In this issue:
- Walgreen's Billion-Dollar Blunder (from the front page of today's Wall Street Journal)
- Pharmacies’ Compounding Profits
- A Useful Primer on 340B
- Déjà Vu for Bad Medicare Part D Ideas
Walgreen Shakeup Followed Bad Projection, The Wall Street Journal
Yikes! This is certainly not a good reason to see yourself on the front page of the Wall Street Journal. This article reveals the behind-the-scenes machinations behind Walgreen's "billion-dollar forecasting error" and recently-announced profit shortfall. According to the article: "The bottom line: Walgreen hadn't factored in, among other things, a spike in the price of some generic drugs that it sells as part of annual contracts." So, Walgreen's execs were unaware of the industry-wide generic inflation trend, which I document in Retail Generic Drug Inflation Reaches New Heights? Oops?
From the article:
Walgreen directors have told investors they were stunned by the change in the pharmacy forecast, which was for earnings before interest and taxes. Stefano Pessina, the company's largest shareholder and a director, has told other investors he wasn't permitted to see the forecasts before they were distributed to the board. The 73-year-old Mr. Pessina, who holds roughly an 8% stake, was unavailable for comment.
In recent meetings, investors say, Walgreen directors told them that forecasts given to directors in April were "inadequate" and that the company's finance and pharmacy units weren't "talking to each other."Don't worry about CFO Wade Miquelon, who was reportedly behind the "botched numbers." He will get severance of $3.2 million and a performance bonus (!) of nearly $1.2 million. I expect more senior management departures to come.
Pharmacies Turn Drugs Into Profits, Pitting Insurers vs. Compounders, New York Times
This New York Times article delves into the controversy over compounding. Payers and PBMs claim that pharmacies are reaping outrageous profits by compounding with unnecessary ingredients, leading to higher costs vs. readily-available products. Pharmacy owners disagree, pointing to patients’ need for “special formulations.” Hmmm. More to come from this battle. P.S. The article has a fantastic illustration!
The 340B Prescription Drug Discount Program: Origins, Implementation, and Post-Reform Future, Rand Corporation
Have you been wondering what the 340B fuss is all about? This RAND white paper has a useful overview of the program’s structure, history, and key controversies. If you are interested in my $0.02, I’ll be presenting “The 340B Drug Pricing Program: Overview, Outlook, and Impact on Managed Care” at AMCP Nexus 2014 in Boston. Click here for session details.
Groundhog Day for Bad Ideas in Medicare Part D, Roll Call
The battle over Any Willing Pharmacy (AWP) and preferred pharmacies is not over. The National Community Pharmacists Association (NCPA) is pushing H.R. 4577 (The Ensuring Seniors Access to Local Pharmacies Act), an anti-narrow network bill that has lukewarm Congressional support. This Roll Call article summarizes why such a bill is a bad idea. It echoes the points from Straight From the FTC: Why Any Willing Provider Laws Hike Costs. Despite the article’s title, the authors erroneously omit any Bill Murray references. I suppose this is one time where Drug Channels really fails to capture the true excitement of a large squirrel predicting the weather.
I still get a chuckle from this one. Click here if you can’t see the video.
If you insist on some pharma humor, check out GlaxoSmithKline Releases New Drug To Treat People Who Just Feel Sort Of Weird Sometimes.