Wednesday, December 19, 2007

Drug Channels: 2007 Year in Review

Believe it or not, it’s time for my final post for 2007.

In the spirit of the season, I want to highlight the major themes of 2007 along with my good calls and near misses. I also want to give you some insights about the Drug Channels blog and its future.

There were 114 posts on Drug Channels in 2007, so this is a very long post. However, you will be rewarded with a hilarious video from now-bankrupt drug wholesaler FoxMeyer if you make it to the bottom.

Shining Light on Pharmacy Economics and the Pharmaceutical Supply Chain

My philosophy in writing this blog can be summed up with a quote from the late Senator Patrick Moniyhan: “Everyone is entitled to his own opinion, but not his own facts.” In my own way, I want to bring facts and balance to subjects that don't get sufficient or accurate coverage from traditional media outlets.

I was proud to break the story about CVS’ lawsuit with Prasco over generic pricing in CVS' Channel Power. Following coverage on Drug Channels, the story was picked up by Pharmalot, Drug Topics, The Pink Sheet, and a few Wall Street analysts. This was my big scoop of the year, even though information about the lawsuit was already in the public domain.

Retail pharmacy proved to be extremely effective at defining the legislative agenda and terms of debate, as I pointed out in Retail Pharmacy's New Power and correctly predicted in January's Lobbying for Pharmacy Profits. While an unprecedented number of pro-pharmacy bills were introduced in Congress, none of the major bills passed despite a Last Ditch Effort for the Senate’s AMP bill S.1951.

I also made some new enemies this year by analyzing how research results were misrepresented to score political points in A Misleading Study on Pharmacy Reimbursement and Hype vs. Research. See the comments beneath each post for a taste of the vitriol. I added insult to injury by pointing out how Part D is proving the value of consumer-directed healthcare.

Drug Channels was also one of the few places to read about the real economics and impact of Wal-Mart’s $4 generics program in Wal-Mart's Gain is not Walgreen's Pain and Wal-Mart adds some $4 generics (yawn).

I also tried to write about channel management from the manufacturer’s perspective. We should never forget there would be no pharmacy or pharmaceutical supply chain without the innovative therapeutics developed by pharmaceutical manufacturers. For example, I followed Pfizer’s new UK distribution model throughout 2007. Pfizer beat back the legal challenges, but then faced an investigation by the Office of Fair Trading (OFT). I overestimated the likelihood of an unfavorable OFT report in Pfizer's UK Plan in Trouble, but hopefully redeemed myself by going Behind the Scenes of Pfizer UK and then explaining what the OFT’s toothless report could mean for the U.S. marketplace.

Average Manufacturer Price (not)

Average Manufacturer Price (AMP) was one of the most popular topics on Drug Channels. We will undoubtedly be hearing much more about AMP, despite the recent injunction covered in No AMP for You!

I worked hard to give you an independent, non-partisan perspective on the impact of AMP. I provided my Comments on the AMP Final Rule just two (weekend) days after it was released and followed up a few days later by analyzing Reactions to AMP from the pharmacy industry. (They didn’t like it.) I explained Why AMP will not be Independents' day, calculated AMP's Impact on Pharmacy Profits, described why PBMs are not worried about AMP, and told you why AMP is Unloved and Unwanted (sniff) by manufacturers. I correctly predicted in May that CMS would exclude PBM rebates from the Final Rule (AMP will exclude PBM Rebates).

I also used Drug Channels to balance the doomsday visions put forth by certain pharmacy in Heretical Questions about the AMP War. Alas, this post did not win me friends at retail pharmacy trade associations, although the many comments from pharmacists indicate a grudging respect and even occasional agreement among actual pharmacists. The Illinois Pharmacist Association even conceded that Drug Channels is “thoughtful and in a lot of ways hard to argue with.”

I even managed to slip in some AMP humor in Death by AMP – an especially popular post in 2007!

The post-AWP Future

Anyone interested in the future of pharmacy reimbursement had plenty to read on Drug Channels this year.

I reviewed the Judge’s original ruling in the Average Wholesale Price (AWP) litigation last June in Comments on the AWP Decision and then followed it up by looking at the damages ruling and Judge Saris’ comments on fictitious AWPs. In my opinion, these decisions will effectively end the consideration of alternate "list price" pharmacy reimbursement models as replacements for current AWP minus models.

As I noted in ASP History Lessons, the introduction of Average Sales Price (ASP) reimbursement for Medicare Part B did not signal disaster for community oncologists or their patients. In fact, The ASP Future is Here because private health plans are already using Medicare’s ASP data for reimbursement, making me think that AMP (if ever published) will become the new pricing benchmark for retail scripts.

On January 1, 2008, CMS will pay for most Part B outpatient drugs at ASP+5%, which is a 1 percentage point drop from the current ASP+6%. It’s one more reason for pharmacies and providers to be anxious about the post-AWP future.

