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, August 31, 2010

Why is Stolen Shire Product Being Returned for Credit?

Add Shire Pharmaceuticals to the list of companies that should be wondering about the integrity of its pharmacy and wholesale channels.

In October 2008, a shipment of Carbatrol and Adderall XR was stolen en route from Shire’s manufacturing facility to its own distribution center. Two weeks ago, Shire notified its trade accounts that "Carbatrol from the stolen lots has started to appear in our expired returns and more stolen product may still be on the market."

Pharmaceutical cargo thefts are on the rise, but every stolen drug needs a buyer for the fenced goods.

So, who's buying?

Thursday, August 26, 2010

Drug Channels News Roundup: August 2010

Here's a rundown of noteworthy news stories from the Drug Channels universe in August.

In this edition, we look at the latest bogus study of drug prices from AARP, get an update on CVS Caremark’s (NYSE:CVS) PBM selling season, hear more about NACDS' secret AMP letter, and learn how McKesson (NYSE:MCK) avoids taxes using an Irish subsidiary. Blimey!

Speaking of the secret AMP letter, please say hello if you see me in the audience this Sunday morning at the NACDS meeting in San Diego during Medicaid Expansion and Changes to Pharmacy Reimbursement. Then join me for a brunch of eggs, spam, bacon, spam, spam, and AMP!

Wednesday, August 25, 2010

Drug Benefit News & Me

I am pleased to announce that I have joined the Editorial Board of Drug Benefit News (DBN), one of my must-read publications about the pharmacy, managed care, and pharmacy benefit industries.

If you enjoy Drug Channels, then you should subscribe to DBN. Just so you know, there's nothing in it for me in making this suggestion.

BTW, you will understand a lot more about me and the Drug Channels blog when I tell you that three of my favorite publications are:
Yes, really.

Tuesday, August 24, 2010

PBMs, Not Physicians, Stepping Up for Genomics

Check out Docs Falling Behind In Race To Help Patients With Genetics, a physician's thought-provoking perspective on the beneficial role of Pharmacy Benefit Managers (PBMs) in accelerating pharmacogenomics—using a patient’s genetic information to optimize drug therapy.

While I can't speak as a medical professional, I'm not surprised to hear this viewpoint from a leading physician. PBMs have powerful incentives to invest in personalized medicine tools that will improve clinical outcomes and manage utilization for their clients. As I see it, successful implementation of these services will be one way for PBMs to maintain spreads within the PBM economic model.

You can complement this article with Genomics: What Lies Within for a good discussion of the DNA sequencing market from The Economist.

Monday, August 23, 2010

Medicaid Drug Rebate Program Summit (sponsor)

I want to give you a quick reminder that IIR's 15th Annual Medicaid Drug Rebate Program (MDRP) Summit is coming up in a few weeks.

IIR is offering a special 25% discount for Drug Channels readers, which will save about $700. Just mention VIP code XP1558DRUGCH when registering.

I have also learned that CDR Krista Pedley, the new Director of the Office of Pharmacy Affairs (OPA) of the Health Resources and Services Administration, will be at the event. Her appointment was announced on July 14.

You can meet CDR Pedley at 1:35pm on Thursday September 16th, Track B, at the session "Changing PHS Regulations, 340B Entity Expansion and Enforcement" with a presentation by Devin K. Williams, Program Management Officer, US Public Health Service, Office of Pharmacy Affairs (OPA).

The MDRP promises to be a valuable and timely event. Check out the agenda for full details.

Thursday, August 19, 2010

Is Medco Overreaching with United BioSource?

Medco Health Solutions (NYSE:MHS) continued its expansion into fee-based clinical services with the acquisition of United BioSource Corporation (UBC). Press Release

The high-level logic of the deal seems logical given Pharmacy Benefit Manager (PBM) industry dynamics and Medco's pharmacogenomic investments.

However, I'm a little puzzled by the strategic fit because United’s customers are manufacturers. PBMs have grown by aligning with the interests of plans sponsors (employers and health plans) rather than with brand-name or generic drug manufacturers.

Is an innovative PBM succumbing to business model creep and management hubris?

Tuesday, August 17, 2010

Rite-Aid Postpones Judgment Day (Again)

Rite-Aid (NYSE:RAD) has a new plan to postpone its ultimate day of reckoning just a wee bit longer—more junk bonds! See Rite Aid Announces Offering of Senior Secured Notes and Proposed Refinancing of Its Revolving Credit Facility

The new junk bond offering will further reduce the risk that Rite-Aid will vanish in a puff of smoke. McKesson (NYSE:MCK), which sells about $13 billion in drugs to Rite-Aid, will also be relieved.

Wow, this company has more lives than a cat with an afterlife.

