Cardinal's Sins

Two weeks ago, Cardinal Health Inc (NYSE:CAH) said it agreed to pay $11 million to settle an investigation by New York Attorney General Eliot Spitzer’s office into improper trading of pharmaceuticals on the secondary market.

The actual Assurance of Discontinuance highlights internal communications about Cardinal’s historical activity with secondary wholesalers (a.k.a. Alternate Source Vendors). More significantly, the Business Reforms in the agreement also provide a roadmap for supply chain security that manufacturers and wholesalers should adopt with appropriate modifications.

A Peek Behind the Curtains
The investigation turned up some very interesting internal information about Cardinal’s past activities before it renounced secondary market activity in 2005. (See “Findings” in paragraphs 1 through 18.) Here are two representative statements:

• In a 2003 internal Cardinal e-mail to a compliance officer, one executive addressed the issue of “smaller vendors” which provided “unique opportunities” to Cardinal. Although acknowledging that the vendors are “high risk,” the writer concluded that “[s]ince we need the margin from these high risk vendors we will continue to buy from them.” (para 5)
• At times, Cardinal purchased from sources despite indications that the vendors may have been unsuitable. For example, in January 2004, one employee examined the pedigrees that Cardinal was receiving, and noted suspicious sources in the chain of custody – in his words – firms “which could be bad.” The employee asked that a plan be put together to review those entities. A Cardinal compliance employee indicated that he had already verified that those entities were licensed as wholesalers. That verification was one appropriate step but insufficient. It does not appear that there was any further response to the request for review, nor that the suspect vendors were excluded. The Investigation has shown that some of the entities the employee identified were, as he suspected, engaging in diversion. Cardinal subsequently discontinued its business relationships with these entities. (para 9)

While reading these statements, please note the following statement in paragraph 22: “Cardinal is willing to enter into this Assurance without admitting or denying the OAG’s findings.” I have not personally reviewed any materials cited in the document. The Attorney General may have misinterpreted the meaning of these emails or taken the statements out of context. You should read the complete document yourself and make up your own mind.

Business Reforms
The Business Reforms (Paragraphs 25 through 33) are the most thought-provoking part of the agreement. Cardinal agrees to:

• Buy only from manufacturers and not from secondary wholesalers (28)
• Sell only to wholesalers that certify compliance with “Wholesaler Safe Product Practices” (Appendix B) and pass appropriate pedigrees or pedigree information to all such Wholesalers when and as required by any federal or state law. (29.c.)
• Create and execute a customer audit program to verify accuracy of certification (31.b.v)

The agreement also addresses the demand side counterfeiting problem (See Thank You for Buying Counterfeits) by requiring Cardinal to monitor customer more carefully. For instance, Cardinal must:

• Create firmwide “know your customer” mechanisms to detect customers who are reselling prescription pharmaceuticals into the Secondary Market. (31.b.i)
• Require closed-door pharmacy customers to certify that they will not redistribute or divert (31.b.ii.)
• Gather, monitor, and analyze sales data to detect instances of possible diversion of prescription pharmaceuticals (31.c.)

To me, it looks like Cardinal taking on the monitoring and enforcement activities that should be the responsibility of state boards of pharmacy. Are these business reforms a tacit acknowledgment that most state pharmacy boards are not doing their job?

A Modest Proposal
This agreement has special significance given the hubbub caused by the successful injunction filed by secondary wholesalers against the FDA’s planned implementation of the pedigree requirements of the PDMA. (See my December posts, such as No PDMA for you! and It's Official: PDMA is Back On Hold.)

While we wait for federal pedigree law to be settled (2007?) and an RFID-enabled track-and-trace infrastructure to arrive (2017?), I would like to make the following suggestions:

1. AmerisourceBergen Corp (NYSE:ABC), McKesson Corp (NYSE:MCK), and all other pharmaceutical wholesalers should voluntarily adopt the Business Reforms outlined in the agreement.
2. All secondary wholesalers should immediately certify their compliance with the Wholesaler Safe Product Practices in Appendix B.
3. Manufacturers should require all Authorized Distributors of Record (ADRs) to adopt the Business Reforms or lose ADR status.
4. Prior to authorizing any reimportation legislation, Congress should require all non-US pharmacies to certify their compliance with a retail-oriented version of the Safe Product Practices in Appendix B. (How about it, Senator Vitter? Check out Of Spammers and Senators first.)

