Drug Channels News Roundup: September 2013

Wow, Sunday was the first day of autumn. Time to buy a rake, gather up some acorns, make fantasy football trades, and read these acquisition-related news stories from the Drug Channels universe.

In this issue:

• Harvest Time—Express Scripts rescues Walgreens-backed Part D plan
• Chinese Acorns—Alliance Boots plans a major China pharmacy expansion
• Raking Up—Magellan buys PartnersRx

Plus, watch my latest TV interview, in which I discuss anti-counterfeiting technology and the folly of sketchy online pharmacies. Will Mainers listen?

Trade and Channel Strategies

Are you ready for some channel strategy? Then join me at CBI’s Trade and Channel Strategies conference, being held this December in Philadelphia. CBI’s annual event has become our industry’s premier event focused on bio/pharma trade management.

I’ll be kicking things off with a keynote address on " Preparing Trade for the Specialty Revolution." I'll highlight organizational and strategic best practices of leading bio/pharma manufacturers.

CBI has arranged a solid lineup of other speakers from such companies Bayer Healthcare, Bracco Diagnostics, CutisPharm, Insys Therapeutics, IntegriChain, Lazard Capital, Mylan Specialty, Novartis, ProMetrics, Sonexus Health, Teva Pharmaceuticals, VHA, Vivus, and more.

Day one’s last session should be a standout. I invited Bill Roth of Blue Fin Group to go mano-a-mano with me in CBI’s XTreme Battle Cage. Two consultants will enter…but only two will leave!

Drug Channels Readers can register with promo code CTC543 by Friday, October 11, and save $400 on registration! Hope you’ll join me in Philadelphia this December.

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!

Payers Want Specialty Drug Distribution to Change

Guess what? Third-party payers want the distribution of provider-administered specialty drugs to change. In particular, most would prefer that buy-and-bill fade away and be replaced by specialty pharmacy fulfillment.

This conclusion comes from the Zitter Health Insight's Managed Care Oncology Index, a survey of payers. The chart below highlights two significant findings:

• About one-quarter of provider-administered specialty pharmaceuticals are now fulfilled by specialty pharmacies, via the white bagging process.

• Payers would prefer that providers acquire most (57%) infused drugs from specialty pharmacies, instead of specialty distributors.

AmerisourceBergen Corporation’s Specialty Group and McKesson Specialty Health (a business unit of McKesson Corporation) generate more than 75% of total specialty product distribution revenues to physician office and clinics. This trend therefore has a big impact on their business.

Manufacturers should pay attention to this channel shift, because a bigger specialty pharmacy presence for infused drugs increases 340B liabilities and raises diversion risks.

Coupon and Co-Pay Off-Set Strategies

Co-pay cards and other offset programs remain controversial. About two years, the Pharmaceutical Care Management Association (PCMA), which represents pharmacy benefit managers (PBMs), started targeting these programs. (See PBMs Launch a New Attack on Copay Cards.) Defenders argue that co-pay offset programs don't increase utilization of higher-cost brand-name drugs and don't reduce generic usage, but do increase adherence. (See A Defense of Co-Pay Cards and A New Reality Check on Co- Pay Offset Programs.) Last week, I suggest that copayment offset programs for specialty drugs are becoming a roundabout way for payers to extract discounts from pharmaceutical manufacturers. (See How the Fourth Tier Coinsurance Boom Drives Copay Offset Programs.)

Given the topic's importance, I’m glad to see CBI launch a new event: the Coupon and Co-Pay Off-Set Strategy Summit. It's being held in Philadelphia on October 9 and 10.

Speakers will represent multiple perspectives, so it should be lively discussion. Speakers come from such companies as Allergan, AstraZeneca, Ironwood Pharmaceuticals, Johnson & Johnson, McKesson, Medical Marketing Economics, Physicians Interactive Holdings, PSKW, Relay Health, Source Marketing, Tufts University School of Medicine, Steward Heath - St Elizabeth's Medical Center, Warner Chilcott, Zitter Health Insights, and more.

Through September 27, Drug Channels readers can register with discount code COUPDC and save $400.* Thanks, CBI!

My Visit to Boots UK: An International Pharmacy Photo Essay

In August, my family and I spent a wonderful 9 days in a surprisingly sunny London. In addition to the usual tourist haunts, I visited a few Boots pharmacies. (Of course I did!) I gained valuable insight into a key overseas pharmacy player that is now part of Walgreens.

Below are my observations on how Boots compares with U.S. drugstore chains. From my photos, you’ll see some similarities but also very intriguing differences. And by publishing this post, I can convert my entire vacation into a business expense. (Shhh, don’t tell the IRS.)

