Thursday, August 01, 2019

Specialty Pharmacies and PBMs Hop On the 340B Money Train

I recently documented the astounding growth in the number of pharmacies participating in the 340B Drug Pricing Program.

Below, we turn our attention to specialty pharmacies and PBMs in the 340B program. We have updated our exclusive analysis of how the biggest independent and PBM-owned specialty pharmacies participate as contract pharmacies within the 340B program.

The five largest specialty pharmacies are owned by CVS Health, Express Scripts, OptumRx, Walgreens Boots Alliance/Prime Therapeutics, and Diplomat Pharmacy. As you will see below, these specialty pharmacies account for more than 20% of total contract pharmacy relationships with 340B hospitals and other covered entities. Yet they represent only 1% of 340B contract pharmacy locations.

We also review 340B participation by other large independent pharmacies.

Large, multi-billion-dollar, for-profit companies don’t participate in government programs unless there is money to be made. So next week, we’ll follow the prescription dollar to explore how specialty pharmacies and covered entities profit from 340B prescriptions.

340BACKGROUND

Today’s article is part of our 2019 exploration into the hidden mysteries of the 340B Drug Pricing Program. Here are two of our related previous articles:
For broader background on 340B’s role in the pharmacy industry, see section 11.5 of our 2019 Economic Report on U.S. Pharmacies and Pharmacy Benefit Managers.

340BIGGEST

The table below summarizes the 340B contract pharmacy involvement of the top five specialty pharmacies, as identified in The Top 15 Specialty Pharmacies of 2018. For comparison, the table also includes non-specialty pharmacies operated by the parent companies of the specialty pharmacies.

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Observations:
  • As of mid-2019, specialty locations associated with the top five specialty pharmacies are operating a combined 319 locations that act as contract pharmacies for 340B covered entities.
  • These locations have a total of 17,365 contractual relationships with these entities. That equates to more than 20% of all contract pharmacy relationships established by 340B covered entities. The figure jumps to 56% of all relationships when we include retail and mail locations.

    Specialty pharmacies have significantly expanded their 340B presence, as indicated by the jump in the number of relationships with 340B covered entities shown in the chart below.
[Click to Enlarge]
  • Each specialty pharmacy location has dozens or even hundreds of contract pharmacy relationships. This is unsurprising, because specialty pharmacies typically fill prescriptions from a central location and then deliver the products directly to a patient’s home. For example, the typical CVS Specialty location has agreements with 217 covered entities, a typical Accredo pharmacy has agreements with 110 covered entities, and a typical AllianceRx Walgreens Prime location has agreements with 426 covered entities.
  • Walgreens has more than 100 stand-alone local community specialty pharmacies that are branded as Community, A Walgreens Pharmacy. Each location acts as a contract pharmacy for an average of eight 340B covered entities. That figure is consistent with a typical non-specialty retail pharmacy.
  • The table also identifies the retail and mail pharmacies operated by the parent organizations of the largest specialty pharmacies. These locations have many fewer relationships per location. The non-specialty pharmacies of CVS and Walgreens have an average of three or fewer relationships per location.
  • In addition to the five companies shown above, many other specialty pharmacies participate as 340B contract pharmacies. Among the top 15 specialty pharmacies, these include Kroger Specialty Pharmacy (143 relationships), McKesson’s Biologics (27 relationships), U.S. Bioservices (23 relationships), SenderraRx (13 relationships), PANTHERx (one relationship), BioPlus (91 relationships), and Onco360 (562 relationships).
We estimate that nearly 10% of all specialty prescriptions are dispensed by 340B contract pharmacies. That makes this channel one of the fastest-growing components of the 340B program. Unfortunately, there is no public data on the share of 340B prescriptions for individual pharmacies.

But as you’ll see in an upcoming article, there is a lot of money to made being a 340B contract pharmacy for specialty prescriptions. All aboard!

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