The Drug Channels blog delivers timely analysis and provocative opinions on pharmaceutical economics and the drug distribution system. It is written by Adam J. Fein, Ph.D., one of the country's foremost experts on pharmaceutical economics and channel strategy. Learn more...

Tuesday, May 24, 2016

CalPERS Bids Reveal Big Three PBMs’ Drug Trend Forecasts and Pricing Strategies

Last week, the California Public Employees' Retirement System (CalPERS) announced that it had selected UnitedHealth Group’s OptumRx as its new pharmacy benefit manager (PBM). Read the press release.

The three big PBMs—Express Scripts, the Caremark PBM business of CVS Health, and the OptumRx business of UnitedHealth Group—all vied for this $4.9 billion contract. Luckily for us, the CalPERS evaluation process was made public.

Below, I peek into the bidding documents to shed light onto each PBM’s drug trend projections and pricing strategies. As you will see, there are significant differences in how each company approached the CalPERS contract—and in what each PBM forecasts for pharmacy benefit spending increases through 2021.

Thursday, May 19, 2016

AmerisourceBergen Charts the Profit Headwinds Facing Drug Wholesalers

In its latest earnings report, AmerisourceBergen gave a downbeat assessment of the challenges confronting its drug distribution businesses. It also unexpectedly reduced financial forecasts for both its 2016 and 2017 fiscal years. In typical public company fashion, the blame was placed on non-nautical “headwinds.”

Fortunately, ABC’s management team didn’t leave us high and dry on the market’s evolution. Below, I rely on its latest quarterly earnings conference call to examine generic deflation, pharmacy consolidation, sell-side discounts, and the specialty market.

McKesson and Cardinal Health are facing similar challenges in their drug distribution businesses. So, hoist up your mainsail as we cast off for some nautical nonsense about the future of pharmaceutical wholesaling.

Tuesday, May 17, 2016

Why Walmart Is Finally Joining McKesson for Generic Purchasing

Well, pierce my ears and call me drafty. Yesterday, Walmart announced that it will jointly source generic drugs to McKesson, its long-time brand-name drug supplier. Read the press release.

Below, I outline why this long-expected deal makes sense for both companies. Walmart finally bowed to the inexorable economics of generic purchasing, while McKesson captured a much-needed partner that it had been aggressively chasing.

The deal also formalizes an intriguing alignment between the three largest wholesalers, the three largest pharmacy benefit managers (PBMs), and the four (soon to be three) largest retail chains. See what you think about my summary chart.

Monday, May 16, 2016

IIR’s Medicaid Drug Rebate Program Summit is Back!

Join IIR and celebrate the year of the AMP Rule at MDRP this September 20-22, at The Palmer House Hilton in Chicago, IL. This is your opportunity to benchmark best practices and gain solutions to overcome new operational challenges brought on by AMP Final Rule, 340B, Medicaid Expansion, Class of Trade, Fair Market Value, FSS, VA, OIG, and other critical government programs


Year after year, MDRP Chicago has continued to be the authoritative gathering for everything pricing, rebates, contracting, and collaboration. Ensure you have the most comprehensive educational experience over three days with unparalleled access to government officials creating regulatory rules, the industry leaders interpreting them, and the pharmaceutical executives implementing them.


See What's New for 2016!
  • The 340B Final Mega-Guidance is out
    • Planning and implementation of processes related to the 340 Mega-Rule
  • Final AMP Rule was released this year
    • Strategic, methodological financial, Legal & Compliance clarity related to each area of the AMP rule
  • Expanded GTN/Financial content NEW this year:
    • New Full Day Pre-Conference Symposium focusing on implications of GTN on government programs
    • Incorporation of dedicated GTN content within the Finance track

Collaborate with your peers and benchmark best industry practices to:
  • Navigate Regulatory Hurdles
    • Understand and comply with state processes, operations and requirements
    • Address the impact of AMP Final Rule, 340B Guidance, along with State Policy changes
  • Minimize Wasted Resources
    • Develop strategies to streamline pricing and reporting
    • New Interactive Think Tank & Innovation Theatre - Hear from the industry's leading service providers as they showcase new technologies and products to improve operations
  • Optimize Finances
    • Calculate liability and improve accuracy and accountability
    • Discover the latest in Automation & Customization of finance systems
    Stay ahead of the curve by getting the best networking, education, and technology at IIR's MDRP Summit.

    Be sure to use Priority Code: XP2158DRUG


    The content of Sponsored Posts does not necessarily reflect the views of Pembroke Consulting, Inc., Drug Channels, or any of its employees.

    Tuesday, May 10, 2016

    The State of Specialty Pharmacy in 2016: Reflections from #Asembia2016

    Last week, Paula and I had the pleasure of attending the 2016 Asembia (formerly Armada) Specialty Pharmacy Summit, in wonderful Las Vegas.

