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 24,000 subscribers. Learn more...

Tuesday, January 15, 2019

Independent Pharmacy Economics Keep Deteriorating

Time for Drug Channels’annual look at independent pharmacy owners’ business economics, drawn from the recently released 2018 National Community Pharmacists Association (NCPA) Digest, Sponsored by Cardinal Health. Here's the press release: NCPA Releases 2017 Digest.

Below, I update our estimates on pharmacy economics and margins. Our analysis reveals that independent pharmacy owners have faced another year of deteriorating finances.

What's more, we estimate that in 2017, the average pharmacy owner’s salary fell to a level comparable to that of an employed pharmacist. Owning a pharmacy, with all of its hassles and additional obligations, now brings the same reward as being an employee. I wonder how many owners will conclude that it’s barely worth the risk and effort.

Read on for our look at pharmacy profits and some comments on the industry’s competitive dynamics, including the financial impact of direct and indirect remuneration (DIR) fees.

The pharmacy consolidation endgame is getting closer. The next time you see a pharmacy owner, offer your condolences.

Monday, January 14, 2019

CBI’s 6th Annual e-Rx and EHR

CBI’s 6th Annual e-Rx and EHR
March 12-13, 2019 | The Inn at Penn | Philadelphia, PA

CBI’s 6th Annual e-Rx and EHR conference, taking place March 12-13 in Philadelphia, provides tangible takeaways and tailored sessions to help you understand how to maximize e-prescribing and EHR technology engagement. Don’t miss the major key insights from industry thought-leaders as they discuss the challenges with streamlining HCP workflow, refined strategies for educating patients and best practices in coordinating channel integration with EHR platforms.

Download the agenda for complete details and register by Friday, February 8, 2019 and receive $300* off the standard rate with promo code DCX300.

Featured Discussion Topics:
  • Discuss the e-prescribing provisions within the SUPPORT for Patients and Communities Act of 2018
  • Examine current initiatives within Apple, Amazon and the City of Philadelphia and how they are becoming three key players in the EHR space
  • Evaluate early clinical factors and treatment of patients to a specific therapeutic area for quality care
  • Hear innovative insights into the efforts of Geisinger and Merck with MedTrue™
  • Review what providers are looking for and assess the gaps in using EHRs
  • Discuss current patient support tools and resources that truly drive physician and patient engagement in population health management
  • Learn to deliver patient-specific drug benefit and cost-information within the e-prescribing workflow at the point of care
  • Understand the value of data analytics in regards to prescribing patterns
Expert Multi-Stakeholder Speaking Faculty:

  • David Kaelber, M.D., Chief Medical Informatics Officer, The MetroHealth System
  • Kimberly Hansen, Director, Network Operations, UnitedHealthcare
  • Julie K. Rockey, MBA, RHIA, Strategic Program Director, Geisinger Health System
  • Eric Wente, Regional Account Executive, Market Access US, Bayer Healthcare Pharmaceuticals, Inc.
  • Patricia Cunningham, MSHI, RHIA, CHPS, Associate Director, Health IT, Boehringer Ingelheim
  • Mark Monticelli, Associate Director, Health Systems Marketing, Astellas
  • Vanessa Menton, Director, Oncology Marketing, Astellas
Don't be left out of the conversation. Download the agenda for complete details and register by Friday, February 8, 2019 and receive $300* off the standard rate with promo code DCX300.

*Offer expires Friday, February 8, 2019; applies to standard rates only and may not be combined with other offers, category rates, and promotions or applied to an existing registration.

The content of Sponsored Posts does not necessarily reflect the views of Pembroke Consulting, Inc., Drug Channels, or any of its employees.

Tuesday, January 08, 2019

The Big Three Generic Drug Mega-Buyers Drove Double-Digit Deflation in 2018. Stability ahead?

Oral generic drugs keep getting cheaper. The Food & Drug Administration (FDA) has intensified the generic industry’s competitive pressures with record drug approvals. The FDA’s actions, combined with the negotiating leverage of the large generic purchasing organizations, led to 2018’s persistent double-digit deflation in manufacturers’ selling prices for oral generic drugs.

Below, we update our analysis of these generic drug mega-buyers.

We estimate that for 2018, the three largest buyers  accounted for more than 90% of total U.S. generic drug purchases from manufacturers. In 2019, acquisitions and contract switches will shift market share among these groups, but not diminish their impact. It's no surprise that manufacturers lose their minds when seeing these monster firms.