Counterfeiting and Security

Supply chain security was another hot topic at Drug Channels.

California’s looming 2009 e-pedigree deadline has manufacturers, wholesalers, and pharmacies scrambling to comply while also lobbying for a full or partial extension. In one particularly well-clicked post, I highlighted Virginia Herold’s trial balloon regarding a CA e-pedigree delay to 2011. Of course, she quickly backtracked from these comments, but I think a two-year delay or a phased implementation (per California Dreamin') is still very likely.

I generated some controversy by exploring the facts and myths behind much-hyped RFID solutions in RFID Un-Hype and More RFID Un-Hype. Check out the comments to those posts for some intriguing back-and-forth with DC readers.

I also attempted to present a unique supply chain spin on a few big media stories. PDUFA & Supply-Chain Security was one of very few resources to highlight the serialization requirements buried inside the Food and Drug Administration Amendments Act of 2007 (FDAAA). I even wrote about Presidential candidate John Edwards’ surprising embrace of track-and-trace technology in John Edwards and ... Pedigree?

Importation and Diversion

I am convinced that importation (a.k.a. legalized diversion) is risky due to my knowledge and experience about pharmacy supply methods. Unfortunately, mainstream media coverage does a poor job of connecting pharmacy and consumer behaviors to the patient safety dangers posed by importation. That’s why I explained the channel impacts behind importation and the fact that importation won’t really save much money.

My snarky posts about Senator Byron Dorgan – especially Consistent Inconsistency – generated fan mail from Washington, DC. (Sorry, only via private e-mail.)

I rounded out my coverage by writing about the fallacy of safe Canadian sourcing (Canadian Dreamin' and Diversion from Canada via China), how and why internet pharmacies Import Chinese Counterfeits, and why you should not buy Fosamax from Tony Soprano. Hey, never say that I don’t provide real-world tips!

Unfortunately, two of the three big drug wholesalers (AmerisourceBergen (ABC) and Cardinal Health (CAH)) faced DEA suspensions for supplying controlled substances to diverting pharmacies. Cardinal has now had suspensions at facilities in Washington, Florida, and New Jersey despite its December 2006 agreement to monitor pharmacies more carefully. I’m sure we’ll learn much more about this story in 2008.

And now a word from your host

I make Drug Channels freely available as part of my mission to educate, inform, and challenge people. I feel fortunate to have been similarly educated in many private emails and conversations that were sparked by the blog. So please keep emailing me with topics, questions, or news articles. I respond personally to all emails.

I am also gratified that readership of Drug Channels soared in 2007. Each week, there are a few thousand visitors on the site compared to only a few hundred in January. Drug Channels is frequently cited by many bloggers and reporters.

Your Reward: FoxMeyer Nostalgia

Congratulations for making it to the bottom of my 2007 review!

Enjoy this jaw dropping clip of a “motivational” meeting led by the senior executives from once-mighty FoxMeyer, which was acquired by McKesson through bankruptcy court proceedings in 1996. The hilarity starts at 1:23. Ah yes, the glory days when top execs would lip sync and dance on stage. I particularly enjoyed “Tim Beauchamp, Distribution Man” at 4:03, although he was a bit pitchy.

Hat tip to On Pharma.
I'll be back during the week of January 8. Until then, I wish you a healthly and happy new year!

All the best,


  1. Adam: just a quick note at year-end from one of the 'few thousand visitors' that jumped on board in 2007. I appreciate the time and thought you put into this...retail pharmacy and distribution are topics that I am still trying fully understand and appreciate. Your blog helps me track the issues and ask questions.

    Thanks have a great break!

    PS: Re: Foxmeyer clip: Although those things are always hard to watch. The writing was pretty clever given some of the other corporate stuff I've seen (and been involved with!). Makes you appreciate real actors and performers all the more!

  2. Adam,

    I started following your blog on retail pharmacy and the distribution channel side. While I have not agree with some of your leanings(thoughts) you have been a very good source of information about the subjects. Thank you for the time and effort that goes into you "Drug Channels" 2008 will be very interesting. 1. Will retail pharmacy finally make a stand with regard to their prescription business and 2. How will the wholesalers respond to the constant erosion of their distribution side with "independents"?

  3. Add me to your list of fans, Dr. Fein. You do a great job on the blog.


  4. To Anonymous #1:
    Yes, the Foxmeyer lyrics were clever, but I don't recommend it for your next sales meeting - especially in the era of youtube!

    To Anonymous #2:
    1. They already are (see the WAG vs. Caremark dispute)
    2. With great difficulty
    More on both topics next year!

    To rj:


  5. Adam,

    Defintely a great year of posts. Thanks for making it both informative and amusing.