Drug Channels 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. Drug Channels reaches an engaged, loyal and growing audience of more than 20,000 subscribers. Learn more...

Friday, August 31, 2012

PBMs Launch a New Attack on Copay Cards (rerun)

I’m taking a break from blogging this week and rerunning some popular posts from the past 12 months. Click here to see the original post and comments from November 2011.

In Wake-Up Call for Copay Cards, I point out that pharmaceutical brand managers should pay attention to the growing controversy over co-pay offset programs (coupons or cards).

Guess what? The Pharmaceutical Care Management Association (PCMA), which represents pharmacy benefit managers (PBMs), just released a blistering report that adds fuel to the fire. The title unambiguously sums up the report’s tone: How Copay Coupons Could Raise Prescription Drug Costs By $32 Billion Over the Next Decade.

My manufacturer clients recognize that it's becoming a payer-driven world, which is why the PBM/pharmaceutical manufacturer relationships can often be described as: The best of frenemies!

Below are four questions to help you think about the future of copay cards for manufacturers, PBMs, and pharmacies.

Thursday, August 30, 2012

Humana-Walmart Preferred Network Plan Wins Big in Part D (rerun)

Here's a look at 2012's preferred network boom. In the upcoming 2013 Medicare Part D open enrollment period, I expect more than 40% of beneficiaries will choose a plan with a preferred pharmacy network. Click here to see the original post and comments from February 2012.

The Centers for Medicare and Medicaid Services (CMS) just released the 2012 enrollment data for Medicare Part D Prescription Drug Plans (PDPs). These new data dispel any doubts about preferred pharmacy networks’ consumer appeal.

There are seven Part D PDPs with preferred pharmacy networks in 2012. (See table below.) Highlights from my data crunching:

  • Enrollment in preferred network plans grew twice as quickly as overall PDP enrollment.
  • Almost one-third of all PDP enrollees are now in a plan with a preferred pharmacy network design.
  • The Humana Walmart-Preferred Rx Plan, the preferred pharmacy network PDP launched in October 2010, is now the third-largest PDP.
  • Two of the three new preferred network plans in 2012 attracted more than 680,000 enrollees.
  • The PDP with Rite Aid as the preferred pharmacy was a bust.
Once again, we see how the power of competition is lowering drug costs for seniors. Needless to say, pharmacy owners who neglected to join a preferred network are complaining.

Wednesday, August 29, 2012

ESRX-MHS: Analysis of the FTC Decision (rerun)

Yesterday, a U.S. District Court judge dismissed most (but not all) of the antitrust claims from a lawsuit against Express Scripts filed by NACDS, NCPA, and a group of independent pharmacies. See Split Decision: Express Scripts, Pharmacies & Antitrust. You can read the ruling here.

So, today's rerun look backs at the FTC's decision to approve the Express Scripts/Medco Health Solutions merger. As you can see below, my original post includes comments about the then just-filed NACDS/NCPA lawsuit. Click here to see the original post and comments from April.


By a 3-1 vote, the Federal Trade Commission (FTC) approved Express Scripts’ (NASDAQ: ESRX) acquisition of Medco Health Solutions (NYSE: MHS). The FTC did not impose any conditions on the deal for antitrust approval, so there are no divestitures or conditions. Here’s the Wall Street Journal’s coverage: Express Scripts Closes Medco Acquisition.

Today, I review the FTC’s statement to explain the antitrust reasoning behind their decision. My predictions from last July (in ESRX-MHS: Antitrust Issues) turned out to be a pretty accurate guide to the FTC’s thinking. Pembroke Consulting clients and Gerson Lehrman Group clients can schedule phone calls with me for additional comments beyond what I discuss below.

And, no, this is not an April Fool’s post.

Tuesday, August 28, 2012

New Data on Specialty Pharmacy’s Challenge to Buy-and-Bill (rerun)

I’m taking a break from blogging this week and rerunning some popular posts from the past 12 months. Click here to see the original post and comments from January 2012.

You should check out the new 2011 ICORE Medical Pharmacy and Oncology Trend Report (free download with registration). This 60-page report provides a wealth of interesting data on the specialty drug benefit management.

The ICORE payer data confirms that the specialty pharmacy channel is displacing buy-and-bill in the physician office market. As I discuss below, this shift is occurring via white bagging of specialty drugs.

