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...

Wednesday, May 30, 2012

Generic Plavix: Let's Do the Price Limbo

On May 17, Plavix (clopidogrel) lost its marketing exclusivity when the FDA approved multiple generic versions, i.e., no 180-day exclusivity period. Plavix is 2012’s biggest generic launch, per Pfizer's Lipitor Strategy and the 2012 Generic Monster.

Prices are going down, down, down. According to this Consumer Reports article, pharmacies are already offering 80% to 90% discounts to cash-pay customers. The generic price war rages on.

How low can they go? Well, the latest Average Manufacturer Price (AMP) data, from the Center for Medicare and Medicaid Services (CMS) show wholesalers and large pharmacies purchasing most generic drugs for less than 10 cents per pill. Clopidogrel will get there quickly, judging by the self-inflicted MAC pricing by retail pharmacies.

The pharmacy industry's marketing is making generic drugs look more and more like every other consumer product. Manufacturers should incorporate these dynamics into loss-of-exclusivity (LOE) brand planning, while pharmacies and PBMs should limber up for the industry's inexorable downward economics.

Tuesday, May 29, 2012

Medicaid Drug Rebate Program Summit

I want to remind you about IIR's 17th Annual Medicaid Drug Rebate Program (MDRP) Summit, a Drug Channels sponsor. The event will be held from September 10 to 12 in Chicago, IL, at the Swissotel Chicago.

IIR is now projecting attendance by more than 500 public sector reimbursement professionals. The 2011 MDRP Summit sold out, so register soon. View a list of confirmed 2012 attendees, by company and job title.

IIR is offering a special 25% discount to Drug Channels readers—up to $850 in savings off the standard rate. Register with VIP code: XP1758DRUG. Thanks, IIR!

Friday, May 25, 2012

Walgreens Rx for Growth: Beer! (rerun)

In advance of Memorial Day weekend, I'm rerunning one of my favorite posts, originally published in February 2011. Amid our festivities, let's all raise a glass for the brave men and women who died while serving in the United States Armed Forces.

"Ah, beer. The cause of and the solution to all of life's problems."—Homer Simpson.

Walgreens (NYSE: WAG) has expanded the definition of "medicine" once again with the introduction of its own private label beer called Big Flats 1901. A six-pack sells for $2.99—less than the cost of a $4 prescription!

The beer's tagline: "It’s the water that makes it." (Legal disclaimer: It does not say "...makes it good.")

Dr. Stephen T. Colbert, DFA, provides his review of this important industry development in the video clip below.

Question: Could this be revenge for CVS Caremark's (NYSE:CVS) first-mover advantage in the drugstore industry's Chia Obama wars?

Wednesday, May 23, 2012

Express Scripts' George Paz Opines on Medco, Pharmacists, and Walgreen

Today's Wall Street Journal has a provocative interview with George Paz, CEO of Express Scripts (NASDAQ: ESRX). See Express Scripts CEO's Take on the Drug Market.

In the interview, Mr. Paz weights in on Medco's cost structure, the value of pharmacist dispensing, and the Walgreen's (NYSE: WAG) dispute. Depending on your point of view, you will be either appalled or impressed by his viewpoints.

Read on for highlights along with commentary from your friendly neighborhood blogger.

Tuesday, May 22, 2012

Oral Oncology Channel Battle: Payers vs. Providers

The Zitter Group recently released Managed Care Oncology Index: Winter 2012, a 331-page multi-client report.

The report is packed with useful data. Given the large pipeline of oral oncolytics, I want to highlight some intriguing stats on the channels for these products.
  • Today, about half of all oral oncology volume goes through specialty pharmacy and almost one-third goes through traditional retail. The balance is split between other channels such as traditional mail-order and provider dispensing.
  • Payers would prefer that a lot more volume goes through the specialty pharmacy channel. In contrast, oncology practice managers would prefer that more volume go through on-site provider dispensing.
The differences of opinion highlight another facet of the ongoing battle for control of specialty drugs. Meanwhile, as I outline below, manufacturers face difficult decisions in commercial and channel strategies.

Friday, May 18, 2012

CLM Solutions: Innovation vs. the Status Quo (Guest Post)

Today’s guest post is from Craig Sharp, Editor at Eye for Pharma, a Drug Channels sponsor. Craig interviews David Kreutter, Vice President of Global Business Analytics and Insights at Pfizer, about the company’s Closed Loop Marketing (CLM) solution

The 2012 Sales Force Effectiveness & Commercial Excellence conference will be held June 12-14, 2012, at the Renaissance Woodbridge Hotel in Iselin, NJ. Click here for registration and Early Bird Specials.

Please contact Theo Fellgett (theo@eyeforpharma.com or 800-814-3459 Ext. 7591) with any questions about the event or this article.

Thursday, May 17, 2012

Drug Channel Profits in the 2012 Fortune 500

Time once again for my annual review of the new Fortune 500 list. In this article, I explore the relative profitability of the largest drug wholesalers, chain pharmacies, pharmacy benefit managers (PBMs), and pharmaceutical manufacturers. I also compare these groups to independent pharmacies.

