Increasing competition, improving access, and lowering the cost of naloxone in California

Abstract

Naloxone is an opioid antagonist that can reverse opioid overdoses and save lives. In 2023, the California Department of Health Care Access and Information mobilized its affordable drug manufacturing program, CalRx, to develop a more affordable naloxone nasal product that could help increase access for all Californians. Partnering with a new market entrant, CalRx offered a stable demand forecast for an initial 3-year agreement. In exchange, the selected manufacturer launched a new generic over-the-counter naloxone nasal product at a transparent price 40% lower than the state's previously contracted rate. In its first 6 months, internal calculations suggest that the CalRx generic naloxone has saved the state over $2.6 million, which could be used to provide more than 108 000 additional units of naloxone free of charge to communities across California. Overall generic naloxone prices declined by 22% in a single quarter immediately following CalRx entry. The CalRx experience has helped disrupt the naloxone market by increasing competition and reducing prices. The experience also demonstrates that leveraging states’ substantial purchasing power to negotiate lower prescription drug prices can have immediate market impact.

Over the past 2 decades, the opioid epidemic has claimed over 564 000 US lives.¹ It is estimated that over 2 million Americans have opioid use disorder, with more than 45 000 opioid overdose deaths occurring every year.² Fatal opioid overdoses have been rising in recent years due to the increasing use of potent synthetic opioids like fentanyl, which can be legally prescribed for pain management and also increasingly accessed through illicit sales.³ There were 7530 opioid overdose deaths in California in 2023, 90% of which were related to fentanyl.⁴

Naloxone is a highly effective opioid antagonist that can reverse an opioid overdose and save lives. The nasal spray formulation, because of its fast action and easy administration, is particularly valuable in the management of an opioid overdose, as it can be administered quickly by persons without formal training.⁵ On March 29, 2023, the U.S. Food and Drug Administration (FDA) approved the over the counter (OTC) sale of naloxone nasal spray, allowing consumers to purchase naloxone without a prescription.⁶ Even though this approval was important to improve naloxone access, the drug's price remained high for most individual consumers.⁷ Increasing availability and access to low-cost naloxone is especially important in California, where growth in opioid overdose deaths has been among the fastest in the nation. In 2021, California recorded 17.8 opioid overdose deaths per 100 000 people, a more than 3-fold increase from the 5.0 opioid overdose deaths per 100 000 people recorded in 2011.⁸

To explore options to increase competition and reduce naloxone cost, in 2023 the California Department of Health Care Access and Information (HCAI) mobilized its affordable drug manufacturing program, CalRx, to create the Naloxone Access Initiative, intended to develop a naloxone nasal product that would be more affordable and increase access for all Californians.⁹ This article describes the process and key outcomes of California's Naloxone Access Initiative.

California's Naloxone Distribution Project and the Role of CalRx

In California, naloxone is dispensed free of charge to qualifying organizations such as schools, fire departments, and community organizations through the Department of Health Care Services’ Naloxone Distribution Project (NDP).¹⁰ Since its implementation in 2018, the NDP has dispensed over 5.1 million naloxone kits, approving over 13 000 applications and reversing more than 297 000 opioid overdose cases.¹¹ Harm reduction groups, which constitute 28% of the participating organizations, account for 58% of the opioid overdose reversals.¹¹

In July 2023, through a Request for Information (RFI), CalRx sought to identify vendors to support the development, manufacturing, or procurement of a low-cost naloxone nasal product.¹² Participation would require manufacturers to provide a transparent and affordable price, in accordance with CalRx's focus on pricing transparency and affordability. In exchange, having the NDP as the principal recipient for CalRx-branded naloxone products would help ensure a stable demand forecast to the selected manufacturer for the duration of the initial 3-year agreement. Furthermore, the potential for publicity associated with being selected as a partner, as well as the prospect of additional sales volume from non-NDP customers in California, helped enhance the overall appeal of the collaboration. In May 2024, California's HCAI announced an agreement between CalRx and Amneal Pharmaceuticals to manufacture a new generic OTC naloxone at $24 per twin pack.¹³ This collaboration offered a 40% savings off the state's previous contracted rate and provided immediate market share to Amneal as a new entrant to the naloxone market. Between May and September 2024, internal calculations suggest that the CalRx generic naloxone has saved the NDP over $2.6 million, which could be used to purchase more than 108 000 additional units of naloxone to provide to communities. By the end of the first year of this partnership, savings on naloxone are projected to be over $12.8 million for California's NDP.¹⁴ As the NDP is currently projected to receive less funding next fiscal year, these savings will be critical in efforts to ensure that the NDP is sustainable and can continue to meet naloxone demand throughout California communities.

Implications on Naloxone Pricing and Market Dynamics

The first naloxone spray product, a 4 mg formulation branded as Narcan®, was approved by the FDA in 2015.¹⁵ By mid-2023, a second branded product and 2 generic versions of naloxone spray 4 mg had been approved into the US market (Table 1).^16,17 In spite of such competition, the average National Average Drug Acquisition Cost (NADAC) costs for branded naloxone nasal spray 4 mg remained stable, at about $60.00 per twin pack, between 2015 and 2023 (Figure 1).¹⁸ Branded product costs only declined after OTC approval and the entry of a third generic competitor in 2023 Q3. Generic naloxone nasal spray 4 mg products, whose costs were lower—about $40.00 per twin pack at their launch in 2022—had a different trajectory. Generic naloxone NADAC prices, which had decreased only 15% in the 2 years between initial generic and CalRx entry, declined by 22% in a single quarter immediately following CalRx entry. This finding is consistent with the literature on the effect of new generic market entrants on bringing down drug prices market wide. The effect also demonstrates that California leveraging its substantial purchasing power to negotiate lower prices for medications can have immediate market impact.