There are now fewer therapeutic areas with excess inflation, so future price reductions will be smaller. What’s more, some generic manufacturers have signaled their intention to exit highly competitive generic drug categories in which prices have dropped. Look for oral generic prices to stabilize—and possibly rise—over the next 12 to 18 months. Perhaps the blindfolds will come off?

P.S. Portions of this post have been adapted from our forthcoming 2019 Economic Report on U.S. Pharmacies and Pharmacy Benefit Managers. We'll be taking this updated and expanded edition out of our bird box on March 5!

Monday, January 07, 2019

CBI’s 20th Annual Patient Assistance & Access Programs – PAP 2019

CBI’s 20th Annual Patient Assistance & Access Programs – PAP 2019
March 4-6, 2019 | Baltimore, MD

During a time when copay programs and patient support are under intense scrutiny and underinsurance continues to plague many patients, PAP 2019 convenes over 450 leaders from the patient assistance and product access field (manufacturers, copay foundations, non-profits, free clinics, advocacy organization, hospitals) to prepare you for what’s ahead. Join over 50 distinguished speakers who are prepared to address the legal environment, industry best practices and policy watch-outs related to prescription access and financial assistance.

Drug Channels readers save $400 off the standard rate when they
use discount code REK226 and register prior to January 25th.*

You can download the agenda here and see in-depth coverage on critical issues, such as:
  • The Impact of Copay Accumulators on Access and Adherence
  • Legal Underpinnings of Patient Assistance and Gain Insight on OIG Oversight
  • Technology and Automation Tools that are Improving the Patient Journey and Outcomes
  • Advancements in Electronic Benefit Verification
  • Strategies for Effectively Managing Patient Data
  • Patient-Centric Support Programs to Remove Barriers and Support Adherence
    Navigating Changes and Ensuring Coverage for Medicare Patients
  • Trends and Approaches in Nursing Support Programs
Visit www.cbinet.com/pap for further details and to register. Drug Channels readers will save $400 off the standard rate they use discount code REK226 and register prior to January 25th.*

CBI will see you there!

*Cannot be combined with other offers or used towards a current registration. Cannot be combined with special category rates, clinic/hospital rates, non-profit rates other offers. Other restrictions may apply</>.

The content of Sponsored Posts does not necessarily reflect the views of Pembroke Consulting, Inc., Drug Channels, or any of its employees.

Thursday, January 03, 2019

Specialty Pharmacy M&A: Our Look at 2018’s Deals

Let’s kick off 2019 with a quick review of last year’s specialty pharmacy mergers and acquisitions (M&A). Our list (below) includes only deals that were publicly announced in 2018.

Pharmacy benefit managers (PBMs) were especially busy. CVS Health bought five specialty pharmacies. UnitedHealth’s OptumRx bought Avella Specialty Pharmacy, the largest independent specialty pharmacy.

Diplomat Pharmacy was uncharacteristically quiet during 2018, though it had been one of the most active acquirers in previous years.

The specialty pharmacy industry is rapidly maturing, so I expect many more exits in the coming years. Looking to pick up a fast-growing specialty pharmacy? Click here for your post-holiday shopping list.

Friday, December 21, 2018

A System Without Rebates: The Drug Channels Negotiated Discounts Model (rerun)

This week, I’m rerunning some popular posts before the holidays. Click here to see the original post and comments from August 2018.

This has been the most impactful article that I have ever published on Drug Channels. Review it and get ready for 2019.

P.S. You can also find this material at www.WorldWithoutRebates.com. (Yes, we bought that domain!)

Are you ready for a world without rebates?

In June, Alex Azar, Secretary of the U.S. Department of Health & Human Services (HHS), summarized his long-range vision for a new drug channel system:
“[W]e may need to move toward a system without rebates, where PBMs and drug companies just negotiate fixed-price contracts. Such a system’s incentives, detached from artificial list prices, would likely serve patients far better.” (emphasis added)
No one has yet explained what a system without rebates would look like.

To facilitate the discussion, I have sketched out a possible new drug channel system that would:
  • Respond to the HHS vision for a “system without rebates”
  • Remove/decrease the reliance on list price as a component of intermediary compensation
  • Use negotiated discounts as an alternative to the current system of retrospective rebates
  • Require manufacturers to negotiate for desirable market access
You can download The Drug Channels Negotiated Discounts Model below.

Please note that I am not advocating for this approach. I am merely exploring one way that a system without rebates could be implemented. I hope you find it helpful for your strategic planning.

