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 18,000 subscribers. Learn more...

Thursday, June 27, 2013

Drug Channels News Roundup: June 2013

Before you leave for the July 4th holiday, take a few minutes to read the latest collection of Drug Channels news stories. This month, I highlight three especially provocative articles:
  • Greed is Still Good—McKesson’s CEO keeps cashing in
  • Customer Experience Beats Location—Walgreens reorganizes for growth
  • Innovation is Even Better—Negative consequences of the generic wave
Plus, a special patriotic message from Sam the American Eagle. Happy 237th birthday, America!

Tuesday, June 25, 2013

Drugstore Industry Profits Rise Again in Latest Gov't Data

Time once again for my annual look at the U.S. Census Bureau’s Annual Retail Trade Report. These government-collected data provide the most complete picture of revenues at all store-based retail drugstores, not just the larger public companies.

Once again, the Census data show that retail drugstores’ financial position looks better than you may expect. Highlights:
  • In 2011, total drugstore gross profits were $54.6 billion in 2011, up $1.5 billion (+2.8%) vs. 2010. Since 2000, drugstore’s gross profits have increased by $21.2 billion.
  • Gross margins (gross profits as a % of sales) averaged about 26% from 1993 through 2006, and averaged about 24% from 2007 through 2011.
As we enter the last major phase of the generic wave, how long will the good news last for the pharmacy industry? Feel free to add your prediction in the comments.

Monday, June 24, 2013

Point of Care Marketing

Point-of-care settings are a fast-growing marketing channel for everything from unbranded disease education to branded product advertising. Patients are primed and ready to receive healthcare information in point of care settings.

Want to learn more? Then you should attend CBI’s Point of Care Marketing Summit, which is being held in Philadelphia, PA, on September 18-19, 2013. Speakers come from such companies as AstraZeneca, Lilly USA, McKesson Specialty, Merck, Pfizer, Shire, and Walgreens.

As a bonus, you can attend sessions from the Bio/Pharmaceutical Retail Strategy Summit and Strategic Distribution Planning for Specialty Products, both of which are happening simultaneously with the Point of Care Marketing Summit.

To save $300, be sure to register by July 18!

Friday, June 21, 2013

Crazy Rumor of the Week: CVS + Celesio?

Is CVS Caremark (NYSE: CVS) planning further overseas expansion?

According to a German business magazine, CVS Caremark has been chatting with Celesio, one of the Big 3 EU pharmaceutical wholesalers. See Celesio Said to Have Held Talks With CVS on Cooperation. Here is the original story (I think): Verkaufsgespräche über Celesio.

An acquisition seems unlikely, given the limited synergies between U.S. drugstore retailing and EU wholesaling. Recall that the Walgreens-Alliance Boots deal was motivated by a potent combination of financial economics and Stefano Pessina's personal ambitions. That said, the global generic purchasing scale of CVS-Celesio would rival the Walgreens-Alliance Boots-AmerisourceBergen deal. Hmmm.

While all sides are denying everything, the article's details seem just a bit too specific to be pure speculation. Big deals have a funny way of motivating more deals. Stay tuned.

Thursday, June 20, 2013

Navigating U.S. and Global Reimbursement Requirements

Here's a conference that should interest Drug Channels readers: CBI’s Reimbursement and Access 2013—A Master Class for Navigating U.S. and Global Requirements. It will be held in Philadelphia, PA on August 13-14, 2013.

Judging by the agenda, the conference will cover many key U.S. drug reimbursement and market access issues. There's also an global market access track, with discussions of the big EU countries: UK, Germany, and France.

Through June 28, Drug Channels readers can register with discount code REIMDC and save $400.* Thanks, CBI!

Wednesday, June 19, 2013

With a Top Secret Letter, HRSA Blesses Amgen’s New 340B Distribution Plan

Here’s some crucial 340B news—along with a perfect illustration of why the 340B drug discount program urgently needs fundamental reform and oversight.

Amgen just announced that Neulasta purchases by 340B covered entities must be made exclusively from such specialty distributors as AmerisourceBergen’s ASD Healthcare business. Despite loud protests from the Safety Net Hospitals for Pharmaceutical Access (SNHPA), the Health Resources and Services Administration (HRSA) has reportedly decided that Amgen’s distribution plan “will not violate the 340B statute.”

This is a major decision for all pharmaceutical manufacturers that provide discounts to 340B entities. Want to know about HRSA’s guidance? Too bad.

Following in the sad footsteps of other barely-accountable government bureaucracies (IRS, NSA, Justice Department), HRSA has labeled its decision “top secret” and won't release any regulations or public rulemaking about manufacturer distribution strategies. Instead, HRSA continues to operate the 340B program through a tangle of sub-regulatory guidance that is not readily available for public comment or review.

Read on to learn more about Amgen's plan, SNHPA's complaints, and HRSA's "decision."

Friday, June 14, 2013

Listen to My Podcast on the Cigna-Catamaran Deal

This week, I did a podcast interview with Daniel S. Levine, editor of life sciences publisher The Burrill Report. Our topic: Cigna Deal Bulks up Catamaran's Muscle.

In addition to comments on the Cigna-Catamaran deal, we also cover:
  • How PBMs influence the healthcare system
  • Why the current PBM business model will needs to evolve
  • How drugmakers will need to work with payers and PBMs
You can listen to the podcast below or at Cigna Deal Bulks up Catamaran's Muscle. For background on the transaction, see my article Catamaran Sails Away with Cigna’s PBM: Deal Analysis.

