Prescription Drug Costs and Utilization in Maine at Retail and Mail Order Pharmacies

Public Law 2018 Chapter 406 requires the Maine Health Data Organization (MHDO) to produce an annual prescription drug (Rx) report that includes:

  1. The 25 Costliest Drugs (determined by the total amount spent in the State)
  2. The 25 Most Frequently Prescribed Drugs in the State
  3. The 25 Drugs with the Highest Year-Over-Year Cost Increases (determined by the total amount spent in the State)

Prescription Drug Costs in Maine

Prescription drug costs in Maine for twelve months (July 2023-June 2024), as reported in MHDO’s all-payer claims data (which represents approximately 90% of Maine’s insured population, both privately insured and public payors) was just under $3 billion, representing over 20% of all health care payments reported to MHDO during this time. The tab in the report below-labeled State Totals provides a breakdown of this total by payor category (Commercial, MaineCare, and Medicare and by Generic and Brand Name Drugs).

As reported by KFF (Kaiser Family Foundation) in the fall of 2024, about six in ten adults say they are currently taking at least one prescription drug, a quarter say they currently take four or more prescription medications, and three in ten adults report struggling to afford their medications. Maine’s experience is similar.

The information provided in this report is designed to provide transparency into the pricing of prescription drugs, starting at the beginning of the chain with the pharmaceutical manufacturers who set each drug's Wholesale Acquisition Costs (WAC), or list price, and Average Wholesale Price (AWP), which is the starting point for those entities negotiating what an insurance company will pay for each drug. The final paid amount per prescription includes what the insurance pays and the consumer's cost-share (which is based on the cost-sharing requirements in each plan).

There is often a tendency when looking at prescription drug cost data to take the total prescription drug costs and divide them by the total number of prescriptions to estimate the cost per prescription. Unfortunately, it is more complex than that because specific prescriptions may vary by patient based on age, weight, or condition, and quantities vary from one consumer to the next based on the number of days’ supply that is filled (e.g., a starting 7-day dosage, a 30-day maintenance supply, or a 90-day mail order).

For example, a prescription for Eliquis (Apixaban) may be written for 2.5 mg tablets twice daily, to reduce the risk of pulmonary embolism after hip or knee surgery; however, the recommended duration for this indication is 35 days for hip surgery but only 12 days for knee surgery. The WAC and the AWP per unit (in this case a unit is a tablet) are the same, but the final paid amount per prescription varies based on the quantity dispensed. The methodology MHDO has used to calculate the average paid amount per unit and the average paid amount per prescription fill accounts for these variations.

Lastly, pharmacy rebates, defined as a discount, chargeback, or other price concession that affects the price of a prescription drug product, accrue as drug products are purchased and dispensed between manufacturers, wholesale distributors, pharmacy benefits managers, and payers over time and may represent a fixed amount per unit or a percentage of an agreed-upon price point such as WAC. Prescription drug rebate data is not included in this report because it is not a data element in MHDO’s APCD for the period July 2023-June 2024. Beginning in 2025, MHDO is collecting prescription drug rebate data at the drug level and will consider how to include this data in future reports.

How to Navigate the Reports

  1. Select the report dashboard of interest from the top of the report (Costliest Drugs, Most Frequently Prescribed, Highest Year-Over-Year Increases, State Totals)
  2. Select the Drug Type (Brand, Generic, Brand, or Generic) and Payor Category (Commercial, MaineCare and Medicare)
  3. Hover over the label of each column for a definition of what the column represents
  4. Hover over the information in any of the columns beginning with Number of Prescription Users to Paid Amount per Fill for additional information regarding the NDC level drug dosage and quantity, brand vs generic, source type, unit of measure, WAC per unit, WAC Percent Change Year-Over-Year, AWP per unit and NADAC per unit. Definitions for these terms are described in our Methodology documentation found here and, in the report in, upper right-hand corner.

Additional Information Regarding the Major Components of Prescription Drug Pricing along the Pharmaceutical Supply Chain

Primary entities in the pharmaceutical supply chain include:

  • Manufacturers – entities that produce and/or repackage drug products for which they set the Wholesale Acquisition Cost (WAC)
  • Wholesale Drug Distributors – entities that distribute products, of which they are not the manufacturer, to non-consumer entities. Wholesalers acquire the products they distribute from manufacturers and later sell the products to pharmacies at market prices.
  • Pharmacies – entities that fill patient prescriptions using drug products acquired from wholesalers.
  • Pharmacy Benefit Managers (PBM) – third-party administrators of prescription drug programs for payers with major duties including development and management of payer drug formularies, negotiation of contract pricing between payers and pharmacies, and negotiation of rebates from manufacturers for products administered on behalf of payers.
  • Commercial Payers – Private providers of health plans and insurance coverage for enrolled members. Payers establish contracted rates with pharmacies and cost-sharing terms for the plans they administer.

