GER Predictability

Scenario:  A Medicaid manages its generic reimbursement at a generic effective rate (GER, i.e. the average percent discount off the AWP for all generic drugs) of 74%.  

Let’s compare PAC Retail to AWP, each delivering an identical GER of 74% on the current MAC list given the state’s utilization across drug group.

Variability of GER across drug groups

GER Variation Across Drug Groups - AWPAWP
Because AWP is so disconnected from acquisition cost, and hence from the Medicaid’s maximum allowable cost (MAC), the GER varies dramatically across drug groups when based on AWP. (A significant number of drugs even show a negative GER.)



GER Variation Across Drug Groups - PACPAC Retail
In contrast, looking across drug groups, the PAC Retail based GER is tightly centered around 74%.

The actual GER achieved is highly dependent on the utilization mix in the case of AWP, but much more predictable if based on PAC Retail.

Looking at NDC’s within a drug group
Beyond AWP’s disconnect with true acquisition cost, another issue exists when measuring the performance of a MAC using a GER metric based on AWP. When looking across NDC’s within a drug group, the AWP often varies even though the MAC is fixed at the drug group level.

The resulting GER therefore depends, in part, on which manufacturers a pharmacy purchases from (i.e. which NDCs within a drug group are utilized). This phenomenon, as illustrated below by a couple of examples, adds a further degree of uncertainty for the Medicaid when targeting GER-based performance metrics.

Drug Label  MAC  NDC  AWP GER 
TRETINOIN 0.05% CREAM 1.1860 45802036142 2.09511 43%
TRETINOIN 0.05% CREAM 1.1860 43478024220 2.51100 53%
HYDROCODON-ACETAMINOPHEN 5-500 0.0440 00406035705 0.19686 80%
HYDROCODON-ACETAMINOPHEN 5-500 0.0440 00591034901 0.50650 92%

In fact, the exact same drug group utilization could result in an AWP-based GER of anywhere from 68% to 77%, depending on which NDCs are actually involved.

PAC Retail, on the other hand, exhibits little to no variance across NDCs within a drug group and will deliver a stable PAC Retail-based GER fixed at 74%,.