Drug Channels

Blogcation! See you at NACDS?

afein@pembrokeconsulting.com (Adam J. Fein) — Thu, 02 Jul 2009 05:29:00 +0000

Well, it is that time of year again. I am taking my usual two-month break from blogging, a.k.a, a blogcation. Yes, I'm sorry to report that your subscription fees only covers 10 months of Drug Channels. Drug Channels is now read by almost 5,000 people each month. Obviously, I only know only a small fraction of you. If you haven't done so, please send me a message if you'd like to chat on the phone or even meet in person at the NACDS meeting in August. (I'll be working during most of July and...

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2008 Pharmacy Market Share Data

afein@pembrokeconsulting.com (Adam J. Fein) — Tue, 30 Jun 2009 04:30:00 +0000

Before I take my usual summer break from blogging (alas, not also a work vacation), I want to share my estimates of 2008 pharmacy market share by company along with some predictions for 2009. FYI, I will be attending the NACDS 2009 Pharmacy & Technology Conference from August 9 through 11 in Boston. Please email me (mailto:afein@pembrokeconsulting.com) if you'd like to set up a one-on-one meeting with me in Boston. And if you just bump into me there, please feel free to introduce yourself...

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Authorized Generics: Money Saver or Evil Strategy?

afein@pembrokeconsulting.com (Adam J. Fein) — Fri, 26 Jun 2009 04:01:00 +0000

Back in the formative youth of the Drug Channels blog (three years ago!), I wrote about Merck's authorized generic (AG) strategy for Zocor (simvastatin) in Winners and Losers in the Zocor Wars. A brand-new FTC report (Authorized Generics: An Interim Report of the Federal Trade Commission) now quantifies the typical short-term savings from authorized generics. . Back in 2006, Merck had decided to sell Zocor to major managed care companies as an authorized generic, but priced lower than the...

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Rite-Aid, Importation, and Obamacare

afein@pembrokeconsulting.com (Adam J. Fein) — Thu, 25 Jun 2009 04:01:00 +0000

Here's a hand-picked selection of free-range news stories for your reading pleasure. Concerns Over McKesson Rite Aid Exposure Being Lifted – Rite-Aid (RAD) recently refinanced about $1.9 billion of debt and its stock price has quintupled since my March 11 post. This article highlights the relatively good news for McKesson (MCK), which is Rite-Aid's primary wholesaler. Bankruptcy may be temporarily off the table, but Rite-Aid continues to reduce store count and is growing more slowly than their...

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PhRMA’s Bold Gamble

afein@pembrokeconsulting.com (Adam J. Fein) — Tue, 23 Jun 2009 04:01:00 +0000

Yesterday, President Obama announced a plan under which drug makers will forgo $80 billion in revenues over the next ten years by paying half the cost of prescriptions for patients in the Medicare Part D "doughnut hole." See: Drug Makers Trim Prices for Health Overhaul PhRMA Statement on AARP-White House Press Conference AARP Thanks President, Senate Leaders for Helping to Close the “Doughnut Hole” As I see it, PhRMA has shrewdly slowed (but not stopped) the momentum behind harsher "reforms"...

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Wholesalers and the Generic Price War

afein@pembrokeconsulting.com (Adam J. Fein) — Thu, 18 Jun 2009 04:01:00 +0000

Pharmaceutical Commerce just published my article on the risks to wholesaler profitability from the generic price war among retail pharmacies. You can read the article for free on the PC site: Drug Wholesalers and the Generic Price War. My key point: While the drug wholesaling industry appears reasonably healthy right now, the ongoing generic drug price war among retail pharmacies will create the risk of reduced wholesaler profitability. Understanding this dynamic is crucial for predicting...

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Cardinal-CVS Deal Almost Done

afein@pembrokeconsulting.com (Adam J. Fein) — Mon, 15 Jun 2009 04:01:00 +0000

Last week, Cardinal Health's (CAH) CEO George Barrett strongly hinted that the company's brand drug wholesale supply contract with CVS Caremark (CVS) is almost done. As far as I know, this is the first public statement by any wholesaler about the status of this mega-contract. As expected, Cardinal will face some "margin erosion" (their words) from the renewal as CVS flexes its buying power. See the "Pricing/Customer Renewals" section of Profit Headwinds for Cardinal Health for background or my...

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Specialty Spending Soars (for now)

afein@pembrokeconsulting.com (Adam J. Fein) — Fri, 12 Jun 2009 04:01:00 +0000

The new report from the Federal Trade Commission (FTC) on follow-on biologics (FOBs) is a must-read for anyone interested in the future profitability of drug channels companies (pharmacies, wholesalers, and PBMs). Here's a link to the complete 120 page report: Emerging Health Care Issues: Follow-On Biologic Drug Competition The latest spending data for specialty drugs show why momentum for follow-on biologics (FOBs) is building. These data come from the most recent drug trend reports of the...