Wholesalers and/or Democratic Senators can send their hate mail to afein@pembrokeconsulting.com.

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Source: http://DrugChannels.blogspot.com

2007 Trends: Democrats Take Over (4 of 4)

Here is the fourth of four posts about major health care trends that I am watching for 2007 along with links to my posts from last year. The first three trends are:

• Trend 1: Pharmacy Infrastructure Integration
• Trend 2: Lobbying for Retail Pharmacy Profits
• Trend3: DIY Supply Chain Security

Trend 4: Democrats take over

Democrats have health care on their mind, especially with the 2008 Presidential election starting to heat up. The Washington Post had a good overview last week. See Shift in Congress Puts Health Care Back on the Table.

I view direct negotiations for Medicare as a long shot for Speaker Pelosi’s first 100 hours. (The draft text of H.R.4 The Medicare Prescription Drug Price Negotiation Act of 2007 looks like meaningless window-dressing with limited impact on the marketplace anyhow.) However, Congress seems likely to focus on how companies within the U.S. pharmacy infrastructure make money, putting PBMs and wholesalers under greater scrutiny. I would not be surprised to see new Congressional hearings about contracts, rebates, and chargebacks.

The proposed AWP settlement, along with the ongoing litigation around this pricing benchmark, will create further heat. The Wall Street Journal is also adding fuel to the fire with its muckraking against the pharmacy infrastructure with year-end articles on taming middlemen and Omnicare Inc. The theoretical saving from universal health care will also focus attention on the pharmacy infrastructure -- just listen to John Edward's weekend remarks or read Sunday's article in (where else) The New York Times.

• The Part D direct negotiations movement
• Additional Comments on the AWP settlement
• AWP Ain’t What Matters
• Are the Democrats helping Wal-Mart's Pharmacy

2007 Trends: DIY Supply Chain Security (3 of 4)

Here is the third of four posts about major health care trends that I am watching for 2007 along with links to relevant posts from last year. The first two trends are:

• Trend 1: Pharmacy Infrastructure Integration
• Trend 2: Lobbying for Retail Pharmacy Profits

Trend 3: DIY supply chain security

State and national governments had a mixed year in protecting the public from counterfeit drugs. Florida overcompensated for years of lax enforcement by finally implementing pedigree laws, although some last minute compromises created controversy. However, the FDA still couldn’t get the PDMA’s minimum standards implemented despite the U.S.’ crazy patchwork of regulation and inconsistent state-level enforcement. The international situation is even worse due to rampant parrallel trade. A new study by the U.K.'s Medicines and Healthcare Products Regulatory Agency claims that "...counterfeiters are targeting the UK's pharmaceutical supply chain, selling counterfeit drugs to wholesalers who supply the NHS
claims."

Now, Democratic Senators Gorgan and Vitter, among others in Congress, want to open up new gateways for counterfeits with the magic bullet of reimportation despite Canadian’s understandable reluctance to be our drugstore. Perhaps the FDA can take consolation in the fact that Canadian online pharmacy MediPlan is winding down, although the young founders left rich. Check out this hilarious screed by Robert Goldberg of DrugWonks.

As a result, private companies are being forced to shoulder the burden of protecting the drug supply chain with a do-it-yourself (DIY) model. Manufacturers in the U.S. are already investing resources into gaining visibility into the movement of their product from factory to patient. Overseas, Pfizer Inc, GlaxoSmithKline plc, and AstraZeneca plc have all announced plans to overhaul drug distribution in the UK, Europe’s major destination for parallel imports. The Cardinal Health Inc (NYSE:CAH) agreement with the New York Attorney General’s office will force the wholesaler to take over monitoring and enforcement activities that would normally be the responsibility of a state pharmacy board. (I’ll say more about the agreement soon.) Even RFID, the most hyped supply chain technology since B2B exchanges, is being developed by private efforts, not government mandate.

