Below, I analyze the latest data on how pharmacy dispensing channels have changed over the past five years. Key insights:
- Retail chains now dispense nearly 6 out of 10 prescriptions.
- Mail pharmacies have experienced declining prescriptions, but have soaring purchases of specialty drugs.
- Contrary to popular belief, independent pharmacies continue to grow.
FIVE YEAR TRENDS
The QuintilesIMS “Invoice spending” data reflect pharmacies’ “Purchases at Invoiced Prices,” which is how I will refer to the data. See my comments below for how you should properly interpret the QuintilesIMS financial numbers, which measure invoiced amounts paid to wholesalers by their pharmacy customers.
The chart below shows our analysis of growth in purchases and prescriptions by dispensing format from 2011 to 2016.
[Click to Enlarge]
As you can see, prescription growth patterns differ significantly from the purchase volume growth trends.
- Chain stores. This category includes chain drugstores and mass merchants with pharmacies. Prescriptions filled at chains have increased more quickly than they have in other formats. Chain stores dispensed 57% of all 30-day equivalent prescriptions in 2016, but they accounted for only 41% of purchases at invoiced prices.
- Mail pharmacies. Total prescriptions dispensed by mail pharmacies have declined significantly. Mail pharmacies, however, have increased purchases, driven by the dispensing of specialty medications. Mail pharmacies dispensed only 10% of all 30-day equivalent prescriptions in 2016, but they accounted for 31% of purchases at invoiced prices.
As I describe in The Top 15 Pharmacies of 2016, PBM-owned and insurer-owned central-fill mail pharmacies with substantial specialty operations constitute six of the of the industry's largest 15 pharmacies. FYI: The shift away from mail is another headwind for Amazon’s pharmacy ambitions.
- independent pharmacies. Prescriptions dispensed by independent pharmacies grew more slowly than did other formats—but, notably, they did not decline. What’s more, purchases by independent pharmacies exceeded that of other retail formats, likely due to fast-growing independent specialty pharmacies. So much for the myth of the vanishing independent pharmacy sector!
APPENDIX: DATA DISAMBIGUATION
Media stories widely misreported the QuintilesIMS data as "drug spending."
However, the data do not represent actual spending by any third-party payer. In fact, the data measure invoiced amounts paid to wholesalers by pharmacies, hospitals, and other healthcare providers. QuintilesIMS defines “invoice spending” to be “based on QuintilesIMS reported values from wholesaler transactions measured at trade/invoice prices and exclude off-invoice discounts and rebates that reduce net revenue received by manufacturers.”
- “Invoice spending” data are not equivalent to a third-party payer’s net spending or the figures reported in the U,S, National Health Expenditures data. A plan sponsor’s net spending is roughly equal to: 1) pharmacy or hospital revenues minus the share of the manufacturer’s rebates passed through to the plan sponsor (per this article) 2) minus the patient’s cost share (copayment or coinsurance) 3) plus any spreads or administrative fees earned by a pharmacy benefit manager (PBM).
I suspect the data are particularly inaccurate for measuring payers’ spending on drugs administered in hospital outpatient settings. As I show in Latest Data Show That Hospitals Are Still Specialty Drug Profiteers, hospitals inflate specialty drug costs by 200% or more above invoice costs.
- The QuintilesIMS data are not equal to pharmacy revenues, which include channel margins. They also do not measure a pharmacy’s or hospital’s cost of goods, because wholesalers provide off-invoice discounts and rebates to their retail and non-retail customers. The data provided by dispensing channel also exclude such other cost-of-goods reductions as pharmacy buying group rebates or 340B Drug Pricing Program discounts.
Now you know!