Enjoy!

Thursday, June 13, 2013

NADAC Momentum: California Abandons Average Acquisition Cost for Pharmacy Reimbursement

You may recall that California was in the process of transitioning Medi-Cal pharmacy reimbursement from the Average Wholesale Price (AWP) benchmark to an Average Acquisition Cost (AAC) benchmark. Would it be Heaven or would it be Hell? Alas, we’ll never know if a CA AAC is a lovely place, because California’s Department of Health Care Services (DHCS) just announced that the its plan is being put on hold. Click here to read the official DHCS statement.

Does this change mean slowing momentum for acquisition cost pharmaceutical benchmarks? I don’t think so. Instead, California actions implicitly endorse the National Average Drug Acquisition Cost (NADAC) data now being collected and published by the Center for Medicare and Medicaid Services (CMS). California wants CMS to take the political hits (and spend the money) to build a new U.S. pharmaceutical pricing benchmark.

The pharmacy industry may want to stab CMS’s efforts with their steely knives, but they shouldn't want to kill this beast. As I see it, they should actually be breaking out the pink champagne (on ice) for cost-based reimbursement, which essentially guarantees pharmacy profits. Read on and let me know if you agree.

Tuesday, June 11, 2013

Catamaran Sails Away with Cigna’s PBM: Deal Analysis

Last night, Cigna (NYSE: CI) ended months of speculation by announcing a 10-year PBM partnership with Catamaran (NASDAQ: CTRX). Check out the oddly-titled press release, which somehow omits Catamaran’s name from the headline: Cigna Retains and Builds On Success of Pharmacy Business Delivering Market-Leading Value to Customers. Or, click here to listen to the Catamaran conference call.

Catamaran wins big from the deal, because it (1) gains at least $5 billion in incremental revenues, (2) removes a major uncertainty about its business, and (3) can now credibly be called one of the Big PBMs. Cigna’s business will transition to Catamaran over the next 24-36 months.

By structuring the deal as an outsourcing arrangement, Cigna is showing confidence in the independent PBM model. The Catamaran-Cigna relationship looks more like CVS Caremark-Aetna outsourcing deal than the Express Scripts-Wellspring quasi-acquisition. Notably, Cigna did not follow UnitedHealth’s OptumRx strategy of insourcing the entire PBM.

Read on for my perspective on the deal.

Monday, June 10, 2013

Medicaid Drug Rebate Program

I want to remind you about IIR’s 18th Annual Summit on the Medicaid Drug Rebate Program (MDRP), being held in Chicago, Illinois on September 9-11, 2013.

New for 2013 are four never-before-heard pharma case studies from AstraZeneca, GlaxoSmithKline, Acorda Therapeutics, and Janssen Pharmaceuticals. The 2012 MDRP Summit sold out so you should register soon. The 2013 agenda looks very strong, so I expect this year's event to be extremely popular, too. IIR is already projecting more than 500 attendees.

Drug Channels readers can register with promo code XP1858DRC and save $400 off the standard registrations rates. Thanks, IIR!

Wednesday, June 05, 2013

Profits in the 2013 Fortune 500: Wholesalers, PBMs, and Pharmacies vs. Manufacturers

Time once again for my annual review of the latest Fortune 500 list. Here, I explore the relative profitability of the largest drug wholesalers, chain pharmacies, pharmacy benefit managers (PBMs), and pharmaceutical manufacturers. I also compare these groups with independent pharmacies. These data will help you understand how drug channel intermediaries make money.

Key observations from the new Fortune list:
  • Drug channel companies have higher revenues than pharmaceutical manufacturers, so they rank higher on the Fortune 500. This results from quadruple-counting of prescription revenues within the channel. See my explanation below.
  • Drug channels companies are profitable. When their profits are measured by Return on Sales, profits of wholesalers, PBMs, and pharmacies are only one-tenth of manufacturer profits. But when these profits are measured by Return on Assets, channel company profitability is about half that of pharmaceutical manufacturers.
  • For the second straight year, investors earned higher returns from drugmakers than from the drug channels group. However, the drug channels group has still outperformed manufacturers over the past 10 years.
  • The profitability of a typical independent pharmacy is higher than the profitability of the eight largest drug channels companies, including PBMs. Sorry to be the bearer of...good news?
You’ll find the the technical notes are at the bottom. Add a comment or opinion. Enjoy!

Monday, June 03, 2013

Speed to Therapy

Check out the agenda for CBI’s 2013 Speed to Therapy: A Multi-Stakeholder Examination of Time to Fill and the Patient Journey.

This new conference hits a hot spot for anyone planning a channel strategy that will improve the patient’s real world experience. The agenda hits all the right topics, including: payer strategies, benchmarking, measurement, technology, and the role of specialty pharmacies. Speakers come from such companies as Aegerion Pharmaceuticals, Alkermes, AmeriCares, Avera McKennan Hospital, Celgene, GlaxoSmithKline, Novant Health Oncology Specialists, Sigma-Tau Pharmaceuticals and more.

Until June 7, Drug Channels readers can register with discount code KXJ559 and save $400. (Sorry, this special discount cannot be combined with the advantage pricing offer.) After June 7, register with discount code EHF627 and save $300 (no expiration date). Thanks CBI!