• H.B. 371 signed by Gov. Bush
• The Impact of the PDMA Injunction
• Pfizer's UK Deal: Change is Here!
• A Big Win for ... Counterfeiters and Politicians?
• Our Demand Side Counterfeit Drug Problem

2007 Trends: Lobbying for Pharmacy Profits (2 of 4)

This is the second of four posts about major health care trends that I am watching for 2007. The first trend is:

• Trend 1: Pharmacy Infrastructure Integration

Trend 2: Lobbying for Retail Pharmacy Profits

I believe that we are on the verge of a political debate about the most cost-effective way to dispense drugs. Profits on generic drugs now subsidize the branded pharma supply chain for wholesalers, retail pharmacies, and PBMs products. Generic margins are under pressure, most immediately under the proposed AMP rules for Medicaid. (I’ll comment more on AMP shortly.) Wal Mart Stores Inc (WMT) generic price war, which is premised upon this retail profit model, will heat up once it adds newer blockbusters such as generic Zocor (simvastatin). Independents continue to claim harm due to the “low and slow” (their words) payments by PDPs under Medicare Part D. BTW, I still maintain that Wal-Mart's $4 generic program will hurt supermarkets and independents more than major chains such as CVS Corp (CVS) or Walgreens (NYSE WAG).

The retail pharmacy industry now realizes that the reimbursement debate will not be fought solely on the basis of economics. Just look at the TRICARE situation. NACDS and NCPA lobbied successfully to remove mail order provisions from the 2007 National Defense Authorization Act even though the Congressional Budget Office estimated that the Pentagon could save $1.5 billion from 2007 to 2016 if the mail-order-pharmacy option was signed into law. Similar efforts are now underway to mitigate the effects of the projected $8.4 billion savings from the Deficit Reduction Act.

• The Attack on Generic Profits in Drug Channels
• Sloppy reporting about Wal-Mart
• Wal-Mart Raises the Stakes
• Will unbundling crush pharmacy profits?
• McClellan and the magic AMP

2007 Trends: Integration (1 of 4)

Happy New Year! I’m back from vacation – tanned, rested, and ready for 2007! (Well, OK, not really tan, but definitely rested and ready. )

Here is the first of four posts about major health care trends that I am watching for 2007 along with links to relevant posts from last year.

Trend 1: Pharmacy Infrastructure Integration

I expect more consolidation within the U.S. pharmaceutical infrastructure – the network of companies that facilitate dispensing and payment of pharmaceuticals -- PBMs, GPOs, wholesalers, retailers, providers, et al. These formerly distinct sectors now find themselves competing for similar profit streams due to cross-industry consolidation. The CVS Corp (CVS) - Caremark Rx Inc (NYSE:CMX) deal, if not undone by a more traditional horizontal combination with Express Scripts Inc (NASDAQ:ESRX), illustrates this trend.

In 2007, I’d expect even more creative combinations as profit models continue to converge. I would not be surprised to see a Big 3 drug wholesaler acquire an acute care GPO such as Amerinet, Novations, Premier, or MedAssets, or a chain pharmacy to combine with a provider a la CVS Corp (NYSE:CVS) and MinuteClinic. However, I do not expect pharmaceutical manufacturers to forward-integrate into the pharmacy infrastructure so as to avoid strategic debacles such as Merck-Medco.

• Consolidation of the US Pharmaceutical Infrastructure
• The 3PL vs. Wholesale battle heats up
• CVS-Caremark: Why Now?
• Rite-Aid + Brooks-Eckerd: Will three wrongs make it Rite?
• Walgreens' Future: I see dead canaries

Trend #2 coming tomorrow!

P.S. I was fortunate to vacation in Jamaica with my family in December. You may be surprised – or perhaps disappointed – that I was not perusing pages from the December 22 Federal Register on the beach. Instead, I enjoyed Walter Isaacson’s highly readable and thoroughly fascinating biography of Ben Franklin, Philadelphia’s second most famous citizen (after Rocky Balboa, of course).