Buy-and-bill will not end for all physician-infused drugs, but there are substantial pressures for certain therapies. White bagging has important implications for specialty distributors, pharmacy benefit managers (PBMs), and providers.

And if you're a manufacturer planning for a new specialty drug's commercial launch, then you need to be the "channel steward" and design a strategy to ensure patient access supported by appropriately motivated partners.

Monday, August 27, 2012

2010: A Good Year for Independent Pharmacies (rerun)

I’m taking a break from blogging this week and rerunning some popular posts from the past 12 months.

In case you didn't know, NACDS has decided to stop publishing its long-running and well-regarded Chain Pharmacy Industry Profile. What a shame. This report was a unique, valuable resource for everyone in the drug channel. Below is the September 2011 article that I wrote about the 2011-12 (and as it turns out, final) edition. RIP, Chain Pharmacy Industry Profile!

The NACDS just released The 2011-12 Chain Pharmacy Industry Profile. (Free to members; $375 for everyone else, including me). As always, it’s chock full o’ useful facts about the pharmacy industry.

The data for 2010 show that independent pharmacies are doing better than you might think. Here’s what I found while rummaging around this year’s profile:

  • Independents are not vanishing. For the second year in a row, more new independent drugstores opened than closed.
  • Revenues at independent drugstores were up by $1.1 billion last year.
  • Average revenues at independent pharmacy outlets were the highest they have been in the past five years. I suspect the data are starting to reflect entrepreneurial pharmacy owners going after the specialty market.
  • Despite this growth, independents are a shrinking part of the prescription pie. But the biggest threat comes from large chain pharmacies, not from mail-order pharmacies.
Read on for more details. As always, I welcome your feedback in the comments below.

Tuesday, August 21, 2012

Drug Channels News Roundup: August 2012

Ah, the end of summer approaches. Almost time to pack up the barbeque and send the kids back to school. In the meantime, please enjoy this selection of news stories from the Drug Channels universe.

In this month’s edition:
  • The Heat is On: AmerisourceBergen discloses new subpoenas over gray market activity
  • The Heat is Off: Big defeat for a bona fide fee AMP whistleblower lawsuit
  • Just Hot Air? A semi-reasonable review of the presidential election’s competing Mediscare claims
Plus, The Onion visits a Walgreens pharmacy and is shocked (shocked, I tell you!) by the employees' attitudes.

Monday, August 20, 2012

Join me at the Revitas Industry Summit: Life Sciences

I want to let you know about the Revitas Industry Summit: Life Sciences, which will held at the Four Seasons Hotel in beautiful Philadelphia, PA, on October 2-3, 2012.

I will be delivering the keynote address, on the politics and economics of pharmaceutical commerce today. I will also moderate an expert panel of executives from branded and generic pharmaceutical manufacturers. We'll be discussing the forces of change in the life sciences business. Should be fun!

Check out the official event details below. The Summit will feature an engaging mix of thought leadership and hands-on best practice sessions. You certainly should attend if your job involves anything related to contract management, pricing execution and management, or compliance automation.

Hope to see you there!

Friday, August 17, 2012

Meet with me at NACDS in Denver

I will be attending the 2012 NACDS Pharmacy and Technology Conference on August 26 and 27.

I still have a few open meeting slots, so please send me an email if you’d like to arrange a one-on-one meeting in Denver. Hopefully, there will be no crazy hurricanes to prevent me from showing up this year!

To get your weekend off to a fun start, The Onion has some man-on-the-street reactions to Proteus Digital Health's ingestible sensor. Love the third comment!

Wednesday, August 15, 2012

Express Scripts Disavows The Medco Legacy

Last week, Express Scripts detailed its post-merger plans for divesting legacy Medco assets. As I predicted over a year ago, many of Medco’s more ambitious diversification activities are on the chopping block, including United BioSource, Liberty Medical, and the European expansion.

All in all, it looks like a back-to-basics strategy for Express Scripts, which is busy cutting costs and leveraging its bargaining power against manufacturers, pharmacies, and wholesalers. Just ask AmerisourceBergen.

Below, I review these legacy businesses to provide some perspective on the divestitures. But if you ask Express Scripts execs about these moves, don’t be surprised if they act like an amnesiac super spy and reply: “Who was David Snow?”

Monday, August 13, 2012

Pharmacy Benefit Oversight and Compliance Congress

I am pleased to welcome CBI’s Pharmacy Benefit Oversight and Compliance Congress as a Drug Channels sponsor. The conference will be held at Planet Hollywood in Las Vegas, NV on November 14-15, 2012.

