Tuesday, July 27, 2010

Drug Channels News Roundup: Late July

Here's a rundown of noteworthy news stories from the Drug Channels universe in July.

In this edition, we look at industry perspectives on a replacement for Average Wholesale price (AWP), an investment analyst recommends CVS Caremark (NYSE:CVS) because it may split up, how health insurance plans are experimenting with preferred networks, and Medco Health Solutions (NYSE:MHS) wins the Ironic Deal of the Year. Plus, the Motley Fool explains why McKesson’s compensation committee "should be ashamed of themselves." Doh!

Competing Stakeholders Disagree Over the Future of AWP Drug Pricing Benchmark and Possible Replacements
This article has a useful cross-section of industry viewpoints on a reimbursement benchmark to replace Average Wholesale Price (AWP). Alas, the real problem is not with reimbursement for brand-name drugs because of current class-of-trade discount structures. (See pages 26-27 of my wholesaler report.) The painful disagreements will be about a benchmark for generic drugs, which is where excess reimbursement still exists. See Alabama: More Momentum for Cost-Plus for Alabama’s Actual Acquisition Cost (AAC) solution.

The Case for CVS Caremark
The Chief Investment Strategist at an asset management fund argues that CVS Caremark’s stock is a good investment given current valuations. His rationale? “The New CEO is not tied to the PBM business which could mean spinoff or divesture if division continues to hold back rest of company at some point in the future.” Sounds familiar.

Insurers Push Plans That Limit Choice of Doctor
According to The New York Times: “the country’s biggest insurers are promoting affordable plans with reduced premiums that require participants to use a narrower selection of doctors or hospitals.” Sound familiar? If not, re-read Walmart's Pitch for Smaller Pharmacy Networks.

Medco Wins Wal-Mart Drug-Benefit Account, Effective Jan 2011
Speaking of Wally World, Walmart (NYSE:WMT) will be shifting its own PBM business from NextRx (Express Scripts) to Medco. The details are not public, but I see no mention of an "access-based network." Mmmm, delicious irony, how I savor your sweet taste...

Why Compensation Should Matter to You
The Motley Fool provides a stock investor’s perspective on executive compensation. Last line: “McKesson (NYSE: MCK) is getting it all wrong. This is a company with only a $19 billion market cap and yet the CEO made over $30 million in each of the past three years based on earnings per share, a measure that can be gamed. The compensation committee at McKesson should be ashamed of themselves.” Food for thought during your next fee-for-service negotiation.


  1. AnonymousJuly 27, 2010

    Great update. LOL on Mckesson CEO comp comment, but I'd be a fool to mention it. I can only take so much screaming from a certain individual there.

  2. AnonymousJuly 27, 2010

    How can anyone say Caremark is holding back CVS? At the time CVS announced the merger its stock was priced at $29 per share. Now it is around $30 per share. Take a look at Walgreen's stock price during the same period of time -- a 40% hair cut. Maybe Walgreen's valuation then was a little excessive but it perhaps cannot explain all the 40% difference. Guys, CVS is valuable because of Caremark, not without it.