Of course, restructuring an excessive debt burden is not the same as saying the future looks rosy. Recent same-store sales trends don’t dispel Rite-Aid’s nickname as “the turnaround that never turns around.” The NYSE is once again threatening to delist Rite-Aid if its stock stays below the price of a Sausage McMuffin.

FWIW, below is a quick primer on their debt load and the new offering.

Friday, August 13, 2010

Secret AMP Letter Emerges; FUL Delay Likely

Ladies and gentlemen, allow me to present the heretofore missing July 20 letter from NCPA and NACDS to the Centers for Medicare & Medicaid Services (CMS) regarding Implementation of Medicaid AMP Pharmacy Reimbursement Provisions of P.L. 111-148. I didn’t even have to file a Freedom of Information Act request to get it!

The Patient Protection and Affordable Care Act requires CMS to implement a new definition of Federal Upper Limits (FUL) based on a new definition of Average Manufacturer Price (AMP) “without regard to whether or not final regulations to carry out such amendments have been promulgated.” In the July 20 letter, NACDS and NCPA make a compelling case that “a proposed rule with comment period be published so that the reimbursement approach is fair to all parties involved.”

CMS will either back down and delay implementation of the new FULs or face the prospect of intense litigation that CMS doesn't have the juice to win. Adam’s odds of new FULs in 2010 are now 7-1 against. Thus, the current bogus FULs will likely remain in place a bit longer. (See Won't Get FULed Again.)

Thursday, August 12, 2010

DC Fracas Over CMS Transparency Proposal

My little ol’ blog post about the Centers for Medicare & Medicaid Services’ (CMS) drug price RFP—CMS Wants Public Transparency to Pharmacy Profits—triggered some heavy-duty maneuvering by the industry’s major lobbying organization.

The Pharmaceutical Care Management Association, which represents pharmacy benefit managers (PBMs), put out a scorching press release on Tuesday citing Drug Channels titled CMS Turns ‘Transparency’ Spotlight on Drugstores.

Then, political heavyweight website The Hill published Pharmacies, drugstores object to Medicaid price transparency effort. The Hill also posted a previously unreleased letter from NCPA and others to CMS that was presumably leaked by the major pharmacy associations.

And in a neat twist for all you conspiracy lovers, the letter that I called “Top Secret” in my original post is not the one obtained by The Hill.

This fight will go on as long as it has to. And if this is your first visit to Drug Channels, you have to comment.

Tuesday, August 10, 2010

CMS Wants Public Transparency to Pharmacy Profits

A potentially industry-changing Solicitation by the Centers for Medicare & Medicaid Services (CMS) popped up recently on Federal Business Opportunities. CMS is looking for a vendor to conduct a new Survey of Retail Prices, Payment and Utilization Rates, and Performance Rankings.

As I describe below, this survey will gather data on both retail pharmacy prices as well as the prices paid by pharmacies to wholesalers or manufacturers. Plus, CMS intends to post these data on its website.

Translation: The whole wide world will have transparency to drug prices and costs, potentially at the National Drug Code (NDC) level. Toto, I've a feeling we're not in Alabama anymore.

Think about what the publication of these data could mean:
  • Pharmacies and Pharmacy Benefit Managers (PBMs)—Transparency to average dispensing spreads between ingredient cost reimbursement and acquisition cost
  • Brand-name Drug Manufacturers—Visibility into channel management and fee-for-service discounts
  • Generic Drug Manufacturers—Visibility into sales and discounting strategy
  • Payers and PBMs—Availability of new reimbursement benchmarks to replace Average Wholesale Price (AWP) and Wholesale Acquisition Cost (WAC)
Few “Interested Vendors” have applied, so read on if you want the job.

Wednesday, August 04, 2010

New Data on Pharmacy Industry Market Share

With little fanfare, NACDS just released its new estimates of 2009 pharmacy revenues and prescriptions. See Industry Facts-at-a-Glance.

Check out the charts below for my summary of prescription revenues and number of prescriptions for the five major drug dispensing formats. The data nicely illustrate key trends that are transforming the pharmacy industry:
  • The shift to high-cost specialty pharmaceuticals

  • The dampening effect of generic drugs on retail revenues

  • The slowdown in mail prescription growth

  • The slow-motion decline of independent pharmacies
Don't just take my word for it. Please post your thoughts and predictions about these newly-released data in the comments below.

Monday, August 02, 2010

Meet with Me at the NACDS Conference

FYI, I will be attending NACDS 2010 Pharmacy and Technology Conference on August 29 and 30. Send me an email if you’d like to arrange a one-on-one meeting in San Diego.

If you happen to bump into me at the meeting, please introduce yourself and tell me what you think about the Drug Channels blog. Very negative comments should be preceded by the offer to buy me a beer.

I'll also be pleased to discuss the innovative pharmacy benefit program illustrated below.