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Importation Fanatics Get Snuffed Out

afein@pembrokeconsulting.com (Adam J. Fein) — Tue, 09 Jun 2009 04:01:00 +0000

"A fanatic is one who can't change his mind and won't change the subject" – Winston Churchill Our old friend Senator Byron Dorgan (D-ND) has once again tried to bring drug importation back from the dead. His latest maneuver failed, but the tenacity of importation fanatics remains impressive and scary. The Senate is currently considering The Family Smoking Prevention and Tobacco Control Act (S.982), which would give the Food and Drug Administration (FDA) authority to regulate tobacco products...

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Profit Headwinds for Cardinal Health

afein@pembrokeconsulting.com (Adam J. Fein) — Thu, 04 Jun 2009 04:01:00 +0000

Cardinal Health (CAH) has had a tough week. The roll-out of its shiny new wholesale business was tarnished by some bad news -- earnings will be down sharply in its next fiscal year starting on July 1. See Cardinal Health Sees FY10 Pressures, Then Momentum from Dow Jones for details. Thursday's stock price was 17% lower than Tuesday's close. Ouch. The company provided the following useful snapshot of the "headwinds" (their words) for the soon-to-be-independent wholesale distribution business....

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PBM Consolidation Ahead

afein@pembrokeconsulting.com (Adam J. Fein) — Wed, 03 Jun 2009 04:01:00 +0000

Looking at some recent news stories, I see more consolidation among Pharmacy Benefit Managers (PBMs). Here are my 5 reasons. 1) The FTC -- Last week, the Federal Trade Commission (FTC) allowed Express Scripts' (ESRX) acquisition of Wellpoint's (WLP) Next Rx in-house PBM business to proceed. As I see it, this deal solidifies Express Scripts' position among the top three PBMs. (BTW, the FTC's non-action is bad news for the independent pharmacist's quixotic quest to undo the CVS Caremark...

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Pfizer Goes Behind the Rat

afein@pembrokeconsulting.com (Adam J. Fein) — Fri, 29 May 2009 04:01:00 +0000

In January, I told you about Pfizer's UK ad campaign that aimed to educate consumers about the dangers of buying drugs online. See Pfizer Tries to Choke Demand for Parallel Imports to watch the video and get my take on Pfizer's strategy behind this campaign. Oddly, the video of a man regurgitating a dead rat remains a very popular post here at Drug Channels. Ever wonder how they made it look so realistic? Well, now you can find out: Never fear – no actual rats were harmed according to the...

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Are Generic Drugs a Bad Bargain?

afein@pembrokeconsulting.com (Adam J. Fein) — Thu, 28 May 2009 13:26:00 +0000

Katherine Eban, well-known author of Dangerous Doses, is back with another drug industry shocker called "Are generic drugs a bad bargain?" The subtitle should get your attention: "All of us want cheaper medicine — but not if it costs us our health." (Cue scary music…) What do you think? Responsible muckracking or irresponsible fearmongering? Eban writes: But a yearlong investigation by SELF — including more than 50 interviews and records leaked from one of the world's largest generic-drug...

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AMP: Salvation

afein@pembrokeconsulting.com (Adam J. Fein) — Tue, 26 May 2009 04:01:00 +0000

A famous philosopher once opined: "The future's not set. There's no fate but what we make for ourselves." The pharmacy lobby looks set to prove this aphorism true by preventing the use and/or publication of cost-plus Average Manufacturer Price (AMP) based reimbursement for generic drugs under Medicaid. Looking at two new pieces of evidence, I expect another legislative delay that will postpone implementation until at least late 2010 – and possibly repeal AMP altogether. Hasta la vista,...

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Jim Gaffigan visits the Pharmacy

afein@pembrokeconsulting.com (Adam J. Fein) — Fri, 22 May 2009 04:01:00 +0000

The last two posts have been sorta heavy, so let's bring the funny for Memorial Day weekend. Here's a video clip from the hilarious and pale Jim Gaffigan riffing on a trip to the pharmacist. His new DVD King Baby is great. Yup, he's the Hot Pocket guy, too. Dispense yourself a chill pill and enjoy. Gaffigan better watch out or the NACDS may go all medieval on him. The NACDS recently "fired back" at an editorial cartoonist from the Washington Post for a blasphemous depiction of a pharmacist....

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The Odd Economics of Maintenance Choice

afein@pembrokeconsulting.com (Adam J. Fein) — Thu, 21 May 2009 11:09:00 +0000

Thank you for posting so many thoughtful and detailed reactions to yesterday's post (Reality Check on Mail Economics). I appreciate your trust in allowing Drug Channels to be a forum for open discussion of complex topics in the industry. Let's take a look at the mail versus retail tradeoff as framed by CVS Caremark. Frankly, I remain puzzled by the economics of CVS Caremark's Maintenance Choice program even after last Friday's 2009 Annual Analyst/Investor Meeting. Maintenance Choice may be a...

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Reality Check on Mail Economics

afein@pembrokeconsulting.com (Adam J. Fein) — Wed, 20 May 2009 04:01:00 +0000

I got a lot of comments and emails about last week's article on CVS Caremark (Debate Over CVS Caremark's Tactics Heats Up). Many people criticized me for not recognizing that mail pharmacy reimbursements are higher than retail pharmacy reimbursements. Regular readers know my credo: "Everyone is entitled to his own opinion, but not his own facts." And as I show below, an independent data source shows that – on average – mail pharmacy reimbursements are actually lower than retail...

