Drug Channels News Roundup, December 2023: CVS’s New GPO, Medicaid vs. PBMs, 340B in Part D, and a Rockin’ Ex-CEO

Happy New Year, everyone! It has been another wild year for our ever-evolving healthcare system.

Thank you, dear readers, for welcoming Drug Channels into your inboxes, browsers, and apps. I’m proud of the diverse and thoughtful audience who follows and comments on our unique content. The Drug Channels community now encompasses 50,000+ LinkedIn followers, 25,000+ email subscribers, and 17,000+ Twitter/X followers.

We’ve had a blast bringing you our perspectives and curated links in 2023 and hope that you had fun engaging with it. Stay tuned for some exciting announcements in 2024!

Wishing you and your family health and happiness,
Adam and the Drug Channels team

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In this issue:

• Say hello to AVERON, CVS Health’s latest group purchasing organization

• States continue to carve PBMs out of Medicaid programs

• Seniors and taxpayers fund a growing share of 340B profits

Plus, George Barrett, former CEO of Cardinal Health and current cool dude, re-launches his music career.

EXCLUSIVE: The 340B Program Reached $54 Billion in 2022—Up 22% vs. 2021 (rerun)

This week, I’m rerunning some popular posts while I prepare for today’s Drug Channels Outlook 2024 live video webinar. My topic #9 for 2024: The Battle Over 340B Gets Even Messier.

Click here to see the original post from September 2023.

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Drug Channels has just obtained new details on the size of the 340B Drug Pricing Program. I couldn’t wait to share the news, hence this special Sunday post.

For 2022, discounted purchases under the 340B program reached a record $53.7 billion—an astonishing $9.8 billion (+22.3%) higher than its 2021 counterpart. The difference between list prices and discounted 340B purchases also grew, to $52.3 billion (+$2.6 billion). 

Hospitals accounted for 87% of 340B purchases for 2022. Every 340B covered entity type experienced double-digit growth, despite drug prices that grew more slowly than overall inflation.

Another surprise: HRSA estimated that manufacturers' contract pharmacy restrictions reduced 340B purchases by only $470 million—or less than 1% of 2022's total purchases. That's far below the figure quoted by 340B lobbyists.

Once again, the data demonstrate that 340B advocates are wrong when they claim that manufacturers are “stripping critical resources from the nation’s health care safety net.” As I noted last year, only in the U.S. healthcare system can billions more in payments and spreads be considered a cut.

Read on for full details and analysis, including the opportunity to download your own copy of the raw data from HRSA.

The Battle for Oncology Margin: How Private Equity Enables Vertical Integration by Pharmaceutical Wholesalers (rerun)

This week, I’m rerunning some popular posts while I prepare for tomorrow’s Drug Channels Outlook 2024 live video webinar. Click here to see the original post from October 2023.

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In case you haven’t noticed, private equity firms have displaced hospitals and health systems as the major acquirers of community oncology practices. These financial firms have assembled significant oncology practice management companies that are primed for purchase by drug channel participants.

Below, I review recent M&A trends and then examine the strategic objectives behind the acquisition of private-equity-backed OneOncology by AmerisourceBergen (Cencora) and another financial buyer. As I explain, AmerisourceBergen (Cencora) gains significant strategic advantage from this transaction, which echoes a historical McKesson deal.

The Federal Trade Commission’s (FTC) has a newfound interest in the roll-up transactions that are creating practice management companies. Nonetheless, I expect this consolidation activity to continue—enabling a new round of vertical integration in the drug channel.

FYI: Today’s article is adapted from Section 6.3. (Future Trends for Buy-and-Bill Channels) of our new our 2023-24 Economic Report on Pharmaceutical Wholesalers and Specialty Distributors, now available to download at special launch pricing.

White Bagging Update 2023: Saving Money or Shifting Costs? (rerun)

This week, I’m rerunning some popular posts while I prepare for Friday's Drug Channels Outlook 2024 live video webinar. Click here to see the original post from September 2023.

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Time for our annual update on the channels for provider-administered drugs.

For 2023, specialty pharmacies—via white, brown, and clear bagging—retained a meaningful share of the distribution channels for provider-administered oncology drugs. Despite the concerted efforts of insurers such as UnitedHealthcare and Elevance Health, however, buy-and-bill remains the most common channel for these products. Below, I review the latest data on trends over the past five years.

Strategies for white and brown bagging reflect the broader battle over oncology margins—and plans’ attempts to shift costs to providers, patients, and manufacturers. The persistence of buy-and-bill reflects this channel’s legacy infrastructure as well as providers’ push back on white bagging mandates. But perhaps patients and manufacturers will start paying more attention to the higher costs from white bagging.

FYI: The material in today’s article is adapted from Chapter 3 of our forthcoming 2023-24 Economic Report on Pharmaceutical Wholesalers and Specialty Distributors, now available to preorder at special introductory pricing.

Surprising Data on Employer-PBM Rebate Pass-Through Arrangements in 2023 (rerun)

This week, I’m rerunning some popular posts while I prepare for Friday’s Drug Channels Outlook 2024 live video webinar. Click here to see the original post from August 2023.

Something to consider while you review today's rerun: The Lower Costs, More Transparency Act (H.R. 5378), which the U.S. House of Representatives passed yesterday, contains new PBM rebate disclosure requirements, but no mandates for rebate pass-through.

