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...

Thursday, November 29, 2012

Two Useful New Data Reports on Drug Distribution

Need stocking stuffers for the channel economics nerds on your holiday shopping list? Good news! The Center for Healthcare Supply Chain Research, the research arm of the Healthcare Distribution Management Association (HDMA), just released two useful new reports: the 2012-2013 HDMA Factbook and the 2012 Specialty Pharmaceuticals: Facts, Figures and Trends.

These reports combine surveys of wholesalers and distributors with compilations of external research. Both are valuable data resources on the economics of full-line pharmaceutical wholesaling and specialty distribution. You’ll have to work to extract meaning from the data avalanche in these reports, but there is gold to be mined. I highlight one such interesting nugget about specialty distributor sales below.

If you like this sort of stuff, then be sure to join me at the 8th Annual Trade and Channel Strategies Conference next week. It’s a great networking opportunity for trade and channel executives. I’m delivering the keynote address and moderating a panel of Wall Street analysts. Use promo code ESX239 for a $300 discount!

Tuesday, November 27, 2012

Prescription Drugs in CMS' New Essential Health Benefits Proposed Rule

While you were brining your turkey last week, the Center for Medicare and Medicaid Services (CMS) published a flock of proposed rules for implementing the Patient Protection and Affordable Care Act (PPACA), including new proposed rules for Essential Health Benefits (EHB): Patient Protection and Affordable Care Act; Standards Related to Essential Health Benefits, Actuarial Value, and Accreditation. It’s a sprightly 119 pages.

In this article, I look at the proposed EHB regulations for prescription drugs. These requirements will apply to plans within health insurance exchanges as well as non-grandfathered private health insurance options in the individual and small group markets. Here are a few highlights:
  • States have some flexibility in defining the “typical employer plan” chosen as the EHB benchmark for pharmacy benefit design.
  • Unlike Medicare Part D, there will be no protected drug classes.
  • Plans can cover as few as one drug per therapeutic category, but will probably end up covering more.
Compared with Medicare Part D, this proposal gives pharmacy benefit managers (PBMs) and health plans greater negotiating leverage over brand-name pharmaceutical manufacturers. Depending on each state’s benchmark plan, the downside could be a loss of patient and prescriber choice.

Read on for a brief review of EHB, the proposed rule, and a few discussion questions for the managed markets team at a pharmaceutical manufacturer.

Monday, November 26, 2012

A New Look

I’m pleased to announce Drug Channels’ new site redesign!

We’ve updated the blog’s graphic design, streamlined the layout, improved loading speed, and added new information about the site’s traffic and readers. You’ll also notice the announcement of Drug Channels Institute, our new e-learning subsidiary. Look for more details on DCI soon.

Our look may be new, but I remain committed to in-depth analysis, pop culture mastery, and top-quality snark. Just check out the music video below, which I made with a few friends to celebrate Hanukkah. Enjoy!

Tuesday, November 20, 2012

Drug Channels News Roundup: November 2012

Here's a pre-Thanksgiving news roundup, to stretch your mind before stretching your stomach later this week. In this issue:
  • Debunking ACOs: A must-read article
  • Attacking ASP: Blaming shortages on reimbursement economics
  • Fearing the DEA: Now attacking shipping companies. Seriously!?!
  • Reviewing Track & Trace: A holiday wish for a national system
Plus, the bizarre-but-true story of how former Kinray owner Stewart Rahr just got banned from upscale sushi chain Nobu. Absolutely hilarious!

Monday, November 19, 2012

New Medicaid Rebate Summit Announced for Early 2013

I am pleased to welcome The Conference Forum as a new Drug Channels sponsor for its Medicaid Rebates Summit (MRS). The event will be held February 14-15, 2013, at the Park Hyatt in Washington DC.

Speakers include representation from: Acorda Therapeutics, APEXUS/ 340B Prime Vendor Program, Bayer HealthCare , BIO, Boehringer Ingelheim, CIS, CMS, Daiichi Sankyo, District of Maryland, Eastern District of PA, Eli Lilly, Express Scripts, HP, Hogan Lovells, Genentech, HRSA Office of Pharmacy Affairs, Janssen, Mylan Pharmaceuticals, National Association of Chain Drug Stores, National Community Pharmacists Association, National Governors Association, PhRMA and Purdue Pharma.

The Conference Forum is offering a special 20% discount to Drug Channels readers. Just register with code DCH20. Thanks Conference Forum!

Friday, November 16, 2012

Kroger Makes a Big Specialty Pharmacy Play

In reviewing the 13 Fastest-Growing, Private Specialty Pharmacies, I predicted: “Given the eye-popping growth, I suspect that many of these companies will not remain independent for much longer.”

Well, it didn't take long. Yesterday, supermarket chain Kroger (NYSE: KR) announced a merger with Axium Pharmacy, the third-largest company on my list. Read the press release.

