Quantifying Generic Buying Power for McKesson-Celesio

Here’s some thought-provoking follow-up data, related to McKesson Finally Snags Celesio: Analyzing the Deal.

Tom Gallucci and his team at FBR Capital Markets have updated their estimates for the biggest global drug buyers’ oral solid generic purchasing power. While ABC-Walgreens-Alliance Boots still tops the list, the McKesson-Celesio combination comes close. See the full list below.

Below, I offer some observations on the new global drug procurement landscape. Expect the most colossal conflict the generic industry has ever seen!

ePharma Summit

Rejoice, digital marketing execs! IIR’s three-day pharmaceutical industry digital marketing event, ePharma Summit, will be held at the Marriott Marquis New York on February 10-12, 2014.

Speakers come from such companies as athenahealth, AstraZeneca, Boehringer Ingelheim, Bristol-Myers Squibb, Catamaran, CSL Behring, Daiichi Sankyo, futurethink, Geisinger Medical Management, GlaxoSmithKline, Ironwood Pharmaceuticals, Janssen Pharmaceuticals, Merck, Pfizer, Purdue Pharma, Walgreen Co., WEGO Health, and more.

Drug Channels readers can register with promo code XP1906DC and save 10% off the standard registration rate. Thanks, IIR!

McKesson Finally Snags Celesio: Analyzing the Deal

McKesson’s long-rumored acquisition of Celesio was officially announced this morning. Read the press release: McKesson Announces Agreement To Purchase Celesio To Create Leading Global Healthcare Services Platform.

The era of global drug distribution has officially arrived. The combined company will have annual revenues exceeding $150 billion and operate in more than 20 countries. Below, I provide analysis and context for the transaction, along with links to deal documents. I also speculate on Cardinal's next steps.

To help you celebrate—or lament—the deal, we are offering a special flash sale on our new 2013–14 Economic Report on Pharmaceutical Wholesalers and Specialty Distributors. Just use the discount code CELESIO no later than Saturday, October 26, 2013.

Express Scripts and the Inevitability of Formulary Exclusion

Here’s a pre-Halloween scare for pharmaceutical manufacturers. Pharmacy benefit manager (PBM) Express Scripts (NASDAQ: ESRX) will drop 48 brand-name drugs from its 2014 standard national preferred formulary. View the Express Scripts 2014 Preferred Drug List Exclusions.

Steve Miller, Express Scripts’ chief medical officer, gave an enlightening interview in which he explained the changes and exclusion criteria. Links and my highlights below.

Express Scripts is following CVS Caremark’s example, so manufacturers should be unsurprised by another inevitable consequence of the generic wave. Brand-name drugs in highly genericized therapeutic classes face enormous pressure for price and rebate concessions. Tier 3 formulary position no longer guarantees cost-effective patient access. And scariest of all: your pricing actions and marketing tactics increase the risk of formulary exclusion.

Customer-Facing Innovation Webinar

Want to learn about the next commercial model for pharmaceutical companies? Curious to know what Pfizer and Novartis are doing?

Then sign up for Eyeforpharma’s Customer-Facing Innovation webinar, taking place on Wednesday, October 30th at 12pm EDT. You’ll hear from Jim Immormino, Head of Commercial Innovation & Strategy at Novartis Oncology and Matt Portch, VP Commercial Model Innovation, Pfizer.

Drug Channels readers can register for free. (Yes, really!)

Customer-Facing Innovation will also be a key topic at eyeforpharma Philadelphia 2014, which will be being held on April 16-17, 2014.

Walmart Plays to Win in 2014 Part D Preferred Networks, while CVS and Rite Aid Lag

In my previous post (For 2014, more than 70% of Medicare Part D plans have a preferred pharmacy network), I highlighted the plans that will dominate Medicare Part D with preferred pharmacy networks.

Below, I examine the pharmacies in the biggest plans’ networks. Key conclusions:

• Walmart participates in more Part D preferred networks than does any other chain.
• Supermarket and other mass merchants—such as Kroger, Safeway, and Target—also now big players in preferred networks.
• Among major chains, CVS and Rite Aid are the laggards.
• Once again, independent pharmacies seem to have missed an opportunity.

Read on for what's happening in your world today.

EXCLUSIVE: For 2014, more than 70% of Medicare Part D plans have a preferred pharmacy network

Today, Medicare Part D kicks off its open enrollment period. Through December 7, America’s seniors can keep their current plan or switch to a new one. But the big story is the narrow network boom.

In 2014, preferred pharmacy networks will dominate Part D. There will be 56 plans with a preferred network, up from only 16 plans in 2013. Our analysis reveals that 72% of the nearly 1,200 regional prescription drug plans (PDP) have a preferred network. By the beard of Zeus!

When the first enrollment data are released in January, I predict that a majority of seniors will have chosen a PDP with a preferred pharmacy network.

Read on for our exclusive look at the 2014 Part D landscape, which includes insights on the major health plans behind the PDPs. As always, Drug Channels brings you the news—so you don't have to get it yourself.

Breaking WBAD: An Update on Walgreens-Alliance Boots Synergies

When the Walgreens-Alliance Boots deal was announced, in June 2012, Walgreens projected $100 million to $150 million of combined first-year synergies.

Last week, Walgreens surprised everyone by reporting $154 million of first year “net synergies” with Alliance Boots. The company now projects combined 2014 fiscal year synergies to be $350 million to $400 million. See the highlights below, along with a special video explaining how Walgreens Boots Alliance Development (WBAD) GmbH got its name.

If the companies continue to outperform their synergy targets, expect follow-on deals to create global purchasing scale. According to Dow Jones, the next noteworthy deal might be McKesson’s acquisition of Celesio.

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?

Specialty Data Optimization

Specialty drugs' growth is generating many new data streams. Unlike a retail pharmacy, a specialty pharmacy may contract with a pharmaceutical manufacturer to provide highly detailed, patient-specific (but de-identified) data for each prescription dispensed. These pharmacy data must then be integrated with other data.

In response to these new flows, CBI is launching a new Specialty Data Optimization Summit. It will be held in Philadelphia, PA, on December 11, 2013. Speakers on the agenda include companies such as Acro Pharmaceutical Services, Astellas, IBM Global, Lilly USA, Occam Health Services, ProMetrics, Roche Pharmaceuticals, and more.

Drug Channels readers can register with promo code PXF783 by Friday, October 11 to save $300 on registration to this one-day event. Thanks, CBI!

FYI, there are two other co-located events: Trade and Channel Strategies (on December 11 and 12), and GPO and Institutional Sales Strategy Summit(on Decmeber 12). See below for additional package discounts.

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.