Table 1.

Naloxone 4 mg nasal spray products approved in the United States by date.

Product name	Product type	Manufacturer	FDA approval date
Narcan®	Branded drug (reference listed drug)	Emergent BioSolutions	November 18, 2015a,b
Naloxone hydrochloride	Generic drug	Teva Pharmaceuticals	April 19, 2019a
Naloxone hydrochloride	Authorized generic of Narcan®	Sandoz	December 22, 2021a
Rextovy®	Branded drug	Amphastar Pharmaceuticals	March 7, 2023
Naloxone hydrochloride	Generic drug	Padagis	July 19, 2023a
Naloxone hydrochloride	Generic drug	Amneal Pharmaceuticals CalRx product	April 24, 2024a

Authors’ analysis of the Food and Drug Administration's Orange Book: Approved Drug Products with Therapeutic Equivalence Evaluations as of September 26, 2024.¹⁶ Additional branded naloxone nasal spray products are available with different formulations: Rivive® 3 mg nasal spray (approved July 2023; manufacturer: Harm Reduction Therapeutics Inc); Kloxxado® 8 mg nasal spray (approved April 2021; manufacturer: Hikma Therapeutics); and Rezenopy® 10 mg nasal spray (approved April 2024; manufacturer: Summit Biosciences Inc). These products are not direct substitutes of the 4 mg nasal spray formulation and, therefore, have not been included in this analysis.

^aProduct available over the counter (OTC).

^bThe OTC version of this product was approved on March 29, 2023.

Figure 1.

Average brand and generic naloxone 4 mg nasal spray prices by quarter, 2021-2024.¹⁸ Prices reflect the average price paid by pharmacies to wholesalers for a twin pack of naloxone nasal spray 4 mg in each quarter. OTC, over the counter. Branded naloxone products are Narcan and Rextovy. Generic naloxone hydrochloride products are those produced by Teva, Sandoz, Padagis, and Amneal/CalRx. Authors’ analysis of NADAC (National Average Drug Acquisition Cost) as of September 26, 2024.

Next Steps

CalRx's Naloxone Access Initiative demonstrates that it is possible to encourage competition in the pharmaceutical market through successful collaboration between the public and private sectors. The pharmaceutical market is often dominated by a few large companies with significant influence over drug pricing. This dynamic can stifle competition and make it difficult for low-cost drug manufacturers to enter and sustain their presence in the market. Even when competitors are able to enter the market, limited market shares and pressures to maintain high profits may limit the actual impact on prices. By strategically applying state dollars, public entities can speed up and support generic competition through targeted procurement. The CalRx experience has helped disrupt the naloxone market by increasing competition and reducing prices. However, non-cost-related barriers to naloxone access may remain and should continue to be addressed by state-led initiatives. Having the CalRx endorsement may have contributed to increased consumer confidence on the new generic product. Through this initiative, a new form of brand loyalty can be developed, that is, the familiarity with the state-led program, the confidence in the quality, and the focus on affordability. In a market where generics have few ways to differentiate, and where confidence in generic drugs can sometimes be low,^19,20 having the CalRx label added to the naloxone product procured for the NDP provides an added benefit that cannot be measured in dollars but can provide customer satisfaction, confidence, and loyalty. Examining this relationship should be the focus of future studies, as it could help not only CalRx but other state-led initiatives as well.

Beyond naloxone, CalRx has vowed to manufacture affordable insulin at a significant discount from brand name prices.^21,22 A partnership with the nonprofit manufacturer Civica Rx has been announced, which will help expand competition and increase affordability in the insulin market. The CalRx biosimilar insulin initiative is committed to transparency in its pricing structure, which contrasts with the often-opaque pricing and rebate models of traditional insulin manufacturers.²² This could contribute to efforts to push the industry toward more transparent and lower pricing models over time.²³ Differently from the naloxone market, however, the main customers of insulin products are individual patients with diabetes, not government programs like the NDP. A successful rollout of the CalRx biosimilar insulin initiative will therefore require a distribution strategy to ensure that pharmacies have the CalRx product in their inventories.

The statutory authority of CalRx allows for the program to expand to additional drugs. HCAI is actively assessing which drugs cost Californians the most and developing strategies to improve affordability and access to the most critical products. The market dynamics of CalRx products can also help identify the key challenges and opportunities for expansion. The CalRx experience can help inform other states that may be interested in increasing pharmaceutical access and affordability through state-led initiatives. Continuing to pursue strategies and partnerships to expand CalRx and push for an equitable, transparently priced pharmaceutical market will help ensure that all Californians can afford and access the medications they need.

Supplementary material

Supplementary material is available at Health Affairs Scholar online.

Funding

This work was supported by the California Department of Healthcare Access and Information.