Tuesday, November 20, 2012

Drug Channels News Roundup: November 2012

Here's a pre-Thanksgiving news roundup, to stretch your mind before stretching your stomach later this week. In this issue:
  • Debunking ACOs: A must-read article
  • Attacking ASP: Blaming shortages on reimbursement economics
  • Fearing the DEA: Now attacking shipping companies. Seriously!?!
  • Reviewing Track & Trace: A holiday wish for a national system
Plus, the bizarre-but-true story of how former Kinray owner Stewart Rahr just got banned from upscale sushi chain Nobu. Absolutely hilarious!

Accountable Care Organizations May Have Difficulty Avoiding The Failures Of Integrated Delivery Networks Of The 1990s
If you read only one article about Accountable Care Organizations (ACOs), make it this one. Lawton Burns and Mark Pauly, both professors at the Wharton School, provide a devastating takedown of the ACO hype. They write:
Accountable care organizations face daunting challenges. First, it is unclear what capabilities they possess to affect quality and cost. Second, even if these capabilities exist in theory, it is unclear whether provider organizations that excel at them will actually emerge.
The most dangerous phrase in the English language? This time is different. BTW, Dr. Burns edited The Business of Healthcare Innovation, which I reviewed last month.

Not Enough Cancer Drugs, Too Many Price Controls
This Wall Street Journal editorial, co-authored by Rep. Bill Cassidy (R-LA), joins the chorus of people linking Average Sales Price (ASP) reimbursement to generic injectable shortages. For background, see What’s Behind the Drug Shortage Epidemic, in which I highlight the distorted economic incentives behind generic production. Senator Orrin Hatch (R-UT) has proposed changing reimbursement for generic injectables from ASP + 6% to Wholesale Acquisition Cost (WAC) for injectable generics with 4 or less manufacturers. See Ending Drug Shortages by Fixing Reimbursement. According to Drug Discount Monitor, Rep. Cassidy has drafted similarly-motivated legislation that would exempt certain generic injectable drugs from 340B drug discounts. Stay tuned to this debate.

Pain-Pill Probe Targets FedEx, UPS
Believe it or not, the Drug Enforcement Administration (DEA) is now targeting FedEx and UPS in its misdirected attack on the pharmaceutical supply chain. According to FedEx, the shipments in question involved "legal drugs with a valid prescription from online pharmacies licensed by the DEA." A FedEx spokesperson states (correctly, IMHO): "We are not law enforcement, we are not doctors and we are not pharmacists." My exclusive research has revealed that operators of online pharmacies also drive automobiles and consume human food, so I expect the DEA will be targeting ExxonMobil and Wegmans next. To paraphrase Martin Niemöller: "First they came for the wholesaler, and I didn't speak out because I wasn't a wholesaler..."

FDA and California Board of Pharmacy Talk Pedigree at Annual HDMA Track and Trace Conference
Here’s a good summary of last week’s Track and Trace Technology Seminar, held by the Healthcare Distribution Management Association (HDMA). The article highlights the clear consensus for a national pedigree system among industry participants, the FDA, and even the California Board of Pharmacy. I presume nothing will happen while the U.S. careens toward the fiscal cliff, but perhaps in 2013?


Billionaire banned from Nobu after 'threatening to kill manager because he was denied his favorite table'
Long-time industry participants surely remember Stewart Rahr, who got a $1.3 billion check when he sold Kinray to Cardinal Health. According to this Daily Mail article, Rahr threatened to kill the manager at Nobu because he was denied his favorite table. (Boo hoo!) Then, he sent a mass email to a bunch of celebrities (Arnold Palmer, Andre Agassi, Donald Trump, Ray Romano, Leonardo DiCaprio, Michael Jordan, et al) along with a Forbes reporter, who reprinted his entire insane ranting email in this article. A sample verbatim quote:
"WHEN I RECENTLY SOLD MY company last year I EMPLOYED almost 2,000 employees n REVENUES of $5,000,000,000 (thats what 5 BILLION (W AN ‘B’ AS IN BOY NOT AN ‘M’ AS IN MAN…"
Apparently, Mr. Rahr's billions are still not enough to buy class and dignity. Yikes!


I hope you enjoy a restful and happy holiday. We’re having a traditional Thanksgiving at my house. We’ll be inviting the neighbors over, giving them smallpox and stealing their houses.


  1. When they first started talking about ACO's I wondered how the Doc's would reduce costs without increasing their litigation risk.  The Doc thinks test A is sufficient and cost saving, but they used to do A and B.  Patient's lawyer thinks the doc should have been more vigilant and done both. They settle out of court and the ACO ends up in worse shape than before.  

    The medical equivalent of the Kobayashi Maru.

  2. I recently explained the Kobayashi Maru to my kids. It's a depressingly good metaphor for healthcare reform.

    For those who don't know, see this wikipedia entry.

  3. Depressingly good indeed!  But I wonder if it's just a metaphor...