Medco Takes on Eli Lilly

Yesterday, Medco Health Solutions (NYSE:MHS) announced its intention to launch a comparative effectiveness study of Bristol-Myers Squibb’s Plavix® versus Eli Lilly’s Effient®. See the press release.

Why, you may ask, would a Pharmacy Benefit Manager (PBM) want to conduct a clinical trial?

Big hint: Effient was approved in July 2009. Plavix will be subject to generic competition in 2011.

Now, can you guess which of the two products will be simultaneously less expensive for payers and more profitable for Medco?

Healthcare Reform: Bullish for PBMs, but Not Pharmacies

"a brand-new market for Medco to serve”

That’s the view on the Senate’s health reform proposal from David Snow, CEO of Medco Health Solutions (NYSE:MHS) as reported yesterday in CEOs Tally Health-Bill Score.

Right now, it looks like healthcare reform will benefit Pharmacy Benefit Managers (PBMs) by expanding coverage. Retail pharmacies would benefit from increased prescription volume but will likely see gross margins drop as the uninsured get the advantage of third-party bargaining power.

Provider Pain in the Healthcare Supply Chain

The State of Healthcare Logistics: Cost and Quality Improvement Opportunities is a worthy new study highlighting successes and challenges for the healthcare supply chain. Download it for free here.

As I summarize below, the findings highlight how providers struggle with missing data standards and stubbornly high inventory costs.

The report got me thinking about the future of the specialty pharmaceuticals distribution channel. I see an emerging opportunity for manufacturers to use their supply chains as a new source of competitive advantage, especially as payers limit provider’s profitability for injection/infusion therapies under traditional buy-and-bill systems.

Interpreting IMS’ Shiny Happy New Forecast

IMS Health raised its 2009 U.S. growth forecast last week to a range of +4.5% to +5.5% and its 2010 forecast to a range of +3% to +5%. See IMS Health Forecasts Global Pharmaceutical Market Growth. Recall that IMS was forecasting a 2009 decline of -1% to -2% just 6 months ago, although the upgrade is no surprise given recent sales trends.

I want to clarify precisely what IMS is projecting and speculate on how it relates to the margins and revenues of drugstores, wholesalers, and Pharmacy Benefit Managers (PBMs). I’m also curious to hear what you think about this new, more optimistic outlook.

Scoring the CBO

Must-read editorial in the Wall Street Journal this morning on the flaws in the CBO’s scoring of the Baucus health care bill. Check out The Greatest Show on Earth.

“Behold: a new $829 billion entitlement that will subsidize insurance for tens of millions of people—and reduce deficits by $81 billion at the same time. In the next tent, see the mermaid and a two-headed cow.”

Perhaps this article will distract you from the, um, unexpected WTF news that President Obama won the Nobel Peace Prize. This is not a joke. See the video below.

A Phony Mail Order Controversy

Are consumers satisfied with mail-order pharmacies?

The J.D. Power and Associates 2009 National Pharmacy Study shows high average satisfaction at mail-order pharmacies. Yet the National Community Pharmacists Association (NCPA) issued a press release immediately after the J.D. Power results claiming Patient Survey Finds Widespread Problems With Mail Order Pharmacies.

Drug Topics magazine duly reported on the “controversy” of these supposedly “conflicting results.”

Now, I don't want to get off on a rant here, but it’s inaccurate and intellectually dishonest to compare the NCPA’s aggregation of “just over 400” independent pharmacy customers' viewpoints with J.D. Power’s statistically sound survey of 12,215 pharmacy customers. And I will gladly debate any pharmacy school professor who wants to defend the statistical reliability of NCPA’s methodology.

A Peek at Drug Wholesalers' Economics

If you sell to (or buy from) drug wholesalers, you should consider buying the new 2009-2010 HDMA Factbook, just released by the research arm of the drug wholesaler’s trade association.

This report is valuable for anyone who negotiates with or analyzes drug wholesalers, although you’ll need to be careful when interpreting the reported statistics. I note a few highlights about drug wholesalers' profitability below and suggest two creative uses of the data.

Unfortunately, I must qualify my purchase recommendation because HDMA has decided not to make the report available as an electronic PDF document. Huh?

CVS' Losses in 2010 Part D Enrollment

Last week, the Centers for Medicare & Medicaid Services (CMS) released information about Medicare Part D stand-alone prescription drug plans (PDPs) available in 2010. Click here to view the raw CMS plan data.

The surprising news comes from CVS Caremark's (NYSE:CVS) loss of 30 to 35% of its Low income Subsidy (LIS) Part D members. This drop will reduce earnings per share for the company. See CVS Caremark Statement Regarding Results of 2010 Medicare Part D Bidding Process.

Here’s a quick look at what happened last week. I’ll save my speculations on the status of CVS Caremark’s PBM business for another day.

CVS Gets Ahead of Walgreens...with Chia Obama!

CVS Caremark (NYSE:CVS) has made a bold strategic move that puts it head and shoulders above rival Walgreen (NYSE:WAG) in the all-important Presidential Decorative Planter Category (PDPC).

Yes, you guessed right. CVS stores will soon begin stocking the Obama Chia.

This is not a joke. See the video below.

Walgreen's Future Profit Potential

Walgreen (NYSE:WAG) posted better than expected sales and announced major progress in its cost-cutting efforts, leading its stock to pop about 10% on Tuesday. Here’s the official release: Walgreen Co. Reports Fourth Quarter 2009 Earnings of 44 Cents Per Diluted Share

Walgreen’s strategic moves are in sync with two important industry trends that I analyze in my (hint, hint) new U.S. Pharmacy Industry: 2009 Economic Report and Outlook:

• The growing advantage of low-cost prescription fulfillment
• The expansion of channel-neutral dispensing models

Both factors—dispensing efficiency and integrated models–also position Walgreen's for more cost-plus deals a la Caterpillar/Walgreens/Wal-Mart.

Download My New Pharmacy Industry Report

I am pleased to announce the release of my new downloadable report U.S. Pharmacy Industry: 2009 Economic Report and Outlook. Here’s the Dow Jones story: Report: US Pharmacy Revenues To Surpass $350 Billion By 2015.

I’m really proud of the report and think you’ll find it to be a valuable planning tool. I want to tell you a bit about the content and give blog readers a sneak peek at the seven major trends.

I also want to offer something special for you, my blog readers. I will randomly select 5 of first 25 Corporate License purchasers for a confidential 60 minute conference call with me to review the report with your team.

AWP Goes Boom

Tomorrow’s the day that First DataBank’s Average Wholesale Price (AWP) goes boom. See What Happens When AWP Goes Boom for background.

My view is that there's not going to be much of a difference after Sept. 26. As I see it, the net impact on total U.S. drug spending will be relatively small and certainly far below the initial multibillion-dollar predictions from a few years ago.

The Medicaid issue is more complex, but not fatal. So far, New Jersey has already announced a reimbursement change that will partly neutralize the impact. (See this NACDS press release.)

And as for the future of AWP? I'm still skeptical that this benchmark will survive too much longer.