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...

Monday, December 21, 2009

See you in 2010!

Well, here we are, my 108th and final post for 2009. Thanks to everyone for your readership, comments, friendship, support and/or criticism. I hope you've enjoyed reading Drug Channels this year as much I enjoyed writing it.

Drug Channels will be back on January 4 with my Strategic Questions for 2010 along with our very first sponsor. In the meantime, I have something naughty and something nice to close out 2009.

Friday, December 18, 2009

Naughty and Nice News

Here's my December roundup of noteworthy news from the Drug Channels universe.

Find out who's been naughty and who's been nice at McKesson Corp. (NYSE:MCK). Plus, news about a new FTC commissioner who's not fond of Pharmacy Benefit Managers (PBMs); New York tries to save money with the AWP rollback; and the launch of a new mail-order pharmacy. Ho ho ho!

Thursday, December 17, 2009

NCPA Responds to Drug Channels

My little ol’ blog caught the attention of the National Community Pharmacists Association (NCPA).

Yesterday, NCPA posted a response to Shhhh! Owning a Pharmacy is Very Profitable entitled Independent Community Pharmacy Today.

I’m flattered that NCPA has validated Drug Channels as a source of industry information worthy of rebuttal. Muchas gracias.

In keeping with my blogging philosophy (“Everyone is entitled to his own opinion, but not his own facts.”), I want to show you clearly why my computations are not “exaggerated,” as NCPA claims. Please note that NCPA’s response neither disputes my figures nor provides any alternative data. U.S. Census Bureau data on pharmacy margins further supports my conclusions.

I also want to clarify one point about the availability of the Digest’s financial data—although my original critique still holds true.

Finally, I want to remind you that I have no conflicts of interest—although my interest in facts can create conflicts.

Wednesday, December 16, 2009

Drug Importation: Dead Again

Importation is off the table (again). See Measure to Allow Drug Imports Fails.

The vote was 51-48 in favor (!) of the amendment, but the number fell short of the 60 votes required in the Senate so the amendment was defeated. Click here to see the roll call of votes by Senator.

Tuesday, December 15, 2009

Shhhh! Owning a Pharmacy is Very Profitable

You may not believe it, but independent pharmacy owners are doing financially quite well, averaging almost $300K in personal income in 2008.

This surprising fact comes from the Executive Summary of the 2009 NCPA Digest Sponsored by Cardinal Health. Click here for the NCPA's public Digest page.

Need further proof that times are good? The NCPA has marked the full financial results as “TOP SECRET.” So much for transparency!

I don’t begrudge the right of business owners to earn a profit. But perhaps pharmacy owners should tone down the woe-is-us rhetoric and stop blaming everyone else—the government, PBMs, drugmakers, third-party insurance, cylons, sunspots, whomever—for (supposedly) “low” profit levels.

Friday, December 11, 2009

CVS Wins a Big One Despite Mudslinging

In the news today: CVS Chosen for $1 Billion Contract to Manage Pharmacy Benefits.

I'm sure the folks in Wooksocket are breathing a sigh of relief ("Whoa.") after November's unexpected contract losses, although this win doesn't "prove" the benefit of a combined PBM-pharmacy chain model. (See CVS Caremark: Pharmacy Gain, PBM Pain.)

Wednesday, December 09, 2009

Myths and Facts about Drug Prices

The House Energy and Commerce Committee’s Subcommittee on Health held a hearing yesterday titled “Prescription Drug Price Inflation: Are Prices Rising Too Fast?” The hearing was sparked by the AARP’s recent report on prescription drug prices that I wrote about in Drug Prices and Pharmacy Profits.

The testimony revealed a major distortion in the AARP-Schondelmeyer price studies, which increasingly make climate research at the University of East Anglia seem like the pinnacle of accurate and unbiased scientific inquiry.

Tuesday, December 08, 2009

Importation: Review Your Agreements

Senator Byron Dorgan (D-ND) is trying to staple his infamous importation bill to the 2,000+ pages (and counting!) Senate health care bill and claims that Senate Majority Leader Harry Reid (D-NV) will allow a vote on it (per the Puffington Host).

The odds of commercial drug importation legislation are higher than anytime in recent memory. What would it mean in practice?
  • Commercial buyers—drug wholesalers, brick-and-mortar pharmacies, mail-order pharmacies—will be sorely tempted to purchase brand-name drugs from overseas sellers.

  • Pharmaceutical manufacturers will have a hard time structuring commercial agreements to reduce or block importation. Manufacturers will also have little choice about whether to do business with known US importers or non-US exporters.
Anyone getting ready to negotiate a wholesale or pharmacy distribution agreement—buyers and sellersshould be paying attention to the language in the importation amendment.

Friday, December 04, 2009

Genzyme's Troubles Will Help Prescott's Vaxafilth

In this short video clip, Dr. Stephen T. Colbert, D.F.A., discusses how manufacturing problems at Genzyme (NASDAQ:GENZ) will aid the upcoming launch of Prescott Pharmaceuticals' new Vaxafilth product. Isn't it time that filth wallowed in you?

Full disclosure: Prescott is one of my consulting clients. I advised them on the trade strategy for Vaxadrin.

Wednesday, December 02, 2009

Will Caterpillar trigger a pharmacy price war?

Here’s a follow-up thought to CAT Rolls Out Preferred WAG-WMT Pharmacy Network.

Will Caterpillar (NYSE:CAT) allow Wal-Mart (NYSE:WMT) and Walgreens (NYSE:WAG) to compete on price within the network?

If so, Caterpillar will reap even bigger savings than initially projected at the expense of pharmacy profits at Wal-Mart and Walgreens.

Tuesday, December 01, 2009

CAT Rolls Out Preferred WAG-WMT Pharmacy Network

Equipment maker Caterpillar (NYSE:CAT) has begun rolling out a pharmacy network made up primarily of Wal-Mart (NYSE:WMT) and Walgreens (NYSE:WAG) pharmacies. Their move is a logical outgrowth of the cost-plus deal that I discussed in CAT + WAG = More Momentum for Cost Plus.

I want to review some newly-public details of their program, which starts in January 2010. Based on my reading of the plan design, this set-up will increase market share for Wal-Mart and Walgreens. Look for copycat deals in 2010 and 2011 if CAT can evolve this network strategy into a beautiful butterfly.

As always, Pembroke Consulting retainer clients can contact me for additional thoughts on this topic. Gerson Lehrman Group customers can make a request via their GLG client representative.