A Post-Election Projection: The 2025 Payer Market for Prescription Drugs

In Latest CMS Forecast Shows Big Drug Spending Growth Through 2025, I examined the July 2016 drug spending forecasts from the Centers for Medicare & Medicaid Services (CMS).

Alas, last week’s election exploded these projections. Today, I analyze CMS’s official pre-election insights about payment for outpatient prescriptions drugs in 2025. I then speculate on how these figures might change under the new administration, which wants to repeal and replace the Affordable Care Act (ACA). Based on the most well-known Republican proposals, I project a rebound in the employer-sponsored market compared with the CMS baseline projections.

But never forget a truism of the projection business: A good forecaster is not necessarily smarter than everyone else—he merely has his ignorance better organized.

Seven Pharmacy and Channel Implications of the New AMP Final Rule (rerun)

This week, I’m rerunning some popular posts while I attend the 2016 Armada Specialty Pharmacy Summit. Click here to see the original post and comments from January 2016.

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Well, pierce my ears and call me drafty! Late last week, the Centers for Medicare & Medicaid Services (CMS) finally released its long-overdue final rule regarding Average Manufacturer Price (AMP) under the Patient Protection and Affordable Care Act (ACA). Since 2012, CMS has announced—and then delayed—the release of the final rule at least five times. Makes you proud to be a taxpayer, doesn’t it?

Savor all of the bureaucratese for yourself in the oh-so-brief 658-page rule, known to the cool kids as CMS-2345-FC. (Note: Not the name of a new Star Wars droid.)

The rule is effective April 1, 2016. (Seriously.) Below, I highlight what it could mean for drug channels, including observations on:

• Prescription reimbursement
• Pharmacy profits
• Manufacturers’ channel strategies
• Bona fide service fees
• Manufacturer-retail direct distribution arrangements
• And more!

Enjoy.

Roundup of AMP Final Rule Analyses (Plus Two New CMS Webinars)

In Seven Pharmacy and Channel Implications of the New AMP Final Rule, I gave you my $0.02 on the Average Manufacturer Price (AMP) final rule from the Centers for Medicare & Medicaid Services (CMS).

Want to know more? Below, I highlight six useful reviews and articles about the rule.

I also provide info on two official (and free) CMS webinars happening later this week:

• For manufacturers on Wednesday, Feb. 10

• For pharmacies on Thursday, Feb. 11

Hope you enjoy this extra dose of disampbiguation!

Seven Pharmacy and Channel Implications of the New AMP Final Rule

Well, pierce my ears and call me drafty! Late last week, the Centers for Medicare & Medicaid Services (CMS) finally released its long-overdue final rule regarding Average Manufacturer Price (AMP) under the Patient Protection and Affordable Care Act (ACA). Since 2012, CMS has announced—and then delayed—the release of the final rule at least five times. Makes you proud to be a taxpayer, doesn’t it?

Savor all of the bureaucratese for yourself in the oh-so-brief 658-page rule, known to the cool kids as CMS-2345-FC. (Note: Not the name of a new Star Wars droid.)

The rule is effective April 1, 2016. (Seriously.) Below, I highlight what it could mean for drug channels, including observations on:

• Prescription reimbursement
• Pharmacy profits
• Manufacturers’ channel strategies
• Bona fide service fees
• Manufacturer-retail direct distribution arrangements
• And more!

Enjoy.

What’s Behind Walmart’s Pharmacy Profit Warning?

Last week, Wal-Mart Stores surprised everyone by highlighting reduced profits from its pharmacy business. In corporate-speak, these were called “headwinds from pharmacy reimbursements” on its quarterly and annual earnings. Investors took note, especially since Walmart usually discloses nothing about its pharmacy business.

Walmart didn’t provide many details about what caused the margin reduction, but I believe two factors played a key role: (1) lower margins from newly insured consumers (compared with cash-pay consumers), and (2) Walmart’s aggressive participation in preferred networks.