As always, I welcome feedback on how to improve and refine this model. Either leave comments below or email me. Enjoy!

Thursday, December 20, 2018

New Disclosures Show CVS and Express Scripts Can Survive in a World Without Rebates. Are Plan Sponsors Now the Real Barrier to Disruption? (rerun)

This week, I’m rerunning some popular posts before the holidays. Click here to see the original post and comments from August 2018.

This rerun explains how and why PBMs are shifting responsibility and blame toward third-party payers. In 2019, we'll hear much more about how payers' use of rebates affect patients' out-of-pocket costs and distort the drug channel. Addressing the problems will require a major rethink of commercial and Medicare Part D pharmacy benefit designs. For my related $0.02 on the politics of "drug prices," see also Drug Prices After the Midterms: Five Crucial Implications of Pharmacy Benefit Design.

P.S. Drug Channels was sad to hear about the passing of Stephen Hillenburg, creator of SpongeBob Squarepants.

Last week, the two largest pharmacy benefit managers (PBMs)—CVS Health and Express Scripts—both stated that rebates now account for a small part of their profits. The companies therefore strongly implied that they could survive in a world in which PBMs did not participate in the flow of funds from a brand-name manufacturer to a plan sponsor. Below, I unpack the new disclosures, which move us materially closer to a new model.

Hmm. The two biggest PBMs and at least one major manufacturer (Pfizer) have now implied a willingness to change. So what’s to stop massive drug channel disruption?

CVS Health perhaps inadvertently identified the real barrier to a system without rebates: employers and health plans. As you will see below, CVS Health disclosed for the first time the massive gross-to-net bubble within its commercial book of business. The new information confirms that plan sponsors are hoarding rebates rather than sharing the savings with the employees whose prescriptions generated the rebate funds.

If we really do migrate to a system without rebates, PBMs’ reportedly minimal profits from rebates mean they could escape drug channel disruption unscathed. The focus will now turn to the plan sponsors that are absorbing rebate dollars. Whether plan sponsors realize it or not, they are the next target.

Wednesday, December 19, 2018

Building a New Drug Wholesaler Compensation Model: What Happens as Brand Inflation Slows? (rerun)

This week, I’m rerunning some popular posts before the holidays. Click here to see the original post and comments from July 2018.

The challenges facing wholesalers have intensified since this article was originally published, in July. Brand-name drug inflation will likely reach historical lows in 2019, and the prospects for a gross-to-net bubble reset are greater than ever. Have executives at the Big Three companies fully grasped the changes coming to the drug wholesaling business model?

For more on the industry, see our 2018–19 Economic Report on Pharmaceutical Wholesalers and Specialty Distributors.

Today, drug wholesalers make money from distribution in a straightforward manner: Buy low, sell high, collect early, and pay late. They also profit as brand-name list prices increase. Like other drug channel intermediaries, wholesalers have warped incentives to prefer ever-higher list prices.

But what happens to their business model if list prices don’t rise—or even if they decrease?

This question is no longer theoretical. Many drug makers—Pfizer, Roche, Novartis, Novo Nordisk, Sanofi, and others—have announced an intention not to raise list prices for 2018 or have rescinded planned increases. Merck has gone further and become the first major manufacturer to reduce the list price of a brand-name, patent protected product, albeit for a product with minimal sales. And for the first time, there is a serious attempt to pop the gross-to-net bubble and build a system without rebates.

Below, I analyze what this could mean for the Big Three drug wholesalers—AmerisourceBergen, Cardinal Health, and McKesson. I explain some of the problems that arise when wholesalers are compensated based on a brand-name drug’s list price. I then suggest an alternative approach that would reshape wholesalers’ economics. It appears that even the wholesalers’ trade association supports some sort of new model.

Given what’s happening, it’s clearly time for some ch-ch-ch-ch-changes.

Tuesday, December 18, 2018

GAO Confirms It: 340B Hospitals and Contract Pharmacies Profit from Low-Income, Uninsured Patients (rerun)

This week, I’m rerunning some popular posts before the holidays. Click here to see the original post and comments from July 2018.

Expect 340B to stay in the news during 2019. Unfortunately, a sensible, bipartisan legislative fix still seems unlikely.

The United States Government Accountability Office (GAO) has just issued a must-read report on the 340B Drug Pricing Program: Federal Oversight of Compliance at 340B Contract Pharmacies Needs Improvement.

Some of the report’s most startling revelations confirm our worst fears about how hospitals and pharmacies are abusing the 340B program.

