Drug Channels delivers timely analysis and provocative opinions from Adam J. Fein, Ph.D., the country's foremost expert on pharmaceutical economics and the drug distribution system. Drug Channels reaches an engaged, loyal and growing audience of nearly 100,000 subscribers and followers. Learn more...

Thursday, December 20, 2012

2012 Drug Channels Year in Review

Dear Drug Channels reader,

This is my 145th (and final) post for 2012. Thank you for welcoming me into your inboxes and browsers this year. I also appreciate the many people who took time to engage in often-spirited discussions below the articles.

Below are 2012’s top 10 most viewed articles. Looking over the list, you can see what an eventful 12 months it's been. There's been no shortage of important drug channel developments!

Drug Channels will return in 2013. In the meantime, please enjoy the video greeting below from my sombrero-sporting alter ego. As you can see, I’ve learned a few new dance moves since last year!

All the best to you and your family,

Tuesday, December 18, 2012

Drug Channels News Roundup: December 2012 (Gangnam Style)

The holidays are here. Before you hit the mall, check out this hand-picked selection of notable news stories from around the Drug Channels universe.
  • A Lump of Coal—Should plan sponsors be saving even more money when brands lose exclusivity?
  • Anti-Stocking Stuffer—90-days supplies can be wasteful, but mail is no better (or worse) than retail
  • The Ghost of Health Reform Future—A look at EHB benchmarks show skimpy coverage in some states
  • Reindeer Games—Walgreen sells a small wholesale business
Plus, the inevitable pharmacy-themed "Gangnam Style" video has arrived, courtesy of some UCSF pharmacy students with waaaaaay too much time on their hands. Enjoy?

Monday, December 17, 2012

Specialty Pharmaceuticals: A Forum for Payers

Today, we welcome back CBI’s 10th Annual Specialty Pharmaceuticals, Oral Therapies and Injectables - A Forum for Payers conference as a Drug Channels sponsor. The event is being held at Planet Hollywood in Las Vegas on January 30 and 31, 2012.

The agenda includes a mix of payers and specialty pharmacies, so I expect lively conversations and lots of learning. There will be speakers from Acorda Therapeutics, Artemetrx Excellus Health Plan, Dean Health Plan, Diplomat Specialty Pharmacy, Kaiser Permanente, Medical Health Plans of America, PriorityHealth, RegenceRx, Travelers Insurance, and WellPoint.

Read more in the official description below or view the website http://www.cbinet.com/conference/fc13120.

Thursday, December 13, 2012

Pharmacy Profits Over the Generic Life Cycle: Explaining the NARP-NADAC Data

Tuesday’s article—Surprise? CMS Computes and Publishes Pharmacy Prescription Profit Margins—generated a lot of email about the new National Average Retail Prices (NARP) and National Drug Acquisition Cost (NADAC) data sets. In particular, the data table showed average gross profit dollars (NARP minus NADAC) that were lower for generic prescriptions ($9.27) vs. brand-name prescriptions ($11.98). This result seems counter to everything that we all think we know about pharmacy margins.

The apparent discrepancy is resolved by comparing profit levels of  newly-launched generics vs. more-common older generics. Below, I discuss the following:
  • Pharmacy profitability from a generic drug varies over the drug’s lifecycle.
  • As shown using the examples of Lipitor and Plavix, a new generic provides pharmacies with gross profits that are 2-3 times larger than an equivalent brand prescription.
  • 7 of the 10 most widely-dispensed generic drugs have average prescription prices below $10, so potential gross profits are correspondingly low.
The generic lifecycle profit framework also highlights the generic wave’s importance for pharmacies. As long as new generics are launching, life is grand. Once the wave peters out in 2016, margin pressure will be brutal for the retail pharmacy industry.

Tuesday, December 11, 2012

Surprise? CMS Computes and Publishes Pharmacy Prescription Profit Margins

Last week, Myers and Stauffer, the contractors collecting pharmacy acquisition costs and revenue data for the Center for Medicare and Medicaid Services (CMS), unexpectedly presented average per-prescription pharmacy profit margins, by payer and prescription type. Click here to view the slide deck. (See pages 64-67.)

Nobody expected this CMS inquisition. They didn't wait very long to follow through on the implied visibility to pharmacies’ prescription economics, as I predicted in Transparency is Here! CMS Exposes Pharmacy Prescription Profit Margins.

