1. Delisting albuterol CFCs: Economic Considerations Randall Lutter, Ph.D. Chief Economist Office of Policy & Planning OPPl/OPl Randall Lutter, Ph.D. Chief Economist Office of Policy & Planning OPPl/OPl

2. Pulmonary-Allergy Drugs Advisory Committee June 10 th, 2004 2 OverviewOverview Delisting albuterol CFCs will deter use of a number of prescribed MDIs that is large in absolute terms but small relative to the market –Ignores GSK giveaway of 2 m MDIs per year Effects on public health are too uncertain to quantify Delisting albuterol CFCs will deter use of a number of prescribed MDIs that is large in absolute terms but small relative to the market –Ignores GSK giveaway of 2 m MDIs per year Effects on public health are too uncertain to quantify

3. Pulmonary-Allergy Drugs Advisory Committee June 10 th, 2004 3 Institutional Background E.O. 12866, Circular A-4 Decision IV/25: “essential” turns on whether there are “available technically and economically feasible alternatives or substitutes that are acceptable from the standpoint of environment and health” § 2.125: “adequately served” E.O. 12866, Circular A-4 Decision IV/25: “essential” turns on whether there are “available technically and economically feasible alternatives or substitutes that are acceptable from the standpoint of environment and health” § 2.125: “adequately served”

4. Pulmonary-Allergy Drugs Advisory Committee June 10 th, 2004 4 Economic Fundamentals Delisting removes albuterol MDIs with CFCs, –only generic albuterol MDIs available are CFC Benefits of earlier delisting include –Controlled transition –Reduced ODS emissions: unquantified reductions in skin cancers, cataracts & UV-B related ecologic benefits –International cooperation –Encouraging Innovation Costs of earlier phase-out dates –Not increased spending per se –Increased prices may deter appropriate usage Delisting removes albuterol MDIs with CFCs, –only generic albuterol MDIs available are CFC Benefits of earlier delisting include –Controlled transition –Reduced ODS emissions: unquantified reductions in skin cancers, cataracts & UV-B related ecologic benefits –International cooperation –Encouraging Innovation Costs of earlier phase-out dates –Not increased spending per se –Increased prices may deter appropriate usage

5. Pulmonary-Allergy Drugs Advisory Committee June 10 th, 2004 5 To Assess Effects of Delisting Baseline: continued availability of generic CFC albuterol Estimated Quantity Response = –Price increase (%) times –Consumer response (elasticity) –MDIs sold in baseline to price sensitive consumers Baseline: continued availability of generic CFC albuterol Estimated Quantity Response = –Price increase (%) times –Consumer response (elasticity) –MDIs sold in baseline to price sensitive consumers

6. Pulmonary-Allergy Drugs Advisory Committee June 10 th, 2004 6 Price Increase Prices, of course, are variable Take current price differences as measure of price increases from delisting –Simple –Transparent –Consistent with GSK wholesale price freeze through December 2007 Prices, of course, are variable Take current price differences as measure of price increases from delisting –Simple –Transparent –Consistent with GSK wholesale price freeze through December 2007

7. Pulmonary-Allergy Drugs Advisory Committee June 10 th, 2004 7 Internet Prices Pharmacychecker.com –Generics: Drugstore.com, 3/24/04: $14 –HFA: Drugstore.com –PROVENTIL HFA, 6/3/04, $39.61 –VENTOLIN HFA, 6/3/04, $38.99 –Unchanged since 3/24 Pharmacychecker.com –Generics: Drugstore.com, 3/24/04: $14 –HFA: Drugstore.com –PROVENTIL HFA, 6/3/04, $39.61 –VENTOLIN HFA, 6/3/04, $38.99 –Unchanged since 3/24

8. Pulmonary-Allergy Drugs Advisory Committee June 10 th, 2004 8 Internet Prices Increase = 180% = ($39-$14)/$14 But web-based prices are unrepresentative because they neglect –Brick and mortar outlets –Shipping costs Avg. retail market prices for cash- paying customers would be best. Increase = 180% = ($39-$14)/$14 But web-based prices are unrepresentative because they neglect –Brick and mortar outlets –Shipping costs Avg. retail market prices for cash- paying customers would be best.

9. Pulmonary-Allergy Drugs Advisory Committee June 10 th, 2004 9 MEPS AHRQ Prices Among non-institutionalized people 0-64 in the non-Medicare population, the estimated average retail prices among all payer types for CFC albuterol inhaler prescriptions in 2000-2001 are: –Generic: $24.77, SE = 0.64 –Brand: $39.41, SE = 1.85 Increase = 56% = ($39-$25)/$25, but Data on HFA prices are too rare to report. Among non-institutionalized people 0-64 in the non-Medicare population, the estimated average retail prices among all payer types for CFC albuterol inhaler prescriptions in 2000-2001 are: –Generic: $24.77, SE = 0.64 –Brand: $39.41, SE = 1.85 Increase = 56% = ($39-$25)/$25, but Data on HFA prices are too rare to report.

