Paying for Prescribed Drugs in Medicaid: Current Policy and Upcoming Changes

To compare actual drug payments to AWPs, WACs, and NADACs, we combined at the National Drug Code (NDC) level the CMS drug utilization data, the CMS list of NADACs for October 4, 2012, and the March 1, 2013 version of Wolters Kluwer Master Drug Database (MDDB) Version 2.5. We set the state drug utilization data to the most recent quarter available. At the time of this analysis, 2012 quarter three drug utilization was available for 40 states and the District of Columbia, 2012 quarter two for six states, 2012 quarter one for one state, and 2011 quarter 4 for two states.  We restricted the sample of interest to all NDCs with NADACs, AWPs, WACs, and utilization data. NADACs reported on October 2012 are reflective of data from at least a few weeks earlier. In this analysis we compared the NADACs to AWPs and WACs as of August 1, 2012.

NADAC data are available for drug products grouped by active ingredient(s), strength, dosage form, and route of administration. Drugs are further classified according to drug category as single-source, innovator multiple-source, or non-innovator multiple-source. Many people refer to drugs in the first two categories using the colloquial terms “brand-name” or “branded” drugs, and drugs in the latter category as “generic” drugs. Using the MDDB, we similarly classified single-source, single-source co-licensed, and multi-source originator products as brand drugs, and all others as generics. We identified the top 25 brand, top 25 generic, and top 100 generic drugs by the total number of paid prescriptions for each drug. We used the MDDB to identify the drug name, American Hospital Formulary System (AHFS) therapeutic class, and AHFS therapeutic subclass for each product. We then calculated the weighted average AWP, WAC, NADAC, and actual amount paid by state Medicaid agencies, for the top 25 brand, top 25 generic, top 100 generic, therapeutic class, and therapeutic subclass. We weighted each drug at the NDC level using the total number of prescriptions dispensed to Medicaid beneficiaries.