Bonus: I’ve included a photo of my amazing visit to (full-size) Stonehenge. Drug Channels goes to 11!

Walgreens Grabs Kerr Drug

Another one bites the dust! Walgreens continued its industry roll-up with today’s surprise acquisition of Kerr Drug’s retail drugstores and specialty pharmacy business. (Kerr is keeping its long-term care pharmacy business.) Here’s the press release: Walgreens to Acquire Kerr Drug’s Retail Drugstores and Specialty Pharmacy Business.

Kerr, a high-profile regional drugstore chain, adds only a small percentage to Walgreen’s revenues. (See the table below.) However, the deal boosts Walgreen’s North Carolina presence, where CVS is much larger. Kerr is also a good fit with Walgreen’s Well Experience strategy.

Kerr’s owners understand industry consolidation’s key rule: Get big, get focused, or get out. Winning in the retail pharmacy industry requires scale or differentiation. Otherwise, cash out gracefully.

Be Smarter with Drug Channels Institute

Since 2006, the Drug Channels blog has been helping thousands of people make sense of pharmaceutical economics and the drug distribution system.

Today, I’m delighted to tell you about Drug Channels Institute (DCI), a cool new service that my wife, Paula, and I created. Our mission is simple: to make you smarter. And we do it with invaluable industry content delivered via interactive, online learning.

Our e-learning modules are packed with information, yet easy to understand. They are an essential tool for building knowledge and results. Plus, you can get started quickly with our on-line hosted solution.

Read on for details. If you're curious, just click here to view two sample e-learning modules.

Multichannel Marketing and the Key to Channel Integration

Today’s guest post is from Craig Sharp, Chief Editor at eyeforpharma.

Craig discusses the Key to Channel Integration and eyeforpharma’s Channel Integration Guide which is a major focus at the Multichannel Engagement USA conference on being held November 18-19, in Philadelphia, PA.

Check it out, especially if you want to learn more about integrating digital channels with traditional approaches.

How the Fourth Tier Coinsurance Boom Drives Copay Offset Programs

The new 2013 Kaiser/HRET Employer Health Benefits Survey, released in August, highlights a troubling trend—the sharp growth in coinsurance for expensive specialty medications on the fourth tier of benefit plans.

Here are some pharmacy benefit highlights from this excellent survey of employer-sponsored health coverage at more than 2,000 companies:

• Three-tier plans remain the most common benefit design, but 25 percent of employees now have a plan with four or more tiers. Products on this top tier tend to be specialty drugs.

• Almost half of employees now face coinsurance (instead of copayments) for fourth-tier drugs.

• Coinsurance averages 32 percent of a drug’s cost, potentially creating large financial burdens for expensive drugs. However, most employees have maximum dollar limits on this coinsurance.

As I see it, the fourth-tier coinsurance boom is closely linked to copayment offset programs. With few formulary rebates available for specialty drugs, employers and their PBMs are daring manufacturers not to cover patients’ huge out-of-pocket costs. Thus, copayment offset programs for specialty drugs are becoming a roundabout way for payers to extract discounts from pharmaceutical manufacturers.

Read on for the tracks of my tiers.

Say Hello to the 12 Fastest-Growing, Private Specialty Pharmacies

Back to work! Time to check in with the new Inc. 5000 list, Inc. magazine’s ranking of the 5,000 fastest-growing private companies. Once again, the list highlights the boom in specialty drug dispensing.

The 2013 Inc. 500 list, which is based on 2012 revenues, includes 12 specialty pharmacies. The pharmacies and their key stats are listed below, along with recent specialty forecasts. Diplomat Pharmacy again topped the specialty pharmacy list, with revenues of $1.1 billion, up 42% vs. 2011. The other 11 pharmacies had total revenues of $1.3 billion.

Pay attention: these companies are the vanguard of tomorrow’s pharmacy industry.

VA DoD PHS Federal Pricing and Contracts

Here’s the latest conference for any Drug Channels readers with government business: CBI's VA DoD PHS Federal Pricing and Contracts for Bio/Pharmaceutical Companies. It will be held on November 21, 2013 at the Loews Hotel in Philadelphia, PA.

The top-notch speaking faculty includes government perspectives from the U.S. Government Accountability Office, U.S. Public Health Service (PHS), the Department of Veterans Affairs, and the Apexus/340B Prime Vendor Program. (Timely!) Industry insights will come from Amneal, Boehringer Ingelheim, Cornerstone Therapeutics, Horizon Pharma, Johnson and Johnson, Lilly, Pfizer, and Teva.

Drug Channels readers can register with promo code HBG345 by September 13 and save $300 on registration!