Drug Channels News Roundup, June 2014: CVS Caremark, Humana, 340B, Catamaran, and Burman’s

It's World Cup time! While you're waiting to leave work early for today's U.S.-Germany game, get a kick out of the latest noteworthy news nuggets from the Drug Channels pitch. In this issue:

• Will CVS Caremark's 2015 formulary exclusion list contain 200 drugs?

• Will Humana sell its PBM?

• What’s behind Burman’s success as a major HCV specialty pharmacy?

• WTF is going on with the 340B orphan drug rule?

Plus, The Wall Street Journal discloses Catamaran CEO Mark Thierer's surprising hobby.

Yes, Walgreens is Seriously Considering Inversion

My, my, how things have changed.

Yesterday, Walgreens released its latest quarterly earnings. President and CEO Greg Wasson has now completely reversed his public tone on tax inversion regarding Alliance Boots. Read his comments below and see what you think.

Putting aside the politically fraught inversion issue, Walgreens' financial picture gives us a valuable glimpse into the pharmacy industry's changing economics. Despite some good news on Alliance Boots synergies, gross margins were pulled down due to generic reimbursement pressures. (A-gain?) I highlight a key comment below, but you should really read the entire transcript.

Walgreens withdrew its 2016 guidance and now plans to update everyone in late July/early August. We'll all be waiting for Wasson to pull a rabbit out of his hat. Presto!

Drug Trend Forecasts, 2014 to 2016: Express Scripts vs. Caremark vs. Catamaran vs. Prime

In Which PBM Best Manages Drug Trend?, I analyze and compare the 2013 drug trend figures from four of the largest pharmacy benefit managers (PBMs)—Catamaran, CVS Caremark, Express Scripts, and Prime Therapeutics.

Today, let’s look at each company’s drug trend projections for 2014 through 2016. As you can see in the charts below, the PBMs' forecasts are surprisingly different, especially for traditional drug trend. Despite specialty trend methodology disparities, the four PBMs have roughly comparable specialty projections.

Check back next year, and we'll see whose crystal ball was most accurate. In the meantime, remember that even a blind pig finds a truffle sometimes.

GPO and Institutional Sales Strategy

GPO and Institutional Sales Strategy Summit
July 22-23, 2014 | Philadelphia, Pennsylvania
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CBI’s GPO and Institutional Sales Strategy Summit brings together institutional sales representatives from the biotech, pharmaceutical and medical device industries to discuss best practices and strategies for working with GPOs, ACOs, and IDNs to achieve national product success.

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• How to utilize integrated delivery networks to improve product sales

• How to establish a contracting strategy around the intricacies of a value-based payment system

• Best practices for partnering with ACOs, GPOs, IDNs and IDs

• Tracking how the "funding cascade" will impact purchasing under the new rules of the ACA

You can’t afford to miss it!

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Why do patients choose, adopt, and adhere?

Today’s guest post comes from Zitter Health Insights.

Zitter describes how patient behavior increasingly affects healthcare spending. In response, Zitter Health Insights now offers Consumer Connect, a market research platform that tracks, stores, and analyzes data entered by thousands of patient panelists.

Read on for some surprising consumer insights on brand selection, costs, and other topics. Or, click here to learn more about Consumer Connect.

Which PBM Best Manages Drug Trend? Express Scripts vs. Caremark vs. Catamaran vs. Prime

Four of the biggest pharmacy benefit managers (PBMs)—Catamaran, CVS Caremark, Express Scripts, and Prime Therapeutics—have now released their 2013 drug trend reports. The reports provide valuable marketplace insights. Just cite them with caution.

As the chart below shows, this year’s results are as mystifying as ever. Express Scripts had the highest overall drug trend, but the lowest specialty trend. Prime Therapeutics had a negative traditional trend, but the highest specialty trend. And so on.

Alas, the top-line figures don’t tell the full story, because of methodology and data presentation differences. As I noted last year, a PBM’s drug trend report is the bikini of pharmaceutical economics. What it reveals is interesting, but what it conceals is essential. Read on for the figure-hugging details.

Distributor Audits

Life Sciences Forum on Distributor Audits
July 15-16, 2014 | Philadelphia, PA
www.cbinet.com/distributoraudits

CBI’s Life Sciences Forum on Distributor Audits brings together compliance, audit and supply chain senior level team members to discuss important challenges and strategize innovative solutions.

