Prescription Drug Wholesale Acquisition Cost (WAC) Increases

The Office of Statewide Health Planning and Development (OSHPD) has released to the public the nation’s first mandatory reporting of information related to increases to the wholesale acquisition cost (WAC) of prescription drugs by drug product as identified by the drug product’s the National Drug Code (NDC). §127679 of the Health and Safety Code requires prescription drug manufacturers to report quarterly Specified WAC Increases of more than 16%, beginning January 1, 2019. This first public release includes all the required information submitted by prescription drug manufacturers for specified WAC increases reported for the first quarter of 2019.

For a full list of the information of WAC increases collected by OSHPD, see the data format and file specifications.

A summary review of the data found that the 3-year median percent increase in WAC for all 1020 reports submitted was 25.8%, which suggests an approximate 8% increase in WAC, compounded annually from 2017 through the first quarter 2019; the annual rate of inflation was 2% for the same period. 

A comparison of WAC increases across WAC categories indicated that the least expensive prescription drugs (WAC < $100) experienced the largest 3-year median percent increase of 37.6%. Prescription drugs with WACs > $10,000 experienced the smallest 3-year median percent increase of 23.3%. However, more than 93% of the reports submitted experienced a 3-year median percent increase roughly equal to the 3-year median for all reported drugs.

Comparing the 3-year median percent WAC increases of different drug source types found that non-innovator multiple source drugs (generics) experienced the largest 3-year median percent WAC increase of 37.6%.

The 3-year median percent WAC increase of the least expensive category of reported non-innovator multiple source drugs (generics) was the largest of any other category by drug source type and WAC. At 156.4%, this percent increase was more than four times the next closest 3-year median percent WAC increase.

Non-innovator multiple source drugs (generics) had the widest range of 3-year median percent WAC increase across WAC categories, from the high of 156.4% to a low of 31.0% for WACs of $100 to $1,000.

Among the single source drugs (brands) that were reported, the most expensive category had the largest 3-year median percent WAC increase of 30.4%, which is higher than the overall median of 25.8%. The most expensive category of drugs have WACs greater than $10,000.

Manufacturers are required to provide reasons that explain how specific cost factors resulted in the reported WAC increases, as well as that describe any changes/ improvements to the prescription drugs that necessitated WAC increases, unless the information is not publicly available. More than two-thirds of the reports (697 of 1020) did not include any reasons for the WAC increases.

The summary below provides the graphs and chart of descriptive analyses that illustrate the findings. The summary can be downloaded as a PDF file by clicking on it.

This is an image of descriptive charts and graphs created using the WAC increase report data. There are also bullet-formatted, short findings relevant to each chart or graph. The image can be clicked on to download an ADA accessible PDF version.

Wholesale Acquisition Cost#

Wholesale Acquisition Cost (WAC) is defined in the U.S. Code as “…the manufacturer’s list price for [a] drug or biological to wholesalers or direct purchasers in the United States, not including prompt pay or other discounts, rebates or reductions in price…”

National Drug Code (NDC)#

The pharmaceuticals industry assigns a unique three-segment number, called the NDC, to each drug product manufactured and sold.  NDCs must be provided to the federal Food and Drug Administration (FDA), and are used for ordering, billing, inventory management, and recalls.

OSHPD requires that relevant reporting uses the 11-digit format of the NDC.  The three-segments of the format can be broken into the following:

National Drug Code Template

The labeler code, also known as the manufacturer code, identifies who manufactures, repacks, or distributes a given drug product.

The product code identifies the drug, its strength, dosage form, and formulation specific to the firm that manufactures the given drug product.

The packaging code typically identifies the number of product units in the given product (package size), but also may indicate the type of packaging used.

Specified WAC Increases#

As specified by California Statute are those “…with a wholesale acquisition cost of more than forty dollars ($40) for a course of therapy … if the increase in the wholesale acquisition cost of a prescription drug is more than 16 percent, including the proposed increase and the cumulative increases that occurred within the previous two calendar years prior to the current year. For purposes of this section, a “course of therapy” is defined as either of the following:

(1) The recommended daily dosage units of a prescription drug pursuant to its prescribing label as approved by the federal Food and Drug Administration for 30 days.

(2) The recommended daily dosage units of a prescription drug pursuant to its prescribing label as approved by the federal Food and Drug Administration for a normal course of treatment that is less than 30 days.

3-Year Percent Increase in WAC#

The percent increase in WAC for a given report (NDC) that includes the WAC increases in the current quarter and the previous two calendar years prior to the current year.

Drug Source#

Defined in the U.S. Code as either:

(1) A single source drug which means a drug “…which is produced or distributed under a new drug application approved by the Food and Drug Administration, including a drug product marketed by any cross-licensed producers or distributors operating under the new drug application… and also includes a …drug that is a biological product licensed, produced, or distributed under a biologics license application approved by the Food and Drug Administration…” Prescription drugs of this source type are often referred to as brand drugs.

(2) A multiple source drug which means a drug “…for which there is at least 1 other drug product which— (I) is rated as therapeutically equivalent (under the Food and Drug Administration’s most recent publication of “Approved Drug Products with Therapeutic Equivalence Evaluations”), (II) except as provided in subparagraph (B), is pharmaceutically equivalent and bioequivalent, as defined in subparagraph (C) and as determined by the Food and Drug Administration, and (III) is sold or marketed in the United States during the period.”

(3) An innovator multiple source drug which “…means a multiple source drug that is marketed under a new drug application approved by the Food and Drug Administration…” Prescription drugs of this source type can be primarily referred to as generic drugs, although a manufacturer of this type of generic would have been granted special authorization to produce the generic while the relevant brand drug was still under protection. In addition, this source type includes the brand drug after protection has expired.

(4) A noninnovator multiple source drug which “…means a multiple source drug that is not an innovator multiple source drug.” Prescription drugs of this source type are often referred to as generics.

Data and Resources#

Additional Information#

Topic: Healthcare
Temporal Coverage: January to March 2019
Spatial/Geographic Coverage: Statewide
Frequency: Quarterly
Citation: Office of Statewide Health Planning and Development (OSHPD), Prescription Drug Cost Transparency