Tuesday, April 26, 2022

Drug Channels News Roundup, April 2022: 340Boom, 340B Profits for Pharmacies & PBMs, Fixing Insulin, Walgreens’ Robots, and Doctors’ Day

Baseball season is in full swing! Oil up your glove, lace up your cleats, and let's run the bases around this month's news stories. Remember: Sometimes you win, sometimes you lose, and sometimes it rains.

In this issue:
  • Green Monster: The 340B market hits new highs in 2021
  • Not-Free Agents: Big 340B profits for CVS, Walgreens, Express Scripts, et al
  • Batter Up: Fixing the insulin market
  • Pinch Hitters: Walgreens bets on robots
Plus, Dr. Glaucomflecken helps UnitedHealthcare celebrate Doctors’ Day!

P.S. For my daily pitches on the industry’s hits and misses, join my nearly 27,000 LinkedIn followers for daily links to neat stuff. You can also find my daily posts at @DrugChannels on Twitter, where I have more than 13,800 followers.

Next week, I'll be live and in-person at Asembia's Specialty Pharmacy Summit. During Tuesday's general session, I'll be joining Dr. Scott Gottlieb for a fireside chat at 8:00 AM and will then present my "State of Specialty Pharmacy 2022" at 9:30 AM. Hope to see you there!

340B Program Continues to Grow While Contract Pharmacy Restrictions Take Effect, IQVIA

It was another year of startling growth for the 340B Drug Pricing Program.

IQVIA estimates that for 2021, total 340B purchases at list prices grew to $94 billion—up by a remarkable $13 billion (+16%). (The report’s Figure 1 is reproduced below.) Once again, the program expanded far more quickly than the overall pharmaceutical market. IQVIA estimates that the 340B program now accounts for 14% of the U.S. pharmaceutical market’s gross sales.

[Click to Enlarge]

Contract pharmacy restrictions slowed—but didn't stop—this out-of-control program growth. As I discussed during last week’s PBM webinar, 340B purchases declined for manufacturers that implemented contract pharmacy restrictions. (See also Figure 3 in the QIVIA report.)

Note that the IQVIA data are presented at list prices, thereby removing the effect of discounts and rebates. This permits effective cross-channel comparisons, but may not accurately represent growth in discounted purchases. I’ll update our analysis of discounted 340B purchases as soon as the data are available.

As a complement to the IQVIA report, I also recommend Pioneer Institute’s recent 340B Drug Discounts: An Increasingly Dysfunctional Program. It’s a useful review of the 340B program’s key problems, which include:
  • Vague legislative language
  • Lack of accountability and transparency
  • Profit-seeking by contract pharmacies
  • Aggressive lobbying by covered entities to preserve status quo
Worth reading.

Decade-Long 340B Tailwind Gives Way to Significant Pharmacy Headwind in 1Q 2022, Nephron Research

Eric Percher and his team at Nephron Research have updated their eye-popping estimates of contract pharmacies’ profits from the 340B program. Contract pharmacies earn 25% to 35% of total 340B discounts. For the top five contract pharmacy players, that translated into $3.2 billion in 2021 and a projected $2.9 billion in 2022. (The chart comes from last week's PBM webinar.)

[Click to Enlarge]

If you’re wondering how the profits can be this staggering, see How Hospitals and PBMs Profit—and Patients Lose—From 340B Contract Pharmacies.

Part of the loot goes to commercial and Medicare Part D plan sponsors. As I explain in Section 11.5.5 of our new 2022 Economic Report on U.S. Pharmacies and Pharmacy Benefit Managers, it is crucial to understand that these companies may not have retained all of the profits implied by the chart above. Instead, the companies share the profits with plan sponsors by accepting lower reimbursement rates for preferred participation in narrow networks. In other words, the available evidence suggests that pharmacies and PBMs have been using 340B profits to subsidize network rates. (I also discussed this issue in CVS, Walgreens, Walmart, and Supermarkets Keep Position in 2022 Part D Preferred Networks—With a Little Help from 340B.

Bottom line: Billions of 340B discounts are diverted from patients and charity care to for-profit companies. What a racket.

P.S. Sorry, I’m not permitted to share a link to the full Nephron report. Please contact to learn more about accessing Nephron’s research reports.

A Radical Treatment for Insulin Pricing, The New England Journal of Medicine

Check out this excellent article from Leemore Dafny, a professor at Harvard Business School. Dr. Dafny does a nice job of explaining the bizarre economics of the U.S insulin market to the New England Journal of Medicine’s physician audience. She argues:
“It has become increasingly clear that relief for patients whose out-of-pocket costs depend on list prices will require more than biosimilar manufacturers pursuing typical business strategies; a regulatory or disruptive business fix is needed.”
She highlights Civica Rx’s announcement to make and distribute insulins with very low list prices. We’ll see if Civica can climb over the insulin rebate wall.

BTW, Dr. Dafny’s first citation is to my infamous article on insulin biosimilars: Why PBMs and Payers Are Embracing Insulin Biosimilars with Higher Prices—And What That Means for Humira. Many thanks!

Walgreens turns to robots to fill prescriptions, as pharmacists take on more responsibilities, CNBC

The robots are coming!

This article explains Walgreens’ latest expansion of automated dispensing. The company plans to have 22 micro-fulfillment centers that will fill half its prescription volume. Many of these prescriptions will be shipped for pickup to stores. Pharmacists will presumably have more time for patient services and counseling.

As I see it, the automation push reflects the same pressures driving the retail pharmacy shakeout. The need for dispensing efficiency has already made chain drugstores larger and busier than other formats. (See Exhibit 32 in our 2022 pharmacy/PBM report.) Automation is the next logical step in this evolution.

Walgreens has a long history of overpromising and underperforming. Let’s see if they can make it work this time.

United Healthcare celebrates Doctors’ Day!, Dr. Glaucomflecken

If you missed Doctor’s Day on March 30, Dr. Glaucomflecken will help you with a belated celebration. Warning: The video below may trigger employees of UnitedHealthcare.

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