Does this profit announcement signal that Walmart will start emphasizing its pharmacies’ profits over growth? I’m sure that its competitors hope so. Read on and see if you agree.

OMG! AMP Final Rule is at OMB!

You gotta strike when the moment is right without thinking. And its looks like the Centers for Medicare & Medicaid Services (CMS) might finally be doing so.

Apparently, the oft-delayed Federal Upper Limits (FUL) and the Final Rule on Covered Outpatient Drugs, a.k.a., the Average Manufacturer Price (AMP) Final Rule, is now officially under final review at the Office of Management and Budget (OMB). The announcement is pasted below, because you probably don't believe it either.

Does this mean that CMS will finally accomplish this policy goal? How quickly will the pharmacy industry sue to stop implementation? Are you wondering which of the buggars to blame for the delay?

Read on for the proof and some background.

Surprise? Once Again, FULs and AMP Final Rule Delayed

In what has become a semi-annual ritual, the Centers for Medicare & Medicaid Services (CMS) last night announced plans to delay the Federal Upper Limits (FUL) and the Final Rule on Covered Outpatient Drugs, a.k.a., the Average Manufacturer Price (AMP) Final Rule. Full text of the non-announcement email below.

You can read about the previous delays here…and here…and here…and, oh yes, here, too.

In its email, CMS confirms that it will do something, at some point in the future, and that it looks forward to partnering with stakeholders whenever it does the thing that it may or may not ever do.

Meanwhile, we'll all just muddle along without clarity on AMP computations, bona fide service fees, the definition of retail pharmacy, and more. It's enough to make any cat grumpy about the Affordable Care Act's implementation.

News Roundup, November 2014: Salix, Merck, Co-Pay Cards, Part D Preferred Networks, and an Insurance Cartoon

Here's a pre-Thanksgiving news roundup, to stretch your mind before stretching your stomach next week. In this issue:

• Stuffing—Salix Pharmaceuticals reminds investors why wholesaler agreements matter

• Pumpkin Pie (in the Face)—How Merck beat co-pay card litigation

• Gobble, Gobble—An important update on retail chains’ participation in Part D plans’ preferred networks

Plus, I share a surprisingly useful cartoon that explains the U.S. health insurance system. Next week, show it to your family, so they understand more about your job and the world around us. Happy Thanksgiving!

Here’s Who Will Pay For Prescription Drugs in 2023

In CMS Forecast: Big Drug Spending Growth, But Hospitals and Doctors Will Still Capture Most Healthcare Spending, I examined the September 2014 drug spending forecasts from the Centers for Medicare and Medicaid Services (CMS).

After crunching the numbers again, I identified new insights into the 2023 drug market. As the charts below show, CMS expects that the employer-sponsored insurance market will shrink more than it had previously projected, while Medicare and Medicaid will grow even faster. CMS is still projecting that individually-purchased private insurance (via both public and private exchanges) will account for a small share of drug spending.

Is your organization prepared for the government’s unprecedented growth?

FULs Delayed (Again); AMP Final Rule Scheduled for June (LOL)

The Center for Medicare & Medicaid Services (CMS) just announced plans to finalize the Federal Upper Limits (FUL) for multiple source drugs sometime before the universe collapses into a dimensionless singularity.

In the meantime, CMS postponed its previously announced July 2014 deadline for finalizing the FULs. For CMS aficionados, the email notice is pasted below. (CMS apparently can’t be bothered to update its FUL website.)

In related non-news, the Office of Information and Regulatory Affairs website now taunts us with a June 2014 arrival for the oft-delayed Final Rule on Covered Outpatient Drugs, a.k.a., the Average Manufacturer Price (AMP) Final Rule. (Read my November note on the last three delays.) Long-time readers may vaguely recall my January 2012 write-up of the proposed rule: New AMP Rule Targets Bona Fide Service Fees.

As my teenage daughter would say: What-ever. See the AMP notice below. I expect the AMP rule to be released after the mid-term elections.

