail community pharmacies, and (2) retail community pharmacies that purchase drugs directly from the manufacturer. Thus, the average acquisition cost paid by a pharmacy (to a wholesaler or a chain warehouse) will be higher.

OBSERVATION #2: Generic drug prices are rising

CMS is still working the kinks out the system, judging by the fluctuating number of products groups with a weighted average AMP:

• July 2011: 719 product groups
• August 2011: 887 product groups
• September 2011: 826 product groups

However, 593 product groups showed up in all three months. To assess whether overall prices rose or fell, I computed an equal-weight index of these 593 product groups using three consecutive WAAMP values. I set July 2011 to equal 100.

As the chart below shows, this hypothetical basket of generic drugs rose by 4.9% from July to September 2011.

Here’s what happened in July vs. September:

• WAAMP increased in 317 product groups (median increase: $0.028; +17%)
• WAAMP decreased in 276 product groups (median decrease: -$0.016; -13%)

Yes, I realize that an index with 3 data points is not too exciting, but hopefully you can see what the WAAMP data will provide—a real-world look at generic drug prices.

Is the trend an artifact of draft data? A quirk in how CMS is averaging? Hard to tell, but I’ll keep an eye on this index as a way to judge the generic drug prices over time.