Tuesday, November 24, 2020

Drug Channels News Roundup, November 2020: Rebate Rule Redux, MFN (maybe), Amazon’s Pharmacy Customers, Drug Spending, GPO M&A, and RxTrace

Happy Thanksgiving, everyone! Before you stretch your stomach, stretch your mind with this extra-stuffed helping of food for thought. In this issue:
  • Rebate rule redux
  • Most Favored Nation and healthcare benchmarking
  • Amazon’s pharmacy customer opportunity
  • Drug spending realities updated
  • GPO consolidation
Plus, I congratulate Dirk Rodgers of RxTrace on his retirement.

P.S. Join the more than 10,600 followers of my curated links published on @DrugChannels on Twitter. My recent tweets have highlighted: doctors against step therapy, distribution of COVID-19 therapies, biosimilar savings, copay accumulator data, prospects for smaller PBMs, the new transparency rule, specialty pharmacy profit metrics, the future of oncology practices, and an update on Diplomat founder Phil Hagerman. You can also join my more than 13,500 followers on LinkedIn.

Are We Gearing Up for a Drug Rebate Rule Instant Replay?, The Evidence Base
vs. Going Through Regulatory Withdrawal, Yale Journal on Regulation

Last Friday, the Department of Health & Human Services (HHS) released a final rule to reform rebates in Medicare Part D, a.k.a. the rebate rule. Recall that one of President Trump’s executive orders from July asked the Secretary of HHS to “complete the rulemaking process he commenced.”

This was surprising, in part because the administration appeared to withdraw its original proposal in July 2019.

The big question: Was the rebate rule actually withdrawn?

Consultant John O’Brien (who worked on the 2019 proposed rule) and Kelly Cleary, a lawyer, argue that the rule was not technically withdrawn, because there was no formal notice published in the Federal Register. Law professor Bridget Dooling disagrees, arguing that the answer is murky given the public comments and communications.

I’m not a lawyer, so I can’t judge who’s right. But there will surely be a major legal battle over administrative procedures, because the rebate rule was finalized in the last days of the Trump administration. More to come.

P.S. Did you catch the tribute to Dan Best that was hidden in the HHS press release?

What drives health spending in the U.S. compared to other countries, Peterson-KFF Health System Tracker

Last Friday, HHS also released its Most Favored Nation model as an Interim Final Rule. This half-baked policy faces a perilous legal journey that will likely prevent it from ever being implemented.

But it raises an intriguing question: Which parts of healthcare are more expensive in the U.S. compared with those of other countries?

Answer: Everything!

The chart below compares U.S. health spending with that of other comparable nations in the OECD. As you can see, the U.S. spends twice as much per capita as other countries. Notably, the “prescription drugs and medical goods” category accounts for 13% of U.S. spending, but 16% of other countries’ spending.

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As the authors note: “Most of the additional dollars the U.S. spends on health compared to peer nations goes to providers for inpatient and outpatient care.” Perhaps this explains why physicians and hospitals seem to love reference pricing for drugs—but never propose benchmarking their fees and salaries to other countries’ rates. Hmm …

BTW, this is not a data aggregation issue, because pharmaceuticals account for a mere 6% of hospitals’ operating expenses.

The 2020 Pharmacy Satisfaction Pulse Survey, Boehringer Ingelheim

Last week, I analyzed Amazon's latest pharmacy announcement in Disruption Delayed: Making Sense of Amazon’s Latest Pharmacy Moves.

Let’s examine current Amazon usage by pharmacy customers. The link above has data from a survey of more than 33,000 U.S. pharmacy consumers (people who filled at least six prescriptions in the previous year and also shopped at a pharmacy within a 30 day period). The surveys were completed between April and July 2020. Drug Channels salutes Boehringer Ingelheim for having sponsored this valuable research.

As you can see from the chart below, more than 70% of U.S. pharmacy customers buy from Amazon at least once per month. Three-quarters of pharmacy customers are Amazon Prime members.

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These data don’t suggest that Amazon will automatically become successful with its non-disruptive pharmacy efforts. However, they do demonstrate the scale of Amazon’s customer base.

Projections of the Non-Retail Prescription Drug Share of National Health Expenditures, Altarum

Despite what you may have heard, prescription drugs are (and will continue to account for) about 14% of total U.S. healthcare spending. Altarum provides a credible source for this figure, as you can see from the chart below:

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Note that the government’s National Health Expenditure data include only outpatient prescription spending on self-administered drugs. (See my review here.) Altarum’s analysis adds provider-administered drugs from both inpatient and outpatient settings.

The lesson: Pharmaceuticals account for 14% of U.S. healthcare spending, but absorb 99% of the political heat.

Vizient to Acquire Intalere, Expanding its Supply Chain Capabilities, Business Wire

Channel consolidation continues. Vizient, the largest provider group purchasing organization (GPO), is acquiring Intalere, the fourth largest.

The table below shows our estimates of each GPO’s size and scope. These data appear as Exhibit 54 from our new 2020-21 Economic Report on Pharmaceutical Wholesalers and Specialty Distributors:

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The Future of RxTrace Has Arrived, RxTrace

Dirk Rodgers, author of the RxTrace blog, has announced his retirement. I’ll miss Dirk’s insights and commentary.

I’ve had the pleasure of working with Dirk for almost 15 years. He’s been my go-to expert on the Drug Supply Chain Security Act (DSCSA). We co-authored State drug importation laws undermine the process that keeps our supply chain safe. (Still true, BTW.)

Enjoy your well-deserved retirement, Dirk!

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