Understanding the NDC Number
The National Drug Code (NDC) is a unique 10- or 11-digit number assigned to each drug product. It is structured into three segments: the labeler code, the product code, and the package code. For the NDC number 72124-0001, the labeler code is "72124," the product code is "0001," and there is no package code in this format[5].
Market Context of Prescription Drugs
The prescription drug market is complex and influenced by various factors, including pricing mechanisms, regulatory changes, and global market trends.
Pricing Mechanisms
Prescription drug pricing is often based on the Average Wholesale Price (AWP) minus discounts negotiated by Pharmacy Benefit Managers (PBMs). However, this system can lead to significant variability in prices. For instance, the NADAC (National Average Drug Acquisition Cost) pricing, which some PBMs use, is considered a closer approximation of actual retail pharmacy drug costs. Between 2018 and 2023, NADAC prices for generics have decreased by as much as 44%, while AWP prices have continued to rise[2].
Regulatory Changes
The FDA is considering changes to the NDC format due to the depletion of current NDC numbers. This change will impact nearly every system in the healthcare and pharmaceutical supply chain, similar to the Y2K transition. The transition from a 5-digit to a 6-digit labeler code will have significant business, economic, IT, and clinical practice implications[1].
Global Market Trends
The U.S. prescription drug market stands out for its high prices compared to other countries. By 2022, prices in the U.S. were 5.5 times those in the OECD (excluding the U.S.) and 7.7 times prices in the rest of the world. This disparity is partly due to the drug mix in the U.S., which skews towards more expensive compounds[4].
Specific Drug Analysis: NDC 72124-0001
Current Pricing
To analyze the price projections for the drug with NDC 72124-0001, we need to consider its current pricing structure. If this drug is a generic, it might follow the pricing trends observed for other generics. For example, generic rosuvastatin saw significant price variability, with AWP ranging from $5.25 to $268.35, while NADAC pricing provided a more stable and lower cost[2].
Price Variability
The price of the drug can vary widely depending on the source and supplier. For instance, Costco and Cost Plus Drugs may offer the medication at prices significantly different from the median AWP or NADAC pricing. This variability highlights the need for a clearer pricing structure to ensure cost savings for plan sponsors and consumers[2].
Impact of Regulatory Changes
The impending change in the NDC format could impact the pricing and availability of the drug. As systems transition to the new format, there may be temporary disruptions or changes in how the drug is coded and tracked. This could influence pricing due to changes in inventory management and supply chain logistics[1].
Price Projections
Short-Term Projections
In the short term, the price of the drug with NDC 72124-0001 is likely to be influenced by the ongoing trends in AWP and NADAC pricing. If the drug is a generic, it may see mid-single-digit percent annual price erosion, consistent with trends in the commodity-like generic drug industry[3].
Long-Term Projections
Long-term price projections will depend on several factors, including the outcome of the NDC format change, global market trends, and regulatory environments. Here are some key considerations:
- Generic Drug Price Erosion: Expect mid-single-digit percent annual price erosion, which could stabilize or slightly decrease the price of the drug over time[3].
- Regulatory Impact: The transition to a new NDC format may lead to temporary price fluctuations but is unlikely to significantly alter long-term pricing trends.
- Global Market Trends: The U.S. market's high prices relative to other countries may continue, but there could be pressure to align prices more closely with international standards, potentially leading to price reductions.
Industry Expert Insights
Marsha K. Millonig on NDC Changes
Marsha K. Millonig, President and CEO of Catalyst Enterprises, LLC, emphasizes the significant impact of the NDC format change on the healthcare and pharmaceutical supply chain. She notes that this transition could be as monumental as the Y2K preparations and encourages organizations to weigh in on the FDA hearings to ensure a smooth transition[1].
Pricing Structure
Industry experts advocate for a clearer pricing structure to reduce variability and ensure cost savings. For example, basing generic drug costs on NADAC pricing rather than AWP can provide more accurate and stable costs[2].
Key Takeaways
- NDC Format Change: The FDA's consideration of a new NDC format will have widespread impacts on the pharmaceutical supply chain and healthcare systems.
- Pricing Variability: Prices for prescription drugs, including generics, can vary significantly based on AWP and NADAC pricing.
- Global Market Trends: The U.S. prescription drug market is characterized by high prices compared to other countries.
- Price Projections: Short-term prices may see stability or slight decreases, while long-term projections depend on regulatory changes, global trends, and the outcome of the NDC format transition.
FAQs
What is the NDC number, and how is it structured?
The NDC number is a unique 10- or 11-digit number assigned to each drug product. It is structured into three segments: the labeler code, the product code, and the package code[5].
How does the AWP pricing system affect drug prices?
The AWP pricing system can lead to significant variability in drug prices because discounts applied by PBMs can differ widely across medications. This system often results in higher prices compared to NADAC pricing[2].
What are the implications of the NDC format change for the pharmaceutical industry?
The NDC format change will impact nearly every system in the healthcare and pharmaceutical supply chain, requiring significant updates and potentially causing temporary disruptions in inventory management and supply chain logistics[1].
How do global market trends influence U.S. prescription drug prices?
U.S. prescription drug prices are significantly higher than those in other countries. By 2022, U.S. prices were 5.5 times those in the OECD (excluding the U.S.) and 7.7 times prices in the rest of the world[4].
What are the long-term price projections for generic drugs like NDC 72124-0001?
Long-term price projections for generic drugs may include mid-single-digit percent annual price erosion, consistent with trends in the commodity-like generic drug industry[3].
Sources
- Wolters Kluwer: "Are You Prepared for a Major Industry Change to the National Drug Code (NDC) Number?"
- Segal: "Spotlight on Prescription Drug Pricing in Q1 2024 Trends"
- S&P Global: "Pharmaceutical Industry 2024 Credit Outlook Is Stable As Revenue Growth Mitigates Pressures"
- ASPE: "International Market Size and Prices"
- FDA: "National Drug Code Database Background Information"