Here are two especially dispiriting findings from the GAO’s analysis:
  • 16 out of 28 hospitals (57%!) did not provide discounted drug prices to low-income, uninsured patients who filled prescriptions at the hospital’s 340B contract pharmacy. Seriously?!?
  • Many 340B contract pharmacies can earn excessive profit margins of 15% to 20% from brand-name 340B prescriptions. As I have long suspected, large, publicly-traded pharmacies are sharing in the 340B discounts generated for covered entities.
Bottom line: Hospitals and pharmacies are making money from poor people. Are you kidding me?!? For shame!

The 340B program’s apologists will have a hard time rebutting the uncomfortable facts from this GAO report. Calling something a “drug discount program” apparently doesn’t mean that the neediest patients get access to those discounts. Read on, and prepare to be outraged.

P.S. In two upcoming articles about 340B, I’ll review the pharmacies participating in the program and then examine the role of specialty pharmacies and pharmacy benefit managers.

Monday, December 17, 2018

Copay Accumulator Update: Widespread Adoption As Manufacturers and Maximizers Limit Patient Impact (rerun)

This week, I’m rerunning some popular posts before the holidays. Click here to see the original post and comments from September 2018.

BTW, my personal Independence Blue Cross “platinum” health plan just added copay accumulator adjustment! Click here to see the evidence.

In January, I alerted you to an important new benefit design trend in Copay Accumulators: Costly Consequences of a New Cost-Shifting Pharmacy Benefit. It is by far the most widely read article ever published on Drug Channels.

New data from Zitter Health insights (ZHI) suggest that these programs are widely used. Nearly one-third of commercially-insured lives are enrolled in plans that have implemented copay accumulator adjustment or closely-related copay maximizers. (We explain the benefit design math behind maximizers below.)

ZHI also found that a surprising number of plans are already set up to use these programs, but have not done so yet. And many more are planning implementation for 2019 and beyond. Check out the full data below.

Manufacturers have stepped up with more financial support to shield patients from the worst aspects of these benefit designs. This support further inflates the gross-to-net bubble. Plan sponsors’ use of maximizers instead of accumulators has also blunted the impact on patients.

Accumulators, maximizers, and large copay support programs are inefficient solutions to flaws in the U.S. drug channel system. Alas, it looks like they are all now a common—but possibly not even fully utilized—feature of the benefit design landscape.

Friday, December 14, 2018

Three Reasons to Join the Industry-Wide Effort to Speed Time-to-Therapy for Specialty Pharmacy

Today’s guest post comes from Lee Ann Stember, President and CEO of the National Council for Prescription Drug Programs (NCPDP).

Lee Ann discusses the crucial importance of getting patients timely access to specialty therapies. She invites Drug Channels readers to participate in NCPDP’s specialty pharmacy work group and its four task groups. Your participation will help establish and refine standards that will benefit patients and all industry participants.

It's simple. Create an account at www.dms.ncpdp.org and then select your preferred task groups. You can also click here to register for upcoming NCPDP meetings.

Read on for Lee Ann’s insights and to get more information about NCPDP’s specialty pharmacy task groups.

Thursday, December 13, 2018

Drug Channels Outlook: What to Watch in 2019

Whew. I can’t recall a year with as much drug channel tumult as we experienced in 2018.

Hot topics included the ever-inflating gross-to-net bubble, the prospect for a world without rebates, the boom in copay accumulators, the specialty pharmacy industry’s slowdown, the completion of vertical integration mega deals, an aggressive federal government attempt to reform the entire industry, the still-looming challenge from Amazon, and much more.

I’m exhausted just thinking about it all!

I’m happy to say that Drug Channels was there to help you figure it out. Our site had another record year of readership. Drug Channels now has more than 24,000 subscribers, including more than 6,600 @DrugChannels Twitter followers. (Follow me there for daily updates.)

Thank you, dear readers, for welcoming me into your inboxes and browsers each week. I’ve had a blast writing Drug Channels and hope that you had fun reading it. I’m grateful to our many sponsors and guest writers. Special thanks to the brave souls who posted comments and joined in the spirited discussions below the articles.

Below, you'll find our annual bonus stocking stuffer: The Drug Channels Outlook: Things to Watch in 2019. These slides capture ideas I shared in my recent keynote presentation at CBI's Trade and Channel Strategies conference. It’s a sneak peek at some of next year's likely hot topics.

You'll also find our annual holiday tradition—a video greeting below from me and Paula, my wife and business partner in Drug Channels Institute.

Wishing you and your family health and happiness,