    The Asembia Summit is now the undisputed, must-attend meeting for anyone in the specialty industry. Nearly 5,000 people were meeting, networking, and connecting at the Wynn Las Vegas. We should all be grateful to Larry and Robert Irene for making this gathering bigger and better every year. Click here to savor the social media action from #asembia16.

    Today’s post marks the sixth time that I will violate Vegas code and tell you what happened there—excluding the goings-on at the over-the-top Encore Beach Club party on Wednesday. (Well, one fun picture made it into the post.)

    Below, I offer my latest reflections on key specialty industry trends facing manufacturers, pharmacies, wholesalers, PBMs, payers, and trade associations. Feel free to add your own observations in the comments.

    Friday, May 06, 2016

    Seven Pharmacy and Channel Implications of the New AMP Final Rule (rerun)

    This week, I’m rerunning some popular posts while I attend the 2016 Armada Specialty Pharmacy Summit. Click here to see the original post and comments from January 2016.

    Well, pierce my ears and call me drafty! Late last week, the Centers for Medicare & Medicaid Services (CMS) finally released its long-overdue final rule regarding Average Manufacturer Price (AMP) under the Patient Protection and Affordable Care Act (ACA). Since 2012, CMS has announced—and then delayed—the release of the final rule at least five times. Makes you proud to be a taxpayer, doesn’t it?

    Savor all of the bureaucratese for yourself in the oh-so-brief 658-page rule, known to the cool kids as CMS-2345-FC. (Note: Not the name of a new Star Wars droid.)

    The rule is effective April 1, 2016. (Seriously.) Below, I highlight what it could mean for drug channels, including observations on:
    • Prescription reimbursement
    • Pharmacy profits
    • Manufacturers’ channel strategies
    • Bona fide service fees
    • Manufacturer-retail direct distribution arrangements
    • And more!
    Enjoy.

    Thursday, May 05, 2016

    Independent Pharmacy Economics: Profits Steady, but Sales Down (Maybe) (rerun)

    This week, I’m rerunning some popular posts while I attend the 2016 Armada Specialty Pharmacy Summit. Click here to see the original post and comments from November 2015.

    Time for my annual look at independent pharmacy owners’ business economics, drawn from the recently released 2015 National Community Pharmacists Association (NCPA) Digest, Sponsored by Cardinal Health. Here's the press release: NCPA Digest: Adherence, Diversified Revenue Critical for Community Pharmacies.

    The data reveal that independent pharmacy owners are doing better than you might expect. In 2014, the average pharmacist owning a single pharmacy earned about $228,000. The number of independent pharmacies continues to hold steady.

    In the NCPA Digest sample, average per-prescription revenue declined, which reduced gross profits and average prescription revenues. On the other hand, IMS Health data imply independents' revenue and prescriptions are growing, not declining. Hmmm.

    As always, I welcome your constructive and civil comments. Please remember our Drug Channels philosophy, courtesy of the late senator Daniel Patrick Moynihan: "Everyone is entitled to his own opinion, but not his own facts."

    Wednesday, May 04, 2016

    Inside McKesson’s Acquisition of Biologics Specialty Pharmacy (rerun)

    This week, I’m rerunning some popular posts while I attend the 2016 Armada Specialty Pharmacy Summit. Click here to see the original post and comments from February 2016.

    Yesterday, McKesson announced its acquisition of two significant oncology businesses: Vantage Oncology and Biologics. Click here to read the press release.

    McKesson provided only general statements about its motivations behind the $1.2 billion deals. Fear not, dear reader. Below, I offer two key hypotheses about McKesson’s strategic considerations in purchasing the Biologics specialty pharmacy.

    This much is certain: For manufacturers, the deals further illustrate the emergence of organized customers that cross traditional commercial and channel boundaries.

    Tuesday, May 03, 2016

    Solving the Mystery of Employer-PBM Rebate Pass-Through (rerun)

    This week, I’m rerunning some popular posts while I attend the 2016 Armada Specialty Pharmacy Summit. Click here to see the original post and comments from January 2016.

    Manufacturers pay billions in rebates to pharmacy benefit managers (PBMs). How much of that money do PBMs share with their plan sponsor clients?

    As far as I know, the only public answer comes from the Pharmacy Benefit Management Institute’s (PBMI) new 2015-2016 Prescription Drug Benefit Cost and Plan Design Report. (Free download with registration.) Drug Channels again toasts Takeda Pharmaceuticals North America for having sponsored the research.

    According to the PBMI’s survey data, only three-quarters of employers directly receive a piece of manufacturer rebates. Some employers get 100% of the rebates. Others get a portion, sometimes with a guaranteed minimum amount.

    Below, I also highlight PBMI data about the prevalence of spread pricing (as opposed to pass-through pricing) as a means for employers to compensate PBMs. Despite what you may have heard, many employers still seem to prefer spread pricing models. Ruh roh!