Drug Channels News Roundup: January 2014

The weather may be chilly, but our monthly news update will keep you purring. Here are four questions to ponder as you digest this month’s noteworthy news highlights:

• What’s McKesson’s next move, post-Celesio bid failure?

• What does Cardinal Health’s CEO think about Obamacare’s effects?

• Is Walgreen’s CEO overpaid?

• How much did Walgreens pay for Kerr Drug?

Plus, the Onion reports on an exciting new antidepressant from Eli Lilly. Is it an antidote to Facebook?

P.S. If you can’t wait for our monthly news updates, then follow @Drug Channels!

Medicare Up, Everyone Else Down: The Latest U.S. Drug Spending Data

Let’s start the new year by looking at the new 2012 National Health Expenditure data, released yesterday by the Centers for Medicare and Medicaid Services (CMS). Full wonkitude in this Health Affairs article: National Health Spending In 2012: Rate Of Health Spending Growth Remained Low For The Fourth Consecutive Year.

Here’s what I found by crunching the latest prescription spending numbers:

• Total U.S. expenditures on outpatient prescription drugs were $263.3 billion, a mild 0.4% annual increase vs. 2011.

• For the second year, prescription drug expenditures were the slowest growing part of the U.S. health care system, which grew by 3.7%.

• Medicare was the only payer with higher spending. All other payers, including private health insurance, spent less.

• Consumers’ out-of-pocket expenditures remained at historically low levels.

Credit the generic wave and benefit design for low drug spending growth. Sorry, Obamacare fans. You can’t attribute the slowdown in overall national health care spending to the Affordable Care Act. (See the CMS comments below.)

Read on for our detailed review and analysis.

AMP Final Rule Delayed Yet Again ... to May 2014

UPDATE (12/2/13): CMS announces its intention to finalize the Federal Upper Limits (FUL) for multiple source drugs in July 2014!

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Here’s another reason to be cynical about the Affordable Care Act's implementation.

The long-awaited Final Rule on Covered Outpatient Drugs, a.k.a., the AMP Final Rule, has been pushed back yet again, to May 2014. This follows at least two previous delays, described here and here.

Sounds to me like politics trumps the law. Given the dual debacles of healthcare.gov and “you can keep your insurance,” I presume the Obama administration wants to avoid political noise from the ACA's hit to pharmacy profits.

The delay is good news for the pharmacy industry. When (if?) the new AMP-based Federal Upper Limits get implemented, pharmacies in many states will face reimbursement cuts of 30% or more. See Obamacare Will Squeeze Pharmacy Profits.

For government notice aficionados, I have pasted the notice below. Enjoy Black Friday!

Drug Channels News Roundup: October 2013

Boo! Time for my Halloween-themed roundup of Drug Channels news stories. Never fear. None are as scary as your teenage daughter's Miley Cyrus costume. (Trust me.)

In this issue:

• Zombie Attack: Why Fortune got its Express Scripts "exposé" wrong

• Don’t Fear the Reaper: Walmart lobbies for preferred networks…in Medicaid!

• 340Boo: A superb article on the 340B drug discount program

• Spooky: 10 megatrends for specialty pharmacy

Plus, Secretary of Health and Human Services Kathleen Sebelius provides tips for coping with the healthcare.gov website.

Obamacare Will Squeeze Pharmacy Profits

The Office of Inspector General (OIG) recently released Medicaid Drug Pricing In State Maximum Allowable Cost Programs. If you own or invest in retail pharmacies, you should read it—anyway, anyhow, anywhere.

The OIG compared existing state Medicaid programs’ generic prescription reimbursement limits with the new limits mandated by the Patient Protection and Affordable Care Act (PPACA), a.k.a. Obamacare. The highlights:

• On average, the new federal reimbursement limits are 22% below the current state amounts.
• Pharmacies in many states will face reimbursement cuts of 30% or more. (See the chart below.)
• Total pharmacy revenues will decline by about $1.2 billion (-0.4%).

One more tricky day for you: The pharmacy industry has successfully lobbied to create state laws requiring that private payers provide “transparency” into generic reimbursement limits. Will savvy private payers rely on the forthcoming government limits to be the bad man?