Understand the importance of administering effective and reliable audits of third party distributors, including how to achieve transparency by holding distributors responsible for their operations and how to build long-lasting and sustainable relationships with distributors.

Learn how to position distribution audits for maximum impact while still working to maintain a dynamic internal audit strategy.

You can’t afford to miss it!

 Save $400 with code TTD998.* Visit www.cbinet.com/distributoraudits for more information.

*Cannot be combined with other offers or used towards a current registration. Other restrictions may apply.

Once Again, Gov't Data Show Rising Drugstore Industry Profits

As a follow up to yesterday’s analysis of Profits in the 2014 Fortune 500, let’s check out the U.S. Census Bureau’s latest Annual Retail Trade Report. These government-collected data provide the most complete industry picture of profits at retail drugstores.

As you can see in the charts below, drugstores’ gross margins increased again, reaching their highest levels in seven years. Gross profit dollars also grew.

Every year Drug Channels publishes these data, I get comments that “the sky is falling for pharmacy,” “next year will show how bad things really are,” yadda yadda yadda. Yet these impartial government data repeatedly show that retail drugstores’ financial position looks better than you may expect.

Profits in the 2014 Fortune 500: Manufacturers vs. Wholesalers, PBMs, and Pharmacies

Time once again for my annual review of the latest Fortune 500 list. These data will help you “follow the dollar” and understand how drug channel intermediaries make money.

Below, I explore the profitability and shareholder returns of the largest drug wholesalers, chain pharmacies, pharmacy benefit managers (PBMs), and pharmaceutical manufacturers. Thanks to consolidation, the 2014 Fortune 500 list contains only eight drug channels companies—AmerisourceBergen, Cardinal Health, CVS Caremark, Express Scripts, McKesson, Omnicare, Rite Aid, and Walgreens.

Below are my five observations from comparing these companies with the Fortune 500’s 12 pharmaceutical manufacturers and a separate survey of independent pharmacies. So, buy a vowel and enjoy a spin on Drug Channels' Wheel of Fortune 500!

Medicaid Drug Rebate Program Summit 2014

IIR’s Medicaid Drug Rebate Program (MDRP) 2014 is back in Chicago this September 15-17, 2014—just in time to provide you with essential regulatory updates surrounding the impact of the ACA, Medicare Part D, AMP Final Rule and the 340B Program Proposed “Mega Rule.”

Year after year, MDRP Chicago has continued to be THE authoritative MDRP event for everything government pricing, regulations, and rebates. It's the largest event in the space with the most speakers and government representation from CMS, HRSA, OIG, and more.

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Download the Brochure Here for Full Agenda and Speaker Details

More details below.

Unsweet Charity: 340B Abuses When Hospitals Buy Oncology Practices

The Biotechnology Industry Organization (BIO) has released a troubling new analysis of the 340B drug discount program, titled Trends in 340B Covered Entity Acquisitions of Physician-based Oncology Practices. (Free download.)

The report highlights what happens when a hospital buys an oncology practice:

• Within about six months, the hospital is using 340B discounts to buy drugs for the acquired outpatient oncology sites.

• The sites quickly account for about 40% of the hospital’s total 340B chargebacks.

• Almost half such hospitals pocket the 340B savings, as evidenced by 340B chargebacks from the acquired sites that exceed the hospitals’ total charity care.

Read on for an insightful chart, along with my explanation for the economics behind hospitals' acquisitions of physician oncology practices. Add this report to the growing evidence that the 340B drug discount program often benefits hospitals and their executives, not needy patients.

FULs Delayed (Again); AMP Final Rule Scheduled for June (LOL)

The Center for Medicare & Medicaid Services (CMS) just announced plans to finalize the Federal Upper Limits (FUL) for multiple source drugs sometime before the universe collapses into a dimensionless singularity.

In the meantime, CMS postponed its previously announced July 2014 deadline for finalizing the FULs. For CMS aficionados, the email notice is pasted below. (CMS apparently can’t be bothered to update its FUL website.)

In related non-news, the Office of Information and Regulatory Affairs website now taunts us with a June 2014 arrival for the oft-delayed Final Rule on Covered Outpatient Drugs, a.k.a., the Average Manufacturer Price (AMP) Final Rule. (Read my November note on the last three delays.) Long-time readers may vaguely recall my January 2012 write-up of the proposed rule: New AMP Rule Targets Bona Fide Service Fees.

As my teenage daughter would say: What-ever. See the AMP notice below. I expect the AMP rule to be released after the mid-term elections.