CVS Caremark: Pharmacy Gain, PBM Pain

CVS Caremark disclosed unexpected problems in its PBM business yesterday, spooking investors and sending its stock down by 20%. See Dow Jones’ coverage: CVS' Pharmacy Benefit Struggles Renew Merger Benefits Debate

Judging by the financials, it sure looks like CVS Caremark has sacrificed its PBM business for the benefit of the retail pharmacy business. They are also having trouble explaining how a PBM customer gains when a brick-and-mortar pharmacy is paired with a benefit management business.

Adding insult to injury, CVS Caremark also disclosed that the Federal Trade Commission (FTC) has opened a formal inquiry into its business. Ouch.

Pembroke Consulting retainer clients and Gerson Lehrman Group customers should feel free to schedule phone calls with me for additional comments beyond what's in this post.

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Dilbert on Drug Marketing

As a follow-up to Tuesday's post, management guru Scott Adams shows how promotion by a pharmaceutical manufacturer affects physicians' prescribing decisions.



Of course, this topic may not be funny for much longer given 40,000 recently announced job cuts by Johnson & Johnson, Pfizer, and Astra-Zeneca or the 16,000 cuts planned by Merck.

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How Generics Change the Market

I just came across an intriguing new study that examines how generic drug entry affects prescription volume and manufacturer revenues. See TIME RELEASE: The Effect of Patent Expiration on U.S. Drug Prices, Marketing, and Utilization by the Public

The paper poses an interesting question and contains some neat data on post-generic market evolution—brand market share, prices, promotional expenses. I’m a bit underwhelmed by the author’s conclusions. So, I suggest that you enjoy the pretty pictures and perhaps incorporate the conceptual ideas into your forecasting models.

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Noteworthy News Stories

Here are some worthwhile articles for your reading pleasure. As always, I welcome story links from Drug Channels readers.

As a special treat, I am including a picture of my Halloween costume at the bottom of the post. Happy Halloween!

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Should pharmacies be liable for stupid patients?

Yesterday’s Wall Street Journal had a scary cover story titled Case Spurs Pharmacies' Fears of Lawsuits Over Drug Abuse. (Click here for a free summary if you can't access the article.)

The article describes a lawsuit against a group of pharmacies for dispensing prescription painkillers to a woman who killed someone while driving high on hydrocodone.

Just my $0.02, but I think it’s ludicrous to pin the blame on a pharmacy for the deranged behavior of one consumer. The pharmacy chains are being dragged into this case because they have deep pockets, not because they should be responsible for the tragedies described in this article.

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Best Of

There are almost 400 posts on Drug Channels. New readers often ask me for a list of the "best" ones.

Here is my periodically updated selections. Unfortunately, some of my best posts were very timely and/or humorous analyses of news events, which means those posts now sound quite dated and sort of lame.

I am listing the best posts for answering the top questions that people ask me. As far as I know, these posts are still valid although some of the information may have been superseded by new developments.

I wrote the U.S. Pharmacy Industry: Economic Report and Outlook to provide an integrated analysis of these (and other) questions. You should check it out for more details.

Who are the biggest pharmacies?

• 2008 Pharmacy Market Share Data

How much money do pharmacies make?

• Pharmacy Profits and Wal-Mart
  
  
• Two Great New Resources on Pharmacy Economics
  
  
• Drug Channel Profits in 2009's Fortune 500 list
  
  
• Pharmacy Profits & Part D

Who does (and will) pay for prescription drugs in the U.S.?

• Who Will Pay for Prescription Drugs?

What are the economics of mail-order pharmacy?

• A Phony Mail Order Controversy
  
  
• Pharmacists Can't Get No Satisfaction from Mail
  
  
• Reality Check on Mail Economics

What is Wal-Mart's strategy in the pharmacy industry?

• Wal-Mart Explains Its Healthcare Strategy
  
  
• The Impact of Walmart's National Mail Pharmacy
  
  
• Wal-Mart Aims at PBM Mail Profits
  
  
• New details on WMT-CAT Pharmacy Deal
  
  
• Wal-Mart's PBM Game Plan

What's going on with Average Wholesaler Price and First Databank?

• AWP Goes Boom
  
  
• What Happens When AWP Goes Boom?
  
  
• Farewell, AWP
  

What is the controversy about CVS Caremark's Maintenance Choice program?

• The Odd Economics of Maintenance Choice
  
  
• A Glimmer of Synergy at CVS Caremark
  
  
• Debate Over CVS Caremark's Tactics Heats Up

Please let me know if I missed one your favorites.

Adam

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