Five Crucial Questions about Healthcare Reform and Drug Channels

Yesterday, I looked at who will pay for our prescriptions drugs in 2022, using drug spending forecasts from the Centers for Medicare and Medicaid Services (CMS). See Public Funds and Exchanges Will Crowd Out Employer-Sponsored Insurance.

As a follow-up, I consider five questions about healthcare reform that could radically alter CMS’s forecasts and disrupt the channel:

• Will private exchanges take off?
• Will employer-sponsored insurance collapse?
• Will copay cards be banned on the public exchanges?
• Will narrow pharmacy networks dominate public exchanges?
• What happens to Pharmacy Benefit Manager (PBM) profits?

It’s not too soon for pharmaceutical manufacturers to consider how market access strategies could change as traditional employer-sponsored private insurance declines. Expect more pressure on the PBM business model, as drug payment shifts to (government-directed) health plans at the expense of self-insured employers.

Public Funds and Exchanges Will Soon Overtake Employer-Sponsored Insurance

The state-level Health Insurance Marketplaces (HIM) launch today, so let’s look at who will be paying for our drugs as healthcare reform kicks in.

In The Outlook for Pharmaceutical Spending Through 2022, I examine the September 2013 drug spending forecasts from the Centers for Medicare and Medicaid Services (CMS). I crunched the numbers again and identified four key insights into the 2022 drug market:

• Public funds, primarily Medicare and Medicaid, will pay for 42% of all drug spending.

• Individually-purchased private insurance (via both public and private exchanges) will account for 5% of drug spending.

• The employer-sponsored insurance market will keep shrinking.

• Consumer out-of-pocket spending will drop to only 10% of drug spending.

The CMS projections are highly precise econometric guesswork. (Hello, dartboard!) Tomorrow, I’ll consider some uncertainties behind these forecasts.

The Outlook for Pharmaceutical Spending Through 2022

The Centers for Medicare and Medicaid Services (CMS) has once again graced us with its forecasts for national health expenditures. The forecast is summarized in a Health Affairs article: National Health Expenditure Projections, 2012–22: Slow Growth Until Coverage Expands And Economy Improves (free download).

Below, I delve into the prescription drug forecasts and show you some pretty charts. Highlights:

• Prescription drug spending growth, which was negative in 2012, is projected to accelerate to 5.2% in 2014.

• From 2012 to 2022, annual expenditures will grow by $194.2 billion (+75%), to $455.0 billion. During this period, Outpatient prescription drugs will be at about 9% of total U.S. healthcare spending.

• Health care reform will add an extra $15.3 billion in annual drug spending by 2022. This is far below last year’s projected incremental $25.9 billion in spending by 2021.

In a future article, I’ll look at who will be paying for all of these drugs. In the meantime, pity the poor government economists tasked with forecasting healthcare spending. They must bravely peer beyond today’s pitched political battles and economic uncertainty—and then hurl a guess at the 2022 dartboard. Chin up, chaps!

Drug Channels News Roundup: August 2013

Sigh. Summer is almost over. Time to pack up our bathing suits and send the kids back to school. In the meantime, please enjoy this curated collection of curiosities, combed from the Drug Channels beach.

In this issue:

• Look Who’s Talking—Walgreens CEO Greg Wasson explains his vision
• Look Who’s Lobbying—A 340B vendor gets an unexpected ex-PhRMA ally
• Look Who’s Disappointing—A post-mortem on ACOs' first year

Plus, The Onion examines America’s unquenchable thirst for prescription drugs.

Drug Channels News Roundup: July 2013

Ah, summer! Stay cool with these stories from the wonderful world of Drug Channels. In this issue:

• Top Dollar—Why Humira will be bigger than Lipitor
• Top Jobs—Pharmacists win again
• Top Sleazeball—No jail time for Avastin counterfeit wholesaler?!?

Plus, a cute, yet highly misleading, cartoon explaining healthcare reform. Top spin?