Santa's Supply Chain

This is my final post of 2006. I'm grateful for the positive response to my blog and very much appreciate the many positive emails and comments that I have received since launching 6 months ago.

Let's wrap-up the year with some homegrown Drug Channels supply chain humor, straight from the pages of The Wall Street Jovial:

Santa's Supply Chain Keeps Pace, Despite Changes

I will be back with my outlook for 2007 on January 2. Until then, have a great holiday!

Adam

Catching up on AMP and PDMA

Here are a few noteworthy news items on AMP and PDMA that I want to recommend:

1. Roundtable: Deficit Reduction Act (Pharmaceutical Executive, Nov. 2006)

I believe that 2007 could go down as the year of Average Manufacturer Price (AMP). I still believe that AMP will ultimately have a much bigger impact than many people expect. (See my June post McClellan and the magic AMP for background.) This roundtable article has some good insights about:

• The class of trade issue
• The use of AMP for rebates vs. reimbursement
• Implications of a public release

I recently heard that CMS will be issuing guidance on AMP very soon. Keep an eye on this apparently obscure issue because it will change life for PBMs, wholesalers, retailers, and insurers.

2. Injunction May Slow Momentum for RFID E-Pedigrees (RFID Update, Dec. 12 2006)

Check out this interesting article on PDMA that quotes Jayne Juvan, my favorite (and the only?) healthcare law blogger, as saying: "Ultimately, the courts tend to favor the government in cases such as this that allege Equal Protection Clause and Due Process Clause violations when the rational basis test applies." She's referring to the RxUSA et al case against the FDA.

The article also calls Drug Channels a "pharmaceutical law blog," which almost offends me. Maybe I should sue?

Thank You for Buying Counterfeits

Can’t get enough PDMA news?

Well, head over to Jayne Juvan’s surprisingly readable legal analysis of the recent injunction entitled RX USA Wholesale v. Department of Health & Human Services: A Legal Perspective. Jayne is a fan of yours truly, so allow me to return the compliment and suggest you read her thought-provoking perspective. She concludes: "Despite this victory, the Plaintiffs in this case have a long way to go, as the litigation only began a few months ago and this is only one hurdle among many that the Plaintiffs must overcome."

I was immediately reminded of a scene from the very funny movie Thank You for Smoking in which the main character (a Washington lobbyist) is asked by his son: "Dad, why is American government the best government?" Without looking up, Dad the lobbyist quickly replies:"Because of our endless appeals system." (This is a great DVD and an even funnier book, so make haste and pick it up today.)

More prosaically, I believe that the very concept of “pedigree” may need to be reconsidered. Counterfeits enter via diversion in the secondary market. But counterfeit sellers require counterfeit buyers, a problem that is not directly solved by pedigree requirements of the PDMA.

In Our Demand Side Counterfeit Drug Problem, I describe three rules that must be followed for pedigree to make the supply chain safer:

1. Pharmacy buyers must demand pedigree documents (electronic or paper) from wholesalers and be able to validate the authenticity of these documents.
2. Pharmacy buyers must only purchase from wholesale distributors in the “Normal Distribution Channel” or wholesale distributors that are willing and able to supply pedigree.
3. Consumers must (a) refuse to do business with any pharmacy that does not adhere to the preceding two rules, and (b) be able to validate a pharmacy’s compliance with these rules.

Rules 1 and 2 are on hold, at least outside Florida. Unfortunately, consumers and their political representative seem intent on ignoring rule 3. (See Of Spammers and Senators.)

In response, the National Association of Boards of Pharmacy launched a new website in November called http://www.dangerouspill.com/, complete with self-congratulatory press release. Like its PhRMA-sponsored counterpart http://www.buysafedrugs.info/, the NABP site aims to educate consumers about the dangers of buying counterfeits.

Business Week also jumped on the bandwagon this week with Bitter Pills, an article outlining the dangers of ordering drugs from “shady online marketers.” (Good tip!) Business Week helpfully portrays the sordid world of online pill sales as a cartoon, although I don't think my kids will be seeing that cartoon on Nickelodean following The Fairly Oddparents!

