Thursday, October 31, 2013

Drug Channels News Roundup: October 2013

Boo! Time for my Halloween-themed roundup of Drug Channels news stories. Never fear. None are as scary as your teenage daughter's Miley Cyrus costume. (Trust me.)

In this issue:
  • Zombie Attack: Why Fortune got its Express Scripts "exposé" wrong
  • Don’t Fear the Reaper: Walmart lobbies for preferred networks…in Medicaid!
  • 340Boo: A superb article on the 340B drug discount program
  • Spooky: 10 megatrends for specialty pharmacy
Plus, Secretary of Health and Human Services Kathleen Sebelius provides tips for coping with the website.

Painful Prescription
Pharma muckraker Katherine Eban tackles pharmacy benefit managers (PBMs) in this sloppy Fortune article. The article focuses on Meridian Health Systems, a non-profit six-hospital chain that hired Express Scripts to manage its pharmacy benefits. Express allegedly overcharged Meridian, which then switched to Envision Pharmaceutical Services. Unfortunately, Eban misses the payer's reality: Caveat emptor. Meridian shopped around and got a better deal, without the government or anyone else getting involved. This is how markets work. If that's the "news," then I look forward to learning how Mass General saved on landscaping costs thanks to the bravery and vision of Joe the Gardener. Please note that I am not defending ESI or PBMs, nor am I being anti-pharmacist. I am merely defending markets and freedom. Big, big difference. Read the article and see what I mean.

State panel hears Medicaid drug distribution proposals, including one from Wal-Mart
Preferred pharmacy networks are kind of a big deal in Medicare Part D plans, and no company is a bigger deal than Walmart. So, it’s no surprise that Walmart is lobbying Alabama’s Medicaid program to create a similar program for the state. From the article: “Wal-Mart representative Kevin McCarter presented a different offer: Make Wal-Mart the main dispenser of Medicaid drugs, and the department store chain would offer a cut in prices for the drugs Medicaid buys.” Walmart claims that the switch would save $120 million in the first year, and $205 million annually by the eighth year. Expect to see similar pitches as states look to control Medicaid costs.

340B: Helping Patients or Enriching Hospitals?
Clinical Oncology News takes critical look at the 340B drug discount program. If you are confused about the controversy or how 340B contract pharmacies like Walgreens operate, then you should definitely read the article. The article includes my $0.02. As I told the reporter: “There are some legitimate entities that really do require additional financial support. However, there are also many profitable, large, well-funded health systems that are taking advantage of the program by using the funds in ways that can’t be linked in any way to its initial purpose.” The article includes the following chart explaining the mysterious world of contract pharmacies:

10 Top Trends in Specialty Pharmacy
The insightful Randi Hernandez of Specialty Pharmacy Times wrote this thought-provoking article on specialty drug megatrends. Use this article—and its many linked sources—as a great pre-read for your next strategy session.

Kathleen Sebelius provides tips for coping with the healthcare website
In case you missed it, here’s Saturday Night Live’s mildly amusing takedown of (Warning: Some NSFW language.) As President Obama said: “If I’ve lost SNL, I've lost Middle America.” Click here if you can’t see the video.


  1. In theory markets should work that way. However, a capitalist economy’s one major weakness is unregulated greed. Greed may be good, but because of human nature, unregulated greed is bad. This is why we have laws to protect consumers (monopoly, anti-trust), pollution laws etc.

    That being said, Eban’s article was not a cry for regulation. It was an easy to understand article that sheds light on a dark business model.

    Yes, employers need to shop around and hopefully find a transparent PBM.
    With more articles like this that overcome the well-funded traditional
    PBM/PCMA spin machine, employers will gain a better understanding of just how important it is to their bottom line to become educated consumers.

    Unfortunately, too many mid-sized self-insured employers delegate his purchasing decision to their HR department execs that have no purchasing expertise.

    Because of that lack of knowledge, HR places their trust in benefits “consultants” who are either clueless about PBMs or worse yet, receiving undisclosed revenue in return for their silence.

    To that end, Eban’s article, and others like it support your position of Caveat Emptor.

    Let the buyer beware….so let us help them know they need to beware!

  2. Adam, I am not sure how many PBM contract audits you have
    done, but I am sure you are aware that employers who do not know about or understand MAC determinations, AMP, WAC, Therapeutic Interchange, or single source determinations are in no way capable to discern a true AWP cost.

    Recently I audited an account who thought they were getting
    AWP-22 on brand drugs. After taking out one source generics and other high cost generics out of their brand pricing they found out that they were only getting AWP -16.5. This AWP magic created spread sheet numbers that were hundreds of thousands of dollars in error but with appearance of high tech correctness.
    Additionally the PBM contract wording allowed the moving of these same generics out of brands when calculating the generic fill rate to make the GFR look better.

    Adam you are not so naïve as to think that PCMA is any
    better than any other advocacy group when it comes to number twisting. However, CNN is not an advocacy group and you used mudslinging directed toward the Fortune Magazine investigative reporter, which you have accused and asked others not to do.

    Again, how it that supposed quasi fiduciary service businesses like PBMs can service accounts for the last 30 years and their clients do not even know what a MAC price is or how MAC is determined. That would be akin to going to a very expensive accountant for 30 years and not understanding what an IRS 1040 form is.
    These long time PBM accounts, for the most part, do not understand MAC or AWP; and PBM contract language has gotten to the point that even I, after 17 years of doing this have to occasionally use an attorney for PBM
    contract word interpretation, wording which is always in the PBMs favor.

    Adam, I have offered many times to do an audit of any PBM
    account you choose from one of the big 3 PBMs, we will do it at no charge and we let you have full access to our process to judge the end product. It easy to do your meta-analysis work but let us get down and do some real on the ground live research.

    Jim Fields CFO ApproRx

  3. Jim,

    As I noted, I am not defending PBMs or Express Scripts. According to the article, Express Scripts was giving Meridian a bad deal. No one was forcing them to stay with Express Scripts, so Meridian switched.

    If a payer wants transparency, then it can choose a PBM (like yours, I presume) that offers it in the market. If your service is better/faster/cheaper/whatever, then it will win. Like many companies, payers hire lawyers when negotiating complex legal documents. I don't see why you consider that to be a significant issue.

    As to why pharmacy owners feel compelled to "educate" payers...well, that's another story for another time.


  4. Adam, I think I can best summarize the issue by saying employers (HR) don't know what they don't know. Even worse the employer's lawyers know even less. Linda Cahn is one of the few attorneys that know the game, and she has a very lucrative practice of removing the big PBMs from her client's health plans. The notion that any one or two attorneys at any small self insured employer are any match for the department of 100 or more attorneys at any of big PBMs is laughable. Then throw in PCMA with its multimillion dollar misinformation campaign and the idea that any employer has enough information to maker a truly educated decision becomes simply impossible.


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