As you will see below, mail and specialty pharmacies’ purchases of products that are eligible for 340B discounts have grown by an incredible 56% per year since 2017. That’s about six times faster than the overall mail and specialty market.
Consequently, specialty pharmacies have gained a greater share of the 340B market. Businesses owned by a few multi-billion-dollar, for-profit, publicly traded companies—Cigna, CVS Health, and UnitedHealthcare—are the primary beneficiaries of this astonishing growth.
To help you make sense of the market changes, I have also included a brief video to explain 340B’s growth and the expansion of contract pharmacies. The video is excerpted from my recent Drug Channels Update: 340B Controversies and Outlook video webinar.
Grab some popcorn and enjoy the show!
Today’s article is the third in our 2021 series exploring the 340B Drug Pricing Program. Here are the first two installments:
For broader background on 340B’s role in the pharmacy and PBM industries, see section 11.5. of our 2021 Economic Report on U.S. Pharmacies and Pharmacy Benefit Managers.
SPECIALTY MOVES IN
In DCI’s review of the 340B contract pharmacy market, we noted that the three largest PBMs—CVS Health (including Caremark and Aetna), Express Scripts, and OptumRx—collectively have 142 non-retail mail and specialty pharmacy locations acting as 340B contract pharmacies.
Combined, these locations have more than 25,000 relationships with covered entities. Consequently, the Big Three PBMs’ non-retail pharmacies account for only 0.5% of 340B contract pharmacies—but 18% of 340B contract pharmacy relationships. (CVS Health and OptumRx operate a further 49 infusion pharmacy locations, which are excluded from these totals.)
What’s more, these same PBMs have increased their dominance over specialty drug channels. For 2020, the three largest PBM-owned specialty pharmacies accounted for more than 60% of total prescription revenues from pharmacy-dispensed specialty drugs. (See DCI’s Top 15 Specialty Pharmacies of 2020: PBMs Expand Amid the Shakeout—While Walgreens’ Outlook Dims.)
THE BIG GROW BIGGER—AND FASTER
Counting the number of locations, however, doesn’t tell us how quickly specialty pharmacies are growing as share of the 340B program’s sales.
The chart below shows the average annual growth in the value of pharmaceutical purchases for three different channels: hospitals and clinics; retail pharmacies; and mail pharmacies (which now dispense primarily specialty drugs). The data compare (1) non-340B product purchases with (2) purchases of products eligible for 340B discounts. These data are presented at list prices, thereby removing the effect of discounts and rebates.
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IQVIA was kind enough to provide us with the detailed data behind this chart. You can also review IQVIA’s summary of its data here: Growth of the 340B Program Accelerates in 2020.
As the chart shows, sales under the 340B program are growing much more quickly than the rest of the market. For each channel, growth in the 340B program far outstrips growth in the overall market. These data rebut critics who attribute 340B’s expansion to overall market growth.
The growth disparity is especially prominent for mail pharmacies. Purchases of non-340B product has grown at an average annual rate of 9%. However, purchases of products eligible for 340B discounts has been growing at an outstanding average annual rate of 56% from 2017 through 2020!
This growth translates into mega-profits for PBM-owned specialty pharmacies, as I explain in How Hospitals and PBMs Profit—and Patients Lose—From 340B Contract Pharmacies.
In the video below, I provide a brief explanation of the factors behind 340B Drug Pricing Program’s growth and the expansion of contract pharmacies. Click here if you can’t see the video.