These worthy efforts aim at consumers. But I must note that the NABP and PhRMA sites sidestep the culpability or responsibility for pharmacy buyers to follow safe sourcing practices. Yes, I know that the NABP Model Rules outline various “Criminal Acts” associated with knowingly handling counterfeit drugs. Even legitimate pharmacists sometimes purchase in the secondary market. For example, a 2004 study found that two-thirds of hospital pharmacy directors use secondary wholesalers as a resource to obtain needed supplies during a product shortage. (Source: A research article published in the American Journal of Health-System Pharmacists.)

The industry sites do not help consumers identify legitimate pharmacies nor do they provide a way to validate that a pharmacy is behaving ethically in its sourcing practices. “End-to-end” visibility is a long way off, so we in the industry must confront the pharmacy buyer problem sooner or later, regardless of the endless appeals that are likely to dog the FDA's attempts to implement the PDMA.

The Impact of the PDMA Injunction

What will the injunction against the Prescription Drug Marketing Act (PDMA) mean in the pharmaceutical industry? (For background, see No PDMA for you! and It's Official: PDMA is Back On Hold.)

The FDA has not updated their PDMA resources page as of this morning, so it’s unclear what their formal strategy will be. Since I’m not qualified to opine on the FDA’s legal options, I’ll focus on a few business implications for manufacturers and wholesalers.

Manufacturers
This injunction should serve as a channel strategy wake-up call to manufacturers. In my opinion, senior executives in commercial operations at pharmaceutical companies should push their trade relations teams to develop formal channel management strategies. Frankly, the PDMA’s conception of “authorized distributor of record” is somewhat simplistic relative to channel management practices in other industries. (More on this topic below.)

I also want to reinforce my belief that manufacturers should invest more resources into gaining visibility into the movement of their product from factory to patient. Despite the RFID hype, the U.S. is still many years from a functional track-and-trace infrastructure, which was defined by Dr. von Eschenbach as “from the assembly line to the dispenser” at the NACDS/HDMA RFID conference. (See The FDA on PDMA.)

The Secondary Market
Let’s not delude ourselves –secondary markets will always exist when there are opportunities to arbitrage price differences between identical products being sold at different prices in different markets. In Europe, this arbitrage occurs as products are diverted across national borders and is called parallel trade. (See London Calling: Fake Drugs Get Real.) In the U.S., arbitrage also occurs as products are diverted between different classes of trade. Check out this graphical depiction of gateways into the U.S. supply chain.

While diverted or resold products are not necessarily counterfeits, all counterfeits enter via diversion in the secondary market. As the Chairman of the Subcommittee on Criminal Justice, Drug Policy and Human Resources noted in November 2005: “The FDA confirmed with Subcommittee staff that drug diversion was the entry point for every case investigated by that agency involving counterfeit drugs going into legitimate pharmacies.” Thus, any wholesaler operating in the secondary market should reasonably expect a higher level of scrutiny over their activities.

Secondary wholesalers
I am impressed by this legal victory, especially given my earlier skepticism. However, secondary wholesalers should recognize that manufacturers in many industries can and do legitimately limit the number of intermediaries that are authorized to sell its products. For example, Apple only allows iPods to be sold through authorized resellers.

The degree of distribution selectivity is a strategic channel design issue for a manufacturer, ranging from a single distributor (exclusivity) to an unrestricted number of distributors within a given market (intensive distribution). There is a large body of academic research on distribution channel selectivity in economics, law, and marketing supporting these channel strategies. Fans of academic jargon may enjoy reading an academic research paper on the topic that I published almost 10 years ago (available here), although the data did not include the pharmaceutical industry.

Given my comments about diversion above, secondary wholesalers must be willing to provide complete transparency to manufacturers about their business practices and product sources. Legitimate secondary wholesalers must be willing to clearly and unequivocally demonstrate how they differ from the unsavory wholesalers that traffic in potentially counterfeit product.