In 2011, we estimate that Kroger was the seventh largest U.S. pharmacy, with prescription revenues equal to about $7.0 billion. (See 2011 Market Share of Top Pharmacies.) While Axium’s 2011 revenues were only $155 million, this deal places Kroger firmly ahead of many retail rivals struggling to take advantage of the coming specialty dispensing boom.

Tuesday, November 13, 2012

Checking in with CVS Caremark

CVS Caremark (NYSE: CVS) posted some impressive financial results last week. Today, I highlight three noteworthy developments:
  • CVS now expects to retain 60% of the scripts picked up from the Walgreen-Express Scripts imbroglio.
  • The now-stabilized PBM business has significant—and growing—synergy for the retail pharmacy business, although the reverse synergy is not as strong.
  • With its latest formulary exclusions, the PBM business is pressuring manufacturers even more.
Has CVS Caremark been smart or lucky? A bit of both, actually. And as I explain below, you won’t hear Wall Street clamoring for a break-up anytime soon.

Thursday, November 08, 2012

Post-Election AMP Analysis: Generic Prices Are Falling

OK, the election is finally over. And President Obama’s re-election pretty much guarantees that price transparency will continue to ripple through the pharmaceutical industry. See Transparency is Here! CMS Exposes Pharmacy Prescription Profit Margins for a look at the first batch of pharmacy acquisition costs and revenue data, from the Center for Medicare and Medicaid Services (CMS).

The Patient Protection and Affordable Care Act (PPACA) also requires CMS to publish weighted average Average Manufacturer Price (AMP) data, which (sort of) show the average multisource (generic) drug prices paid by wholesalers and large pharmacies. With healthcare reform repeal off the table, I expect the AMP figures to be finalized within a few months.

In the meantime, we can draw some firmer conclusions from the 14 months of draft AMP data. Here are two observations from my number crunching, detailed below:
  • Generic manufacturers still sell most of their products for less than 10 cents per pill.
  • Over the past five months, the Drug Channels Index of Generic Weighted Average AMPs (IGWAAMPS) dropped by 9.9%.
Don’t forget that these AMP data pose a mega-compliance threat for manufacturers, which have to deal with murky and undefined rules. Gee, healthcare reform will be fun!

Tuesday, November 06, 2012

Why Pennsylvania's New Anti-Mail Law Will Hurt Pharmacy and PBM Profits

Last Thursday, Pennsylvania joined the anti-mail pharmacy movement when Governor Corbett signed into law SB 201, a bill requiring consumers to receive equivalent terms at retail vs. mail pharmacies. The law takes effect on March 1, 2013.

At first glance, the PA law may appear to be a big victory for retail pharmacies, because mail pharmacies can no longer have a copayment advantage with consumers. But pharmacy owners should curb their enthusiasm. The law has strong language requiring retail pharmacies to accept “the same pricing, terms, conditions or requirements” as a mail pharmacy. Congratulations, pharmacy owners! You won the legal right to reduce your margins in a frantic, race-to-the-bottom price war!

The law also provides another headwind for mail pharmacy, and therefore is likely to reduce pharmacy benefit manager (PBM) profits. Last night, Express Scripts gave a downbeat assessment of 2013. The anti-mail legislative movement may come up in this morning's 9:30 AM earnings call.

Read on and then post a comment with your opinion.

Monday, November 05, 2012

5th Annual Government Programs Summit

I am pleased to welcome back IIR as a Drug Channels sponsor for its 5th Annual Government Programs Summit. The event will be held March 11-13, 2013 at the Hyatt Regency in Baltimore.

IIR bills the Summit as "the largest and most comprehensive program in the Northeast – where pharmaceutical drug pricing, contracting and compliance executives go to get informed, be prepared and stay compliant."

Speakers include government officials from HHS, OIG, OPA, VA, the Office of Pharmacy Affairs, and many State pharmacy boards. There are also lots of industry speakers from such companies as Acorda Therapeutics, AmerisourceBergen, Argus Health Systems, Daiichi Sankyo, Eli Lilly, Express Scripts, Genentech, Horizon Pharma, Johnson and Johnson, Leo Pharma, McKesson, Morton Grove Pharmaceuticals, Mylan Pharmaceuticals, Novartis, Pfizer, Reckitt Benckiser Pharmaceuticals, Upsher Smith, Vertex Pharmaceuticals, and West-Ward Pharmaceuticals.

IIR is offering a special 25% discount to Drug Channels readers. Just register with your VIP code: XP1851DRUG. Thanks, IIR!

Friday, November 02, 2012

Predictive Acquisition Cost Bulletin: Retail Pharmacy Benefits

Here's some updated info on Predictive Acquisition Cost (PAC), the new drug pricing measure developed by Glass Box Analytics and distributed by Elsevier/Gold Standard. Elsevier/Gold Standard is a Drug Channels sponsor.

In addition the PAC price benchmark, Elsevier/Gold Standard is also publishing new data on the minimum and maximum PAC for a particular drug. Check out the recent PAC bulletin for details.

Anyone interested in pharmacy reimbursement and economics should also download their white paper: Drug Price Types and Options For A Future Standard. (Free with registration.)