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.

2014 sPCMA Business Forum

Happy New Year! Don’t forget to put the sPCMA Business Forum on your 2014 calendar. This important PBM and specialty pharmacy industry event is taking place March 12 and 13 in Orlando, FL.

Conference features include remarks by Former Secretary of State Hillary Rodham Clinton, 30+ educational sessions with 20+ hours of CPE, time and facilities for private meetings, pre-conference networking via the LinkedIn Group PCMA-Connect and several networking receptions.

Conference topics will be timely and thought-provoking, covering everything from “Paying for Specialty Pharmaceuticals,” and “Government and Regulatory Battles over Specialty,” to diagnostics, biosimilars, 340B, and channel insights. A more comprehensive agenda will be posted to the event webpage soon, be sure to check back.

Register Now!

The 2013 Drug Channels Year in Review

Dear Drug Channels reader,

Whew. It’s been a crazy, busy year. Thank you for welcoming me into your inboxes and browsers. I’ve had fun writing about this year’s unexpected, unusual, and fascinating events. I’m grateful to our many sponsors and guest writers. Special thanks to the brave souls who joined in the spirited discussions below the articles.

This was also big year for Drug Channels. We hit almost 8,000 subscribers, started tweeting @DrugChannels, and proudly launched the Drug Channels Institute (DCI), a management education and computer-based training business for and about the pharmaceutical industry.

Below, I gift wrap 2013’s six biggest themes, so you can unwrap your favorite articles for the holidays.

Drug Channels will return in the new year. In the meantime, please enjoy our Drug Channels video greeting. As a special treat, you can see me dancing with my wife, Paula, who runs DCI’s e-learning business.

Here’s my 2014 promise to you: If you like your Drug Channels, you can keep your Drug Channels. Period.

All the best to you and your family,
Adam

Our Evolving Channels: CBI Trade and Channel Strategies Wrap-Up

Last week, we attended CBI’s 9th Annual Trade and Channel Strategies conference in Philadelphia, Pennsylvania. The keynote speaker was none other than Adam J. Fein, Ph.D.

Dr. Fein and others pointed out that manufacturer trade activities must evolve into an integrated channel strategy commercial function.

Below, we summarize other key takeaways from the meeting, including alternative distribution strategies, the outlook for buy-and-bill, and the emergence of boundary-spanning organized customers.

Benchmarking Manufacturers' PBM Rebates

The Pharmacy Benefit Management Institute (PBMI) has just released its 2013-2014 Prescription Drug Benefit Cost and Plan Design Report. (Free download.) This report provides invaluable insight into employer-sponsored pharmacy benefits. Drug Channels again salutes Takeda Pharmaceuticals North America for having sponsored the research.

As far as I know, the PBMI report offers the only public benchmarking data on manufacturer rebates to pharmacy benefit managers (PBMs). A few highlights:

• Employers use a wide variety of rebate structures, including per-prescription guarantees and percentage shares. Nearly one-third of smaller employers get no rebates.

• Rebates average $17 per 30-day brand-name retail prescriptions. Surprisingly, rebates were comparable for both large and small employers.

• On average, PBMs pass more than 80% of rebates back to employers.

Read on for details from the report. And don’t forget to join me at the PBMI’s Annual Drug Benefit Conference in February.

Express Scripts Plans a Specialty Drug Price War

According to a new must-read Bloomberg story, Express Scripts plans to start a price war over new hepatitis C treatments. The news follows the release of Gilead’s Sovaldi (sofosbuvir), which reportedly costs $1,000 per pill.

Express Scripts projects that Hepatitis C drug trend will grow by 168% by 2015, so payers are closely watching this test case. When there are multiple treatments in a therapeutic class, can the biggest PBM really control specialty drug costs?

While Express Scripts is talking boldly, the empty threat of blocking valuable medications has come back to life more times than a narcoleptic Jason Voorhees.

Read on for details on the unlucky hepatitis C medications that may be cut (or not) by Express Scripts’ machete.

Cardinal and CVS Caremark Form a Generic Power Buyer: Deal Analysis

If you can’t beat ‘em…

Yesterday, Cardinal Health (NYSE: CAH) and CVS Caremark (NYSE: CVS) announced a new 50/50 generic drug buying joint venture. See CVS Caremark And Cardinal Health Announce Creation Of Largest Generic Sourcing Entity In U.S.