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Hi, Barbie! The likelihood of major national legislation over the pharmacy benefit management (PBM) industry has never been greater. A serious effort exists to require greater transparency into PBMs’ activities and mandate full pass-through of rebates to plan sponsors.

Today, I review some surprising new data on a crucial aspect of the drug channel: how employer-sponsored health plans access the billions of dollars in manufacturer rebates that are negotiated by their PBMs.

As Barbie learned, the real world isn’t what you thought it was. Only about 60% of employers report that their PBM passes through all rebates on traditional and specialty drugs. What's more, one-third of employers choose spread pricing for their pharmacy network.

These data seem to contradict public statements by PBM executives, while also undermining the purpose of legislation that mandates rebate pass-through to plan sponsors. Notably, most of the proposed legislation fails to mandate pass-through to the patients whose prescriptions generated the rebates.

Read on for the details. Although when you find out that PBM reform isn’t about horses, you may lose interest.

What’s Behind CVS Health’s Novel Vertical Integration Strategy for Humira Biosimilars (rerun)

This week, I’m rerunning some popular posts while I prepare for Friday’s Drug Channels Outlook 2024 live video webinar. Click here to see the original post from September 2023.

One update: CVS Caremark's 2024 formulary for patient-administered autoimmune products prefers:

• Humira
• Hyrimoz (the high WAC Sandoz biosimilar)
• adalimumab-adaz (the unbranded, low WAC Sandoz biosimilar)

Perhaps coincidentally, Sandoz products are marketed by Cordavis, the new business described in today's rerun.

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CVS Health has finally revealed its strategy for biosimilars of AbbVie’s Humira.

Rather than announce multiple biosimilars for its pharmacy benefit manager (PBM) formulary, the company will instead launch Cordavis, a new subsidiary that will market a private label, low-list-price version of Sandoz’ Hyrimoz. Here’s the press release: CVS Health Launches Cordavis.

Below, I highlight how CVS Health could profit from this strategy and outline crucial unanswered questions about this latest vertical integration move. Let’s see if plan sponsors, patients, and legislators will pay attention to the man behind the curtain.

Transforming Medication Access with the Next Generation of Patient Support Services

Today’s guest post comes from Kelly Martin, Vice President of Product Management at CoverMyMeds.

Kelly discusses the obstacles that patients face when attempting to access, afford, and adhere to specialty therapies. She describes how CoverMyMeds improves the patient experience by blending technology with human expertise and connection.

Click here to learn about CoverMyMed’s next-generation patient support services.

Read on for Kelly’s insights.

What CVS Pharmacy’s New Cost-Plus Reimbursement Approach Means for PBMs, Pharmacies, Plan Sponsors, and Prescription Prices

Is the world ready for new ways to price pharmacy and pharmacy benefit manager (PBM) services? CVS Health thinks so, as evidenced by two new initiatives that it announced yesterday. Below you'll find details and links to source documents.

I commend CVS Health for attempting to address key economic challenges facing the retail pharmacy industry and for tackling the hidden complexities of PBM pricing models. As I explain, a shift to cost-based pharmacy reimbursement could stabilize CVS Health’s retail business by improving its dispensing profits.

Nonetheless, CVS Pharmacy’s cost-plus model has some notable shortcomings for plan sponsors and is far less “disruptive” than the company would like us to believe. Mark Cuban should be flattered—but not fearful.

What's more, other large pharmacies will likely follow CVS with attempts to force payers and PBMs to accept some form of cost-plus reimbursement. (Et tu, Walgreens?) If that happens, expect higher prescriptions prices, less efficiency, and a slowdown in the inevitable retail pharmacy shakeout.

For more on the future of PBM and pharmacy pricing, join me on December 15 for a new live video webinar: Drug Channels Outlook 2024. I promise a a jam-packed 90 minutes filled with crucial information you need to know for the year ahead. Click here to learn more and sign up.

Drug Wholesalers and Brand-Name Drug Prices: Understanding CVS Health/McKesson and Why Pharmacies Lose Money on GLP-1s

Consider two apparently unrelated drug channel anomalies:

• In McKesson’s 2023 fiscal year, CVS bought $75 billion in pharmaceuticals from McKesson’s wholesale business—a jump of more than 35% compared with the previous year.

• Despite skyrocketing sales for anti-obesity GLP-1 drugs, many retail pharmacies are losing money on every prescription.

The common factor behind these two disparate situations: Pharmaceutical wholesalers’ unusual pricing for brand-name drugs sold to pharmacies, hospitals, and other buyers. Below, I walk through the economic fundamentals to help you understand another obscure aspect of our opaque drug pricing system.

This morning’s announcement of CVS Health’s CostVantage pharmacy reimbursement model reflects the latest attempt to fix the system’s wacky economics. Tomorrow on Drug Channels, I’ll delve into the pros and cons of this new approach.

For more on the economic forces behind healthcare industry changes, join me for my upcoming live video webinar, Drug Channels Outlook 2024, on December 15, 2023, from 12:00 p.m. to 1:30 p.m. ET. Click here to learn more and sign up.

How Direct-to-Consumer Rx Platforms Help Patient Support Programs Succeed

Today’s guest post comes from Josh Bliss, Head of Pharma Solutions at SingleCare.

Josh outlines manufacturers’ challenge when educating and informing patients about patient support programs. He then describes the SingleCare prescription discount card and Pharma Solutions, which provides manufacturers with a platform to reach patients.

Click here to learn how manufacturers can advertise patient support programs at the point of purchase.

Read on for Josh’s insights.