10. Pulmonary-Allergy Drugs Advisory Committee June 10 th, 2004 10 MEPS AHRQ Prices Among people with income less than 400% of federal poverty level, who pay cash because they have no insurance or only private non-group insurance, estimated average retail prices were –$22.02 for generic inhalers, SE = 0.74 –Data on branded inhaler prices were too rare to be reportable Among people with income less than 400% of federal poverty level, who pay cash because they have no insurance or only private non-group insurance, estimated average retail prices were –$22.02 for generic inhalers, SE = 0.74 –Data on branded inhaler prices were too rare to be reportable

11. Pulmonary-Allergy Drugs Advisory Committee June 10 th, 2004 11 IMS Health Price Data National Prescription Audit Plus TM ; 1st Quarter 2004 (extracted April 2004) Prices are measured using the average pharmacies’ revenues from uninsured customers, insured customers, and Medicaid beneficiaries alike Includes chain, independent and food store pharmacies, excluding internet, mail- order and long-term care pharmacies National Prescription Audit Plus TM ; 1st Quarter 2004 (extracted April 2004) Prices are measured using the average pharmacies’ revenues from uninsured customers, insured customers, and Medicaid beneficiaries alike Includes chain, independent and food store pharmacies, excluding internet, mail- order and long-term care pharmacies

12. Pulmonary-Allergy Drugs Advisory Committee June 10 th, 2004 12 IMS Health Price Data National Prescription Audit Plus TM ; 1st Quarter ‘04 Median price for generic albuterol MDIs =$19.70 Price for albuterol HFA MDIS = $43 Difference of ~ $23 –suggests increase of 120% = ($43-$19.7)/$19.7 –should be seen as approximate because of recent trends HFA albuterol prices rose by ~ 8% over earlier year –reflects full price for insured and uninsured alike Median price for generic albuterol MDIs =$19.70 Price for albuterol HFA MDIS = $43 Difference of ~ $23 –suggests increase of 120% = ($43-$19.7)/$19.7 –should be seen as approximate because of recent trends HFA albuterol prices rose by ~ 8% over earlier year –reflects full price for insured and uninsured alike

13. Pulmonary-Allergy Drugs Advisory Committee June 10 th, 2004 13 Response to Price Increase Extensive economics literature finds small effects but rarely distinguishes among drugs. Goldman et al. (JAMA, 2004): –530,000 people in 52 health plans over 4 years –As the average co-payment for antiasthmatics doubles, the average number of days of treatment supplied fell by more than 0.30 Albuterol (including albuterol sulfate) was most common antiasthmatic Extensive economics literature finds small effects but rarely distinguishes among drugs. Goldman et al. (JAMA, 2004): –530,000 people in 52 health plans over 4 years –As the average co-payment for antiasthmatics doubles, the average number of days of treatment supplied fell by more than 0.30 Albuterol (including albuterol sulfate) was most common antiasthmatic

14. Pulmonary-Allergy Drugs Advisory Committee June 10 th, 2004 14 Response to Price Increase Goldman et al. (JAMA, 2004): –For drugs with no OTC substitutes—a set that presumably includes albuterol MDIs--the effect is 0.15 –For diabetes, asthma and gastric acid disorder, ER visits grew by 17% & hospital days by 10% when co-pays doubled. –But results “not definitive”. Goldman et al. (JAMA, 2004): –For drugs with no OTC substitutes—a set that presumably includes albuterol MDIs--the effect is 0.15 –For diabetes, asthma and gastric acid disorder, ER visits grew by 17% & hospital days by 10% when co-pays doubled. –But results “not definitive”.

15. Pulmonary-Allergy Drugs Advisory Committee June 10 th, 2004 15 Response to Price Increase: Summary MDIs sold to price sensitive population. 2.8 million (MEPS) to 6 million (NHIS) Price increase120% (IMS’ National Prescription Audit) to 180% (Internet) Estimated elasticity0.15 (JAMA) Possible quantity response 0.4 million to 1 million

16. Pulmonary-Allergy Drugs Advisory Committee June 10 th, 2004 16 Discussion Empirical Caveats Ignores responses of insured patients to any increases in co-pays. –Co-pays for branded products are much higher than co-pays for generics. Price sensitive population, price increase, and consumer response (elasticity) are all quite uncertain. Ignores responses of insured patients to any increases in co-pays. –Co-pays for branded products are much higher than co-pays for generics. Price sensitive population, price increase, and consumer response (elasticity) are all quite uncertain.

17. Pulmonary-Allergy Drugs Advisory Committee June 10 th, 2004 17 Policy Caveats GSK letter of 5/3/04 –GSK will make 2 million complimentary samples of Ventolin available each year to physicians, “who may choose to reserve these inhalers for their lower-income patients” –“freeze” wholesale acquisition cost –This giveaway may significantly offset lost canisters, provided it is well targeted to the most price sensitive patients GSK letter of 5/3/04 –GSK will make 2 million complimentary samples of Ventolin available each year to physicians, “who may choose to reserve these inhalers for their lower-income patients” –“freeze” wholesale acquisition cost –This giveaway may significantly offset lost canisters, provided it is well targeted to the most price sensitive patients