Shocking? Not really. As I noted in Quantifying Generic Buying Power for McKesson-Celesio, big deals have a funny way of spawning more deals. Et tu, Express Scripts?

The joint venture structure and deal terms make it a win-win for CVS Caremark and Cardinal. Both companies will gain significant scale going into the upcoming wave of newly-generic drugs. Read on for the details and comments on the new joint venture structure.

Three New Specialty Pharmacy Deals Signal The Boom Ahead

There have been three major specialty pharmacy announcements over the last week.

• Long term care pharmacy Pharmerica acquired a minority stake in fast-growing specialty pharmacy Onco360

• Express Scripts opened up its specialty pharmacy network to physicians in the RainTree Oncology network

• Grocery chain Giant Eagle bought Rx21, a small transplant/hepatitis C specialty pharmacy

Pay attention. As these deals show, the specialty market is getting even hotter. Everyone wants specialty drug revenue. Read on to find out who’s moving in.

Transparent Drug Pricing Is Good for All

Today’s guest post is from George Kitchens, RPh, President of Artia Solutions, and consultant for Elsevier.

In this new post, Kitchens revisits the topic of drug price transparency and discusses how Predictive Acquisition Cost (PAC) helps ensure accurate reimbursement rates for both pharmacies and payers. To learn more, download Elsevier’s most recent report on PAC use cases across the industry, entitled Achieving Cost Savings with Accurate Drug Price Information: Industry Use Cases for PAC.

Please contact George Kitchens (gkitchens@artiasolutions.com) with any questions about the article.

We’re All A-Twitter!

Great news! You can now find more fresh information tidbits on the Drug Channels Twitter page.

At our page, @DrugChannels, you’ll find our carefully curated, hand-crafted selection of news and opinions about drug distribution, pharmaceutical economics, reimbursement, payers, current events, and more.

Follow us to learn about the events we attend, get up-to-the-minute news via live tweets, and view fun photos of us in action.

Sample tweets below. Enjoy!

3 Reasons Why CVS Caremark Absorbed Coram

While you were busy brining a turkey last week, CVS Caremark purchased Coram LLC, the specialty infusion services and enteral nutrition business unit of Apria Healthcare Group. Read the press release.

I spot three factors behind the deal:

• Home infusion is a fast-growing channel for specialty drugs, so the deal deepens CVS/pharmacy’s footprint as a major dispensing channel. CVS can also catch up to Walgreens.

• Home infusion can be a cheaper site of care, which helps Caremark’s specialty benefit management PBM business. Oddly, CVS Caremark’s own data shows home infusion to be more expensive than in-office treatment. See the chart below.

• Benefit coverage for home infusion specialty drugs is fragmented across the pharmacy and medical benefits. Payers are therefore looking for integrated management, visibility, and control.

Read on for details and background, some of which appeared a mere two weeks ago in CVS Caremark’s 2013 specialty trend report. CVS Caremark continues to expand throughout the healthcare system, swallowing up adjacent sectors with ease.

Attention, Hospital Shoppers: Cancer Markup Madness

Ever wonder why cancer care costs so much more in a hospital than in a doctor’s office? A Milliman, Inc., study—Comparing Episode of Cancer Care Costs in Different Settings: An Actuarial Analysis of Patients Receiving Chemotherapy—has an answer. (Free download).

The report compared cancer treatment costs in outpatient hospital departments vs. outpatient physician offices. As we highlight below, hospitals inflate drug expenses far beyond acquisition costs.

• For treatment in a physician office, total drug costs range from $12,000 to $62,000. 

• For treatment in a hospital outpatient setting, total drug costs range from $18,000 to $91,000. 

• The markups are especially egregious for such higher-cost specialty drug therapies as cytotoxic chemotherapies and biologics.

Once again, we see that hospitals can generate more revenue from specialty drug administration than can independent physician-owned clinics. Drug channel intermediaries can add to drug prices, with different markups for different channels.

Read on to see how shopping for cancer drugs in a hospital setting can bag you a very bum deal.