Many Drug Channels readers will be interested in this event. Participating speakers come from such companies as Aveta, Catalyst Health Solutions, Express Scripts/Medco Health Solutions, Navitus Health Solutions, OptumRx, Prescription Solutions, and UnitedHealth Group.

Read more in the official description below or visit the event website.

CBI is offering a special $400 discount to Drug Channels readers. Just register at http://www.cbinet.com/pbm with promo code MAG639. Thanks, CBI!

Friday, August 10, 2012

How CVS Plans to Woo Walgreen’s Ex-Customers

When Express Scripts (NASDAQ: ESRX) and Walgreen (NYSE: WAG) split up last January, millions of previously-loyal customers found their way to other pharmacies. CVS Caremark’s (NYSE: CVS) retail business has been the big winner, gaining about one-third of those former Walgreen’s shoppers and a big sales boost.

Now that Express Scripts and Walgreen have made up (sort of), the pharmacy industry will be battling over these ex-Walgreen’s customers. On this week’s earnings call, CVS management explained why they expect to retain at least 50% of the business. And given what they disclosed, I agree. See the highlights below.

Manufacturers should care about these massive market share swings. Some pharmacies are more aggressive at therapeutic and generic substitution. As the African proverb says: When two elephants fight, it is the grass that gets trampled.

Tuesday, August 07, 2012

The Incredible Economics of Physician Dispensing

The Workers Compensation Research Institute just-released Physician Dispensing in Workers' Compensation, a data-based analysis of the pricing of prescriptions associated with worker’s comp claims. (The report is $25 for members and $45 for non-members.)

The results are less-than-super news:
  • In some states, physician-dispensed scripts are more than 40% of the worker’s comp market.
  • Physician-dispensed pills were 60% to 300% more expensive than retail pharmacies.
  • Some physicians routinely prescribe over-the-counter drugs and are paid large multiples of retail cash prices.
  • Repackaging frequently inflates Average Wholesale Price (AWP) for physician-dispensed prescriptions
Although pharmaceutical manufacturers play no part in these schemes, I suppose it’s only a matter of time before the trial lawyers go after the drug makers anyway.

Monday, August 06, 2012

Drug Price Types and Options For A Future Standard

I am pleased to welcome Elsevier/Gold Standard as a Drug Channels sponsor.

Anyone interested in pharmacy reimbursement and economics should download and read their new white paper: Drug Price Types and Options For A Future Standard. (Free with registration.) It reviews and compares 10 of your favorite price benchmarks, including AWP, AMP, NADAC, and more.

The paper also describes Predictive Acquisition Cost (PAC), a new drug price developed by Glass Box Analytics and distributed by Elsevier/Gold Standard. The companies claim PAC comes closer to a pharmacy's true acquisition cost than those 10 alternatives, making PAC a candidate for an industry-wide standard. (See below or read the white paper.)

While I can't yet vouch for the claims summarized below, I'm certainly intrigued.

Friday, August 03, 2012

Real World Data and Health Outcomes

Today’s guest post is from Emma D’Arcy, Senior Healthcare Consultant at Complete Digital, on behalf of eyeforpharma, a Drug Channels sponsor.

In this guest post, Emma recaps the recent eyeforphama Real World Evidence webinar, which also included speakers from Bristol-Meyers Squibb and Amgen. More industry-led panels on this topic will be held at the Real World Data and Health Outcomes conference, November 28-29 in Boston, MA.

Please contact Theo Fellgett, VP North America at eyeforpharma (theo@eyeforpharma.com or 201-234-4802) with any questions about the article or event.

Thursday, August 02, 2012

The Narrow Network Revolution

Today's Wall Street Journal has a must-read article on payer strategies: Remember Managed Care? It's Quietly Coming Back.

While the article focuses primarily on managed care's re-emergent love affair with prior authorization, it also highlights payers growing acceptance of narrow and tiered provider networks. These are usually "tiered" networks in which patients incur bigger out-of-pocket charges if they go to providers that aren't in the "top" category. The cost for an out-of-network provider is prohibitive.

The article is a useful reminder that the growth of preferred and limited pharmacy networks reflects broader healthcare changes. Expect plans in healthcare reform's insurance exchanges to feature narrow pharmacy networks.