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Weekend Update + Spinal Tap

afein@pembrokeconsulting.com (Adam J. Fein) — Fri, 15 May 2009 04:01:00 +0000

In my recent Drug Channels reader survey, a few people requested occasional updates on past stories. Here you go! 1. Generic Drug Scandal Hits Wholesalers and Drug Makers in Canada (4/28/09) -- Some well-known wholesalers and manufacturers are being accused of participating in a drug recycling and duplicate reimbursement scheme in Canada. It now looks like the Canadian problems are multiplying faster than hockey penalties according to More charges laid in alleged Ontario drug reselling...

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Debate Over CVS Caremark’s Tactics Heats Up

afein@pembrokeconsulting.com (Adam J. Fein) — Thu, 14 May 2009 04:01:00 +0000

The pharmacy lobby scored a major PR victory with a high-profile story in yesterday's Wall Street Journal that will surely attract the attention of legislators and the public. But I think that the article is not balanced because it ignores the economic and competitive realities of today's pharmacy industry. CVS Appears to Steer Plan Patients to Its Stores states: CVS Caremark Corp. is apparently steering its pharmacy-benefits patients to its own drugstores by raising co-payments for some who...

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A Glimmer of Synergy at CVS Caremark

afein@pembrokeconsulting.com (Adam J. Fein) — Thu, 07 May 2009 04:01:00 +0000

The famous British economist John Maynard Keynes once quipped: "When the facts change, I change my mind – what do you do, sir?" Judging by CVS Caremark's latest financials (CVS Caremark Reports Results for First Quarter 2009), I need to change my mind on revenue synergies. In CVS Caremark: No Visible Revenue Synergy, I wrote: Maintenance Choice program may be appealing to payers and consumers, but there is not yet a quantitatively visible shift in CVS' retail activity. If CVS pharmacies are...

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Wal-Mart Aims at PBM Mail Profits

afein@pembrokeconsulting.com (Adam J. Fein) — Wed, 06 May 2009 04:01:00 +0000

Hot on the heels of Walgreens potential cost-plus deal, Wal-Mart just announced a new mail pharmacy pilot in Michigan. The program offers a 90-day supply of 300 generic prescriptions for $10 each via free mail delivery. Official details: New Walmart Program Broadens Access to Affordable Prescriptions in Michigan (official press release) http://www.walmart.com/pharmacyhomedelivery (Wal-Mart's mail pharmacy web site) Although this is just a pilot, we have no reason to assume Wal-Mart will stop...

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Is Walgreens planning a direct-to-payer deal?

afein@pembrokeconsulting.com (Adam J. Fein) — Mon, 04 May 2009 04:01:00 +0000

This morning's Wall Street Journal article about Wal-Mart's (WMT) pricing model with Caterpillar (CAT) drops a bombshell in the last paragraph. According to Wal-Mart Expands Drug Program: "Walgreen has a growing relationship with Toyota, operating about a half dozen pharmacies at the auto maker's U.S. work sites. The car maker is discussing with Walgreen the possibility of setting up a program similar to Wal-Mart's project with Caterpillar, in which Walgreen would expand its drug program for...

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Good Stuff to Read

afein@pembrokeconsulting.com (Adam J. Fein) — Wed, 29 Apr 2009 04:01:00 +0000

Here are some interesting articles and sites for your reading pleasure. As always, I welcome links to interesting stories from Drug Channels readers. Rat advert complaints dismissed – Apparently not everyone enjoyed Pfizer's rat ad as much as the Drug Channels readership. 64 people in Britain complained about the rat ad that I describe in Pfizer Tries to Choke Demand for Parallel Imports. The UK's Advertising Standards Authority (ASA) sagely concluded: "we considered the metaphor of...

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Generic Drug Scandal Hits Wholesalers and Drug Makers in Canada

afein@pembrokeconsulting.com (Adam J. Fein) — Tue, 28 Apr 2009 14:54:00 +0000

While the world is focused on swine flu, some well-known wholesalers and manufacturers are being accused of participating in a drug recycling and reimbursement scheme in Canada. According to Monday's press release from the Ontario Ministry of Health and Long-Term Care: "The audits found that some pharmacies have been purchasing a greater amount of generic drugs than they require, collect professional allowances on the full amount, and then return what they don't need to the wholesaler. The...

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Drug Channel Profits in 2009’s Fortune 500 list

afein@pembrokeconsulting.com (Adam J. Fein) — Mon, 27 Apr 2009 08:00:00 +0000

Spring must be here, because it's time for my annual review of the Fortune 500 list. The subject of profits comes up frequently in reader comments on the blog. This review will give you some facts and perspective on the profitability of the largest drug wholesalers, chain pharmacies, and pharmacy benefit managers (PBMs). And to keep things spicy, I also compare this group to independent pharmacies and manufacturers. Key conclusions By a conventional metric (revenues), the biggest drug...

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