Drug Channels

A New Opportunity to Reach the Drug Channels Audience

afein@pembrokeconsulting.com (Adam J. Fein, Ph.D.) — Fri, 20 Nov 2009 07:00:00 +0000

Many people ask me about the readership of Drug Channels. This post shares new details about the companies visiting Drug Channels along with traffic statistics since March 2007. I am also announcing the availability of two sponsorship opportunities for companies interested in connecting with the Drug Channels community. The number of sponsors will be limited to two companies at any one time and will be allocated on a first-come, first-served basis. I include some high-level details below, but drop me a line to discuss the opportunity. Regular readers shouldn’t fret—I won’t compromise the...

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Drug Prices and Pharmacy Profits

afein@pembrokeconsulting.com (Adam J. Fein, Ph.D.) — Wed, 18 Nov 2009 07:00:00 +0000

I’m sure most of you read Sunday’s New York Times article on drug prices: Drug Makers Raise Prices in Face of Health Care Reform. The NYT story is based on the AARP’s latest analysis of prescription drug list prices: Rx Watchdog Report: Drug Prices Continue to Climb Despite Lack of Growth in General Inflation Rate. Comparing list prices for a single product category to a computed, non-list price index for a broad basket of goods (CPI-U) is mathematically illogical. After all, the CPI-U for prescription drugs increased at a rate less than half the rate of list prices. But we all know...

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Healthcare Reform Options for AMP

afein@pembrokeconsulting.com (Adam J. Fein, Ph.D.) — Tue, 17 Nov 2009 07:03:00 +0000

Have you been wondering what’s going on with our old friend Average Manufacturer Price (AMP)? Never fear, Drug Channels is here! I recently came across a useful summary from the law firm of Reed Smith in Health Reform Update: Focus on Prescription Drug Price Regulation. See the second page of their briefing for an overview of how AMP would be handled under the House or Senate healthcare bills. To understand the business implications of AMP, I humbly suggest that you read the sections titled “Risks to the Superior Profitability of Generic Drugs” and “Replacing the Average Wholesale Price...

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PBMs Go Global for Growth

afein@pembrokeconsulting.com (Adam J. Fein, Ph.D.) — Fri, 13 Nov 2009 05:01:00 +0000

Express Scripts (NASDAQ: ESRX) is featured in an unusual press release from Chinese company SeaRainbow Holding Corp., Ltd. (SZSE: 000503) announcing Express Script's entry into the fast-growing China market. See Express Scripts, SeaRainbow to Pioneer PBM Business in China. There will be plenty of growth for Pharmacy Benefit managers (PBMs) in the good ol’ US of A, especially given current health reform proposals and prospects for PBM consolidation. But the global opportunity is even bigger because those markets are much less sophisticated in the management of pharmacy benefits, especially...

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Gray Market: I'm Not Dead Yet

afein@pembrokeconsulting.com (Adam J. Fein, Ph.D.) — Thu, 12 Nov 2009 13:49:00 +0000

Secondary market appears to be alive and well. Whether or not patients remain alive and well is a whole different question. Check out Profiteers peddling flu vaccine from newspapah-of-recahd The Cape Cod Times, which notes: The seasonal flu vaccine is in short supply, but licensed pharmacists and medical professionals can purchase it on a so-called "gray market" — for as much as eight times the manufacturers' original price.Unfortunately, the illegitimate secondary market will exist as long as there are willing buyers for products with questionable heritage. History has shown us that wild...

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Manufacturers and the Evolving Pharmacy Channel

afein@pembrokeconsulting.com (Adam J. Fein, Ph.D.) — Tue, 10 Nov 2009 05:01:00 +0000

Pharmaceutical Commerce just published my article on the implications of the evolving retail pharmacy industry for pharmaceutical manufacturers. You can read the article for free on the PC site: The Evolving Retail Pharmacy Channel: Implications for Manufacturers. The article is based on my U.S. Pharmacy Industry: Economic Report and Outlook. My key point: The corner drugstore has evolved into consolidated, multibillion-dollar public corporations that manage the distribution, dispensing, and payment of prescriptions. These organizations will be able to use their emerging influence to...