Big 3 Wholesalers
I believe that the introduction of Inventory Management Agreements (IMAs) and Fee-for-Service agreements now limit product leakage into the grey market, closing a significant entry point for counterfeiters. Drug makers literally pay for greater product security by purchasing data from wholesalers to monitor orders, inventories, and product movement in real-time.

In addition, wholesalers such as AmerisourceBergen Corp (ABC) and Cardinal Health Inc (CAH) publicly renounced secondary market sourcing, the HDMA tightened its membership requirements, and major pharmacy chains such as CVS committed to secure sourcing. My conversations with executives at the big 3 wholesalers – McKesson Corp (MCK), Cardinal Health, and AmerisourceBergen – have convinced me that these companies are genuinely committed to a secure supply chain.

Two more things

• Before we let the rhetoric about “extinction of small distributors” get out of hand, I must ask: How come we have not heard about secondary wholesalers going out of business in Florida after the July 1 implementation of state-level pedigree? Just wondering…
• I must be touching a nerve on this topic because a few individuals prefer to insult me via private emails. One of these fellows (“D.K.”) is too cowardly to disclose his affiliation in this matter. I have posted my opinions for all to see. Perhaps he will open himself up to the same scrutiny by posting a (non-anonymous) comment on this blog.

It's Official: PDMA is Back On Hold

The pedigree requirements of the Prescription Drug Marketing Act (PDMA) are back on hold. This is a big loss for the FDA and a big win for secondary wholesalers, especially RxUSA. I'll post tomorrow on possible implications for the pharmaceutical supply chain in 2007.

See my post from last Friday -- No PDMA for You! -- for background. Then read Federal Injunction Will Delay Part of Drug-Tracking Law in today's Wall Street Journal, which states:

"In a surprising decision that strikes a blow against Food and Drug Administration efforts to curb counterfeit drugs, a federal judge granted an injunction that delays part of a long-stalled drug law that was to have taken effect Friday of last week.

Yesterday, U.S. District Court Judge Joanna Seybert of the Eastern District of New York sided with a group of drug wholesalers who argued that the law is in breach of equal protection and due process because it requires certain recordkeeping of some wholesalers but not others, according to lawyers for both sides of the case."

BTW, Heather Won Tesoriero of the WSJ and I appear to be the only people writing about this topic. Although that's surprising given the hype leading up to Dec. 1, I think of it as just one more good reason to tell your friends in the industry to read this blog. 'nuff said.

Sloppy reporting about Wal-Mart

Last Thursday's New York Times included some very sloppy reporting about Wal Mart Stores Inc (WMT). See Side Effects at the Pharmacy. (The story was widely syndicated, so here's an alternate link: Side Effects at the Pharmacy.)

The article questions the profitability of Wal-Mart’s program by incorrectly interpreting prescription data and then quoting a “consultant” with an undisclosed bias against Wal-Mart. This type of shoddy reporting only further confuses the debate about health care spending.

Since the New York Times’ editors read this blog, allow me to clear the air a bit by answering four questions:

1. How busy is an average Wal-Mart pharmacy? (A: A lot less than an average Walgreens)
2. How many more prescriptions did the $4 generic program generate? (A: About 16% more)
3. Did Wal-Mart have $31.5 million in extra dispensing costs? (A: Nope.)
4. Why was the Times so unbalanced? (A: Piling on?)

Q1: How busy is an average Wal-Mart pharmacy?

As a baseline, let’s estimate the typical volume at a Wal-Mart pharmacy in 2005.

• According to Drug Store News, Wal-Mart’s 2005 Rx sales were $11.036 billion.
• The average price per script in the mass merchant pharmacies was $62, implying that Wal-Mart dispensed 178 million prescriptions in 2005.
• Wal-Mart had 3,289 stores with pharmacies (per DSN).

After a little math, I estimate that the average Wal-Mart store dispensed 148 prescriptions per day in 2005 (assuming 365 selling days per year). For comparison, the same calculation for Walgreens yields an estimate of 270 prescriptions per pharmacy per day in 2005.