Key observations from the 2012 Fortune 500 list:
  • Most drug channel companies rank more highly on the Fortune 500 because they are bigger (in revenues) than pharmaceutical manufacturers.
  • Drug channels companies are pretty profitable. In 2011, median profitability of drug channels companies was up slightly vs. 2010. 
  • Beware of the "pennies in profit" fallacy, which reflects revenue double-counting within the channel system. Channel companies' profitability is about half of the profitability of pharmaceutical manufacturers when using an appropriate metric such as Return on Assets.
  • In 2011, investors earned higher returns from drug makers than from the drug channels group. This is a switch from previous years, although the drug channels group outperformed manufacturers over the past 10 years.
  • The profitability of a typical independent pharmacy is well above the median profitability of the 10 largest drug channels companies, including PBMs.
The technical notes are at the bottom. Add a comment or opinion below. Enjoy!

Tuesday, May 15, 2012

Cardinal Settles with the DEA, while Senators ask for an Inquiry

Cardinal Health (NYSE: CAH) made news again today by announcing a settlement with the Drug Enforcement Administation (DEA) regarding its Lakeland, FL, distribution center. See Cardinal Health Brings Resolution to Litigation with DEA Settlement.

Regular readers know that I've been very critical of the DEA's aggressive and misguided pursuit of pharmaceutical manufatcurers and wholesalers. For perspective on this current dispute and Cardinal's historical troubles, see February's Cardinal Fights a Misdirected DEA.

Read on for some more thoughts on this issue and details of how Senator Chuck Grassley and Senator Sheldon Whitehouse are trying to shine a light on the DEA's impact on drug shortages.

Monday, May 14, 2012

BREAKING NEWS: Cardinal Health to Acquire DIK Drug

In today's sorta surprising (but not really) M&A news, Cardinal Health (NYSE: CAH) has signed a letter of intent to acquire regional wholesaler Dik Drug. No press release yet, so consider this post to be another Drug Channels exclusive. (The news was confirmed to me by Cardinal's SVP of Public Relations.)

This deal is one more step in the long-running consolidation of the U.S. pharmaceutical distribution business. It also helps further boost Cardinal's business with smaller pharmacies. Dik is a closely-held and fairly secretive private company, so there's no official data on revenues, but most likely less than $2 billion. [UPDATE: I have learned that revenues are actually below $500 million.]

Industries do not consolidate forever (even drug wholesaling). Given the limited number of possible buyers and the pharmacy industry's pace of change, I expect that the remaining regional wholesalers will be looking for a reasonable exit strategy over the next few years, too. Read on for some additional background.

Thursday, May 10, 2012

Walgreens is Losing Its Battle with Express Scripts

Last week, Walgreen (NYSE: WAG) reported another month of dismal sales following its exit from the Express Scripts (NASDAQ: ESRX) pharmacy network. See Walgreens April Sales Decrease 3.7 Percent.

The chart below highlights the ignominy of watching Rite Aid (NYSE:RAD) grow more quickly than Walgreens. That must hurt. Last December, Walgreen’s management presented rosy scenarios in which they retained as much as 70% of the Express Script’s business. My back-of-the envelope calculations suggest they actually retained about 15%.

Walgreen’s management is hoping for an unlikely miracle during the PBM selling season. When that doesn’t happen, expect some executive heads to roll and a deal to be made.

Tuesday, May 08, 2012

Armada 2012: Reflections on the Evolving Specialty Marketplace

Last week, I attended the always-energizing Armada Specialty Pharmacy Summit in Las Vegas. In violation of standard Vegas rules, I’ll tell you what happened there…or at least the part related to the specialty market.

As always, the Irene brothers put on a top-quality event at the Wynn, my personal favorite Vegas hotel. I came away impressed by the diversity and scale of the specialty pharmacy marketplace. Future directions for the specialty pharmacy industry were evident everywhere. Below are four observations from my conversations at the meeting.

Special thanks to the many, many Drug Channels readers who introduced themselves to me during the Summit. I feel privileged to have such loyal and thoughtful readers.

Wednesday, May 02, 2012

Drug Channels News Roundup: May 2012

It’s May! The trees are blooming, the sun is shining, and the birds are singing. But you’d rather stay inside and enjoy my monthly look at noteworthy news stories from the Drug Channels universe, right?

News stories...Assemble!
  • A new benefit design for Stark Industries? Humana and Walmart launch a preferred pharmacy network for the commercial market.
  • Loki would be proud. The FDA reminds 108 physician practices not to buy from dubious sources. Really?!?
  • Hulk Smash Buy-and-Bill! UnitedHealth’s Lee Newcomer makes the case against current reimbursement models. Just don't make Dr. Newcomer angry. You wouldn't like him when he's angry.
Plus, The Onion reports on Walgreen's unusual new social media tool. I wonder if it's the same technology used by the Strategic Homeland Intervention, Enforcement and Logistics Division?