Below, I summarize the new gross profit and margin computations based on NADAC and NARP data, along with adjusted numbers that account for the acquisition cost survey’s flaws. Highlights:
  • A pharmacy’s average gross profit per prescription is $12.50.
  • Gross margins on brand prescriptions average about 10%, while gross margins on generic prescriptions average about 50%.
  • Pharmacies continue to earn more from Medicaid than other third-party payers.
  • Cash pay prescriptions, most of which are generic, yield higher margins than third party prescriptions.
  • The response rate for the acquisition cost survey is surprisingly high, especially among independent pharmacy owners.
Perhaps we shouldn't be surprised. After all, CMS’ chief weapon is surprise and fear. No, wait, their two weapons are fear, surprise, and ruthless efficiency. No, no, their *three* weapons are...Wait, I'll start again...

Monday, December 10, 2012

Join me at the PCMA Specialty Pharmacy Business Forum

I am pleased to welcome PCMA’s Specialty Pharmacy Business Forum (SPBF) as a Drug Channels sponsor. The event will be held at the wonderful Wynn Las Vegas on March 26-28, 2013.

Based on last year's inaugural event, I consider the SBPF to be a must-attend meeting for anyone connected to the specialty channel—manufacturers, pharmacies, payers, PBMs, wholesalers, and others. Full details from PCMA below.

Hope to see you in Las Vegas!

Friday, December 07, 2012

CVS is going to Brazil!

According to press reports, CVS plans to samba to Brazil by acquiring Onofre, the eight-largest pharmacy chain in Brazil. See CVS said in talks to buy Brazil Onofre for $313M. If you can read Portuguese, see Grupo CVS negocia a compra da Onofre.

According to IMS Health, Brazil's market (as measured by manufacturers' revenues) was $29.9 billion in 2011, and is projected to grow by 12-15% through 2016.

As far as I know, this would be CVS' first major international expansion. It's a sensible expansion of their strong core pharmacy business and provides a clear contrast to Walgreen's approach. The deal is tightly focused on retail pharmacy (without any distracting wholesale assets). Onofre can be readily acquired without any complex financial arrangements and provides a manageable platform to learn about this fast-growing market.

Full story below. Que gostoso!

Thursday, December 06, 2012

Growing Pains: The Trouble with Being an Emerging Pharma Player Today

Today’s guest post is from Becky Holloway, Product Marketing Manager at Revitas, a Drug Channels sponsor. In this post, Becky describes the compliance and contract management challenges facing mid-sized pharmaceutical manufacturers.

On December 13, Revitas will be sponsoring a live webinar entitled “A Survival Guide for Emerging Growth Pharmaceutical Companies”. Becky will be joined by Eric Newmark of IDC Health Insights to discuss the state of the pharmaceutical mid-market today. Becky will also talk with Stephanie Kupski of Cangene Corporation, an emerging pharmaceutical manufacturer. Check it out!

Wednesday, December 05, 2012

A New Peek at HMO-PBM Relationships

The Sanofi Managed Care Digest Series just released its 2012-13 HMO-PPO Digest, a great compendium of facts and data about the world of Health Maintenance Organizations (HMOs). The report is free with site registration.

The 2012-13 Digest provides interesting— and as far as I know, unique—how HMOs work with Pharmacy Benefit Managers (PBMs). A few highlights:
  • HMOs are more than one-quarter of the total insurance market. Medicare and Medicaid HMOs are the fastest-growing part of the HMO business.
  • HMOs increasingly outsource benefit management services to PBMs.
  • HMOs rarely adopt a PBM’s national formulary.
Hopefully, this post will give the wonks among us (ahem) useful publicly-available insights on PBM’s relationships with their clients. Let me offer a hearty Drug Channels "Thank You" to sanofi-aventis for again sponsoring this research.

Tuesday, December 04, 2012

Does the CBO now support co-pay cards for Medicare Part D?

Last week, the Congressional Budget Office (CBO) released an important new memo: Offsetting Effects of Prescription Drug Use on Medicare’s Spending for Medical Services.

After reviewing the evidence, the CBO concluded that prescription drugs can reduce overall healthcare costs—at least in Medicare. The CBO can now officially account for prescription drugs’ beneficial effects in budget forecasts. For example, the cost of closing the Medicare Part D coverage gap just dropped by 41%!

But by supporting the economic benefits of prescription drugs, the CBO may have inadvertently provided an argument to reverse the long-standing federal program ban on co-pay offset programs, a.k.a., co-pay cards, co-pay coupons. Two-thirds of Medicare Part D prescription drug plans (PDPs) have five-tier designs with high out-of-pocket co-insurance. Does the CBO’s change of heart mean co-pay offset programs should be encouraged, not banned, from federal programs?

Read on and let me know if you agree.