Q2: How many more prescriptions did the $4 generic program generate?

According to Wal-Mart’s Nov. 16 press release: “To date, as new states have been added to the program, 2.1 million more new prescriptions have been filled in those states as compared to the same time periods last year.”

• As of November 15, the generics program was available in 2,507 Wal-Mart stores.
• Stores were added on four different days (9/21; 10/6; 10/19; and 10/26). A calendar and some math shows that Wal-Mart had almost 65,000 total available selling days for the $4 generics program in these stores.
• Wal-Mart’s claim of “2.1 million more new prescriptions” translates into almost 15,000 new prescriptions per available selling day, or 32 new prescriptions per store per available selling day.

In other words, the average Wal-Mart pharmacy’s daily volume has increased by 22% (32/148) from September 21 to November 15.

However, IMS data indicates that total prescription growth was 6% from mid-September to mid-November 2006 versus the same period last year.

Therefore, it appears that Wal-Mart’s $4 generic program has added about 16% in real incremental prescription volume to the typical Wal-Mart pharmacy.

Q3: Did Did Wal-Mart have $31.5 million in extra dispensing costs?

The New York Times pooh-poohs the program, noting “…Wal-Mart might be able to declare the overall program profitable only by spreading the costs well beyond its pharmacy ledger.” The reporter then quotes “a pharmacy consultant in Stoughton, Wis.” named Ed Heckman: “But other costs, including store overhead and pharmacists’ paychecks, can add as much as $15 to the cost of dispensing a prescription, Mr. Heckman said. ”

Let’s see…2.1 million prescriptions @ $15 equals …$31.5 million!! So the program must be a boon for all of those pharmacists who are working extra hours, right?

Wrong. Total volume at a Wal-Mart pharmacy has gone up by about 32 new prescriptions per day – about 2 per hour given typical store hours. Marginal (incremental) overhead costs are probably $0.00 for an average Wal-Mart pharmacy. Following Mr. Heckman’s quote, the reporter notes that “selling drugs at $4 might be well below cost for many pharmacies.” Perhaps, but probably not for Wal-Mart.

Q4: Why was the Times so unbalanced?

I’m afraid I can’t really answer this question. Perhaps they are piling on after the post-election bashing given by Senator Barack Obama and former Senator John Edwards?

Nevertheless, I feel compelled to note that the New York Times failed to disclose a major conflict behind the quote above about costs. Mr. Heckman is not just a “pharmacy consultant,” but also President of PAAS National, a company that is "supported and endorsed by the NCPA” (the National Community Pharmacists Association). According to its website, PAAS also operates the Community Pharmacy Contract Clearinghouse for NCPA.

I note this lack of disclosure because NCPA has been a very outspoken critic of Wal-Mart. Check out the rather unambiguous titles of NCPA’s press releases "analyzing" Wal-Mart's $4 program:

• Wal-Mart Generics Program: Less Than Meets The Eye (11/21/06)
• Wal-Mart PR Stunt Goes Nationwide (10/19/06)
• Wal-Mart Pulls Another Fast One (10/5/06)
• Wal-Mart Offers Up Classic Bait-and-Switch (9/28/06)

Hmmm, wonder what NCPA really thinks?

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Anyway, this point of this post is simply to highlight that sometimes what passes for analysis in the mainstream media is really just opinion. Or as U.S. Senator Daniel Patrick Moynihan famously quipped: "Everyone is entitled to his own opinion, but not his own facts."

No PDMA for you!

Looks like the PDMA will not be going into effect after all.

I've been skeptical about the injunction filed by a group of secondary wholesalers to stop implementation of the pedigree requirements of the PDMA on Dec. 1. (See The FDA on PDMA and Channel Conflict as Pedigree Looms.)

But on Thursday, Magistrate Judge Kathleen Tomlinson recommended that a preliminary injunction against the Department of Health and Human Services and the FDA be granted. See the Wall Street Journal story Judge Rules on Long-Delayed Drug Law. (Fans of legal reasoning will surely enjoy the full injunction report and recommendation.)