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CVS Caremark: Pharmacy Gain, PBM Pain

afein@pembrokeconsulting.com (Adam J. Fein, Ph.D.) — Fri, 06 Nov 2009 05:36:00 +0000

CVS Caremark disclosed unexpected problems in its PBM business yesterday, spooking investors and sending its stock down by 20%. See Dow Jones’ coverage: CVS' Pharmacy Benefit Struggles Renew Merger Benefits Debate Judging by the financials, it sure looks like CVS Caremark has sacrificed its PBM business for the benefit of the retail pharmacy business. They are also having trouble explaining how a PBM customer gains when a brick-and-mortar pharmacy is paired with a benefit management business. Adding insult to injury, CVS Caremark also disclosed that the Federal Trade Commission (FTC) has...

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Dilbert on Drug Marketing

afein@pembrokeconsulting.com (Adam J. Fein, Ph.D.) — Thu, 05 Nov 2009 07:01:00 +0000

As a follow-up to Tuesday's post, management guru Scott Adams shows how promotion by a pharmaceutical manufacturer affects physicians' prescribing decisions. Of course, this topic may not be funny for much longer given 40,000 recently announced job cuts by Johnson & Johnson, Pfizer, and Astra-Zeneca or the 16,000 cuts planned by Merck. Copyright © 2006-2009 Pembroke Consulting, Inc. and Copyright © 2006-2009 Drug Channels blog. This Feed is for personal non-commercial use only.

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How Generics Change the Market

afein@pembrokeconsulting.com (Adam J. Fein, Ph.D.) — Tue, 03 Nov 2009 07:01:00 +0000

I just came across an intriguing new study that examines how generic drug entry affects prescription volume and manufacturer revenues. See TIME RELEASE: The Effect of Patent Expiration on U.S. Drug Prices, Marketing, and Utilization by the Public The paper poses an interesting question and contains some neat data on post-generic market evolution—brand market share, prices, promotional expenses. I’m a bit underwhelmed by the author’s conclusions. So, I suggest that you enjoy the pretty pictures and perhaps incorporate the conceptual ideas into your forecasting models. The authors use monthly...

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Noteworthy News Stories

afein@pembrokeconsulting.com (Adam J. Fein, Ph.D.) — Fri, 30 Oct 2009 04:01:00 +0000

Here are some worthwhile articles for your reading pleasure. As always, I welcome story links from Drug Channels readers. As a special treat, I am including a picture of my Halloween costume at the bottom of the post. Happy Halloween! Face-Off: Pharmaceutical Distributors A financial blogger ranks the stock market prospects of the Big 3 drug wholesalers--AmerisourceBergen(ABC), Cardinal Health (CAH), and McKesson (MCK). Can you guess who comes out on top? CVS Caremark Drug-Benefit Pitches Missed The Mark For Some The premise of this Dow Jones article from early September: "CVS Caremark...

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Should pharmacies be liable for stupid patients?

afein@pembrokeconsulting.com (Adam J. Fein, Ph.D.) — Thu, 29 Oct 2009 04:01:00 +0000

Yesterday’s Wall Street Journal had a scary cover story titled Case Spurs Pharmacies' Fears of Lawsuits Over Drug Abuse. (Click here for a free summary if you can't access the article.) The article describes a lawsuit against a group of pharmacies for dispensing prescription painkillers to a woman who killed someone while driving high on hydrocodone. Just my $0.02, but I think it’s ludicrous to pin the blame on a pharmacy for the deranged behavior of one consumer. The pharmacy chains are being dragged into this case because they have deep pockets, not because they should be responsible for...

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Best Of

afein@pembrokeconsulting.com (Adam J. Fein, Ph.D.) — Wed, 28 Oct 2009 04:01:00 +0000

There are almost 400 posts on Drug Channels. New readers often ask me for a list of the "best" ones. Here is my periodically updated selections. Unfortunately, some of my best posts were very timely and/or humorous analyses of news events, which means those posts now sound quite dated and sort of lame. I am listing the best posts for answering the top questions that people ask me. As far as I know, these posts are still valid although some of the information may have been superseded by new developments. I wrote the U.S. Pharmacy Industry: Economic Report and Outlook to provide an integrated...

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Drug Channels Earnings Calendar

afein@pembrokeconsulting.com (Adam J. Fein, Ph.D.) — Tue, 27 Oct 2009 04:01:00 +0000

In an unusual confluence of the calendar, the big 3 drug wholesalers and big 3 pharmacy benefit managers (PBMs) will all be reporting their latest financial results on 4 of the next 9 days. These financial reports and accompanying conference calls provide invaluable insights into the strategies and economics of companies within U.S. drug channels. As a service to Drug Channels readers, I'm providing a brief rundown of the upcoming calendar along with links to the earnings conference call webcasts for each company. If you don’t have time to listen to the calls, free transcripts show up on...

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Medco Takes on Eli Lilly

afein@pembrokeconsulting.com (Adam J. Fein, Ph.D.) — Wed, 21 Oct 2009 04:01:00 +0000

Yesterday, Medco Health Solutions (NYSE:MHS) announced its intention to launch a comparative effectiveness study of Bristol-Myers Squibb’s Plavix® versus Eli Lilly’s Effient®. See the press release. Why, you may ask, would a Pharmacy Benefit Manager (PBM) want to conduct a clinical trial? Big hint: Effient was approved in July 2009. Plavix will be subject to generic competition in 2011. Now, can you guess which of the two products will be simultaneously less expensive for payers and more profitable for Medco? SAVING MONEY, MAKING MONEY Dr. Robert Epstein, Medco's chief medical officer,...

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Healthcare Reform: Bullish for PBMs, but Not Pharmacies

afein@pembrokeconsulting.com (Adam J. Fein, Ph.D.) — Tue, 20 Oct 2009 04:01:00 +0000

"a brand-new market for Medco to serve” That’s the view on the Senate’s health reform proposal from David Snow, CEO of Medco Health Solutions (NYSE:MHS) as reported yesterday in CEOs Tally Health-Bill Score. Right now, it looks like healthcare reform will benefit Pharmacy Benefit Managers (PBMs) by expanding coverage. Retail pharmacies would benefit from increased prescription volume but will likely see gross margins drop as the uninsured get the advantage of third-party bargaining power. The Bullish Case for PBMs If you believe the CBO’s October 7 analysis of the America’s Healthy Future...

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Provider Pain in the Healthcare Supply Chain

afein@pembrokeconsulting.com (Adam J. Fein, Ph.D.) — Fri, 16 Oct 2009 04:01:00 +0000

The State of Healthcare Logistics: Cost and Quality Improvement Opportunities is a worthy new study highlighting successes and challenges for the healthcare supply chain. Download it for free here. As I summarize below, the findings highlight how providers struggle with missing data standards and stubbornly high inventory costs. The report got me thinking about the future of the specialty pharmaceuticals distribution channel. I see an emerging opportunity for manufacturers to use their supply chains as a new source of competitive advantage, especially as payers limit provider’s...

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Interpreting IMS’ Shiny Happy New Forecast

afein@pembrokeconsulting.com (Adam J. Fein, Ph.D.) — Tue, 13 Oct 2009 04:00:00 +0000

IMS Health raised its 2009 U.S. growth forecast last week to a range of +4.5% to +5.5% and its 2010 forecast to a range of +3% to +5%. See IMS Health Forecasts Global Pharmaceutical Market Growth. Recall that IMS was forecasting a 2009 decline of -1% to -2% just 6 months ago, although the upgrade is no surprise given recent sales trends. I want to clarify precisely what IMS is projecting and speculate on how it relates to the margins and revenues of drugstores, wholesalers, and Pharmacy Benefit Managers (PBMs). I’m also curious to hear what you think about this new, more optimistic...

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Scoring the CBO

afein@pembrokeconsulting.com (Adam J. Fein, Ph.D.) — Fri, 09 Oct 2009 12:33:00 +0000

Must-read editorial in the Wall Street Journal this morning on the flaws in the CBO’s scoring of the Baucus health care bill. Check out The Greatest Show on Earth. “Behold: a new $829 billion entitlement that will subsidize insurance for tens of millions of people—and reduce deficits by $81 billion at the same time. In the next tent, see the mermaid and a two-headed cow.” Perhaps this article will distract you from the, um, unexpected WTF news that President Obama won the Nobel Peace Prize. This is not a joke. See the video below. Poll: Happy, Healthy Obamas Out Of Touch With Miserable...

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A Phony Mail Order Controversy

afein@pembrokeconsulting.com (Adam J. Fein, Ph.D.) — Thu, 08 Oct 2009 04:01:00 +0000

Are consumers satisfied with mail-order pharmacies? The J.D. Power and Associates 2009 National Pharmacy Study shows high average satisfaction at mail-order pharmacies. Yet the National Community Pharmacists Association (NCPA) issued a press release immediately after the J.D. Power results claiming Patient Survey Finds Widespread Problems With Mail Order Pharmacies. Drug Topics magazine duly reported on the “controversy” of these supposedly “conflicting results.” Now, I don't want to get off on a rant here, but it’s inaccurate and intellectually dishonest to compare the NCPA’s aggregation...

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A Peek at Drug Wholesalers' Economics

afein@pembrokeconsulting.com (Adam J. Fein, Ph.D.) — Wed, 07 Oct 2009 04:01:00 +0000

If you sell to (or buy from) drug wholesalers, you should consider buying the new 2009-2010 HDMA Factbook, just released by the research arm of the drug wholesaler’s trade association. This report is valuable for anyone who negotiates with or analyzes drug wholesalers, although you’ll need to be careful when interpreting the reported statistics. I note a few highlights about drug wholesalers' profitability below and suggest two creative uses of the data. Unfortunately, I must qualify my purchase recommendation because HDMA has decided not to make the report available as an electronic PDF...

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CVS' Losses in 2010 Part D Enrollment

afein@pembrokeconsulting.com (Adam J. Fein, Ph.D.) — Tue, 06 Oct 2009 04:01:00 +0000

Last week, the Centers for Medicare & Medicaid Services (CMS) released information about Medicare Part D stand-alone prescription drug plans (PDPs) available in 2010. Click here to view the raw CMS plan data. The surprising news comes from CVS Caremark's (NYSE:CVS) loss of 30 to 35% of its Low income Subsidy (LIS) Part D members. This drop will reduce earnings per share for the company. See CVS Caremark Statement Regarding Results of 2010 Medicare Part D Bidding Process. Here’s a quick look at what happened last week. I’ll save my speculations on the status of CVS Caremark’s PBM...

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CVS Gets Ahead of Walgreens...with Chia Obama!

afein@pembrokeconsulting.com (Adam J. Fein, Ph.D.) — Fri, 02 Oct 2009 04:00:00 +0000

CVS Caremark (NYSE:CVS) has made a bold strategic move that puts it head and shoulders above rival Walgreen (NYSE:WAG) in the all-important Presidential Decorative Planter Category (PDPC). Yes, you guessed right. CVS stores will soon begin stocking the Obama Chia. This is not a joke. See the video below. Walgreen pulled the Obama Chia from its stores back in April. Fortunately, CVS will fill the gaping hole in our nation’s soul and do