Wholesaler Acquisition - First step in the Supply Chain

A wholesaler’s acquisition of drug products from manufacturers is the first step in the supply chain. Typically, wholesalers purchase drug products at the WAC and store them in distribution centers until the products are later purchased by pharmacies.

Acquisition of drug products by wholesalers is typically the last point in the pharmaceutical supply chain where WAC is used as the price point of a transaction. From this point forward, WAC is instead used as a basis from which price values (AWP, manufacturer rebates, etc.) are derived through the application of markups and/or discounts from the value of WAC.

Pharmacy Acquisition of Drug Products

The next step in the pharmaceutical supply chain is the pharmacy’s purchase of drug products from a wholesaler. Typically, wholesalers sell drug products to pharmacies at or below the current WAC values.

Wholesalers generally sell drugs to pharmacies for less than the amount they spend to purchase the drugs from manufacturers. This cost reduction develops through several factors:

  • Rebates received by wholesalers from manufacturers are largely passed through to pharmacies as price reductions.
  • Wholesalers purchase large quantities of products that remain in inventory long enough that they gain value through subsequent WAC increases by manufacturers. This method of inflation-based compensation allows wholesalers to sell products to pharmacies at a price point that is above what was initially paid to acquire the product but below a then increased WAC price.
  • Wholesalers generate operational income that is not directly derived from specific drug products. These additional income components (not reported to MHDO) enable wholesalers to offer product pricing to pharmacies below WAC while generating a positive margin overall.

Purchasing a Prescription Drug Under a Commercial Insurance Plan – Consumers, Payers and PBMs

The final components of the supply chain are initiated when a consumer submits a prescription at a pharmacy.

Consumer Payment

When a consumer with insurance fills a prescription, the pharmacy submits a claim for reimbursement to the Pharmacy Benefits Manager (PBM) contracted with the insured’s commercial payer. The PBM then adjudicates the claim to determine the amount of reimbursement to which the pharmacy is entitled based on its contracted rate with the payer. In addition, the PBM notifies the pharmacy of the share of reimbursement that should be collected from the insured at the time the prescription is filled.

Payer Payment

Commercial Payers engage PBMs to negotiate rates with pharmacies for the drugs the pharmacies dispense. As prescriptions are filled, PBMs charge insurers their contracted rate less the consumer payment amount and facilitate payment to the pharmacy. Rates negotiated between pharmacies and commercial payers are typically derived as a percentage-based discount from Average Wholesale Price (AWP) plus a fixed-price dispensing fee (e.g., AWP-15% +$2.00 dispensing fee).

Pharmaceutical Manufacturers may provide publishers of AWP with a recommended AWP value or specify a markup value to be applied to WAC. Where manufacturers do not provide AWP guidance, the value is typically set as a 20% markup over WAC.

The amount that a pharmacy is reimbursed by a commercial payer (including consumer cost share) above the cost the pharmacy paid to procure the drug product can vary greatly from one NDC (drug) to another depending on the amount that AWP is marked up from WAC.

Another variable in prescription drug pricing is the method by which PBMs are paid for the services they provide. In some instances, the PBM charges the payer a contracted price for prescription drugs, and the contracted price for the prescription drugs differs from the amount the PBM pays the pharmacy – this arrangement is referred to as spread pricing.

Commercial payers, manufacturers, and pharmacies may also pay PBMs administrative fees for their services.

Manufacturer Rebate Payment to PBMs

In addition to negotiating pharmacy reimbursement rates, PBMs develop and maintain drug formularies used by payers to determine the level of cost sharing for specific drugs between a commercial payer and its members. Drugs on a formulary are divided into tiers with different cost-share ratios. Drugs on less preferable tiers result in higher out-of-pocket costs for members.

To achieve placement on preferred formulary tiers, manufacturers negotiate rebates, based on a percentage of WAC, that are payable to PBMs as drug products are dispensed. PBMs then pass through some or all the rebates to commercial payers, reducing the net amount paid by the payer for the specific drug product. The difference between the rebate amount received and the rebate amount passed through is retained by the PBM as revenue.