Thursday, December 05, 2013

3 Reasons Why CVS Caremark Absorbed Coram

While you were busy brining a turkey last week, CVS Caremark purchased Coram LLC, the specialty infusion services and enteral nutrition business unit of Apria Healthcare Group. Read the press release.

I spot three factors behind the deal:
  • Home infusion is a fast-growing channel for specialty drugs, so the deal deepens CVS/pharmacy’s footprint as a major dispensing channel. CVS can also catch up to Walgreens.
  • Home infusion can be a cheaper site of care, which helps Caremark’s specialty benefit management PBM business. Oddly, CVS Caremark’s own data shows home infusion to be more expensive than in-office treatment. See the chart below.
  • Benefit coverage for home infusion specialty drugs is fragmented across the pharmacy and medical benefits. Payers are therefore looking for integrated management, visibility, and control.
Read on for details and background, some of which appeared a mere two weeks ago in CVS Caremark’s 2013 specialty trend report. CVS Caremark continues to expand throughout the healthcare system, swallowing up adjacent sectors with ease.

INDESTRUCTIBLE: HOME INFUSION IS CHEAPER (MAYBE)

Two weeks ago, CVS Caremark released its Insights 2013 Specialty Drug Trend report. IMHO, it’s a worthwhile document, but I suggest that you download the PDF rather than endure the nausea-inducing animated “web magazine.”

Here’s a chart from the 2013 report that shows the costs of Remicade and its administration. The source is “CVS Caremark Internal data, 2013.”

[Click to enlarge]

This chart has new meaning, post-Coram. Hospital outpatient remains the most costly site of care, per Attention, Hospital Shoppers: Cancer Markup Madness.

Curiously, CVS Caremark’s data shows that drug costs are higher in home infusion vs. the buy-and-bill office-administered channel. Huh?

INDESCRIBABLE: FRAGMENTED BENEFIT MANAGEMENT

The chart below, from the latest EMD Serono Specialty Digest (another worthwhile download), highlights the diversity of specialty benefit coverage for home infusion.

[Click to enlarge]

Most plans cover self-administered specialty drugs (oral and injected medications) only under the pharmacy benefit. Most plans cover office-administered specialty drugs (infused and other provider-administered medications) only under the medical benefit.

But for home infusion drugs, benefit coverage is more diverse. Commercial plans usually cover home infusion under the medical benefit, similar to how they cover office-administered drugs. However, Medicaid and Medicare Advantage Prescription Drug plans (MA-PD) more frequently cover home infusion specialty drugs under both the pharmacy and medical benefit.

Caremark is a big player in both Medicare and Managed Medicaid, so controlling home infusion channel will provide significant advantages.

NOTHING CAN STOP IT

As CVS Caremark’s Insights 2013 Specialty Drug Trend report notes, infused drugs account for about $35 billion of the specialty market. Infused drugs also account for one-third of specialty drugs in the pipeline.

That’s why Walgreens has assembled an impressive roster of non-retail dispensing channels to augment its industry-leading retail pharmacy position. Its notable home infusion deals include:
  • Option Care, which was the largest home infusion business at the time of Walgreen's acquisition
Even grocery chain Schnuck Markets is getting into the infusion game, in the intriguingly titled You now can receive chemotherapy at Schnucks. (To me, that headline reads like: "You can now get your teeth cleaned at Burger King.")

The Coram acquisition is CVS Caremark’s biggest deal since it bought the Longs Drug Store chain. CVS Caremark can now play catch up as it oozes throughout the healthcare system. Beware!


4 comments:

  1. Home infusion is generally an AWP minus reimbursement contract. Physician office contracts are trending to ASP plus arrangements. The calculations make office the least expensive for drug cost. MCOs in their zeal to lower drug costs made office infusions a loser and with economics of denied charges and overhead, the only place providers could send complex biologic infusions is the hospital (at twice the cost). MCOs need to seriously evaluate their strategy to make in office infusions attractive. But that is the anthesis of cost saving. Simple but then complex, at the same time.

    ReplyDelete
  2. "Simple but then complex" - That pretty much sums up pharma economics!

    I highlight selected reimbursement methods in The Latest Data on Specialty Pharmacy Reimbursement. By comparison to those data, page 37 of the most recent EMD Serono report shows:

    Physician Office (non-oncologist) = AWP-12.3%
    Physician Office (oncologist) = AWP-11.7%
    Home infusion = AWP-13.3%

    Adam

    ReplyDelete
  3. Simple but complex.


    From Icore's 2012 report (page 12)
    Provider Reimbursement Approach Overall
    ASP Plus: 55% (down 2% from 2011)
    AWP Minus: 17% (down 9 % from 2011)
    VFS: 25% (up 9% from 2011) don't look behind the curtain


    Then hospital outpatient infusion:
    "Charge minus a discount"


    Just remarking on your "Huh?"


    Bill

    ReplyDelete
  4. Interestingly, Caremark used to be THE dominant player in home infusion. At one point in the early 1990s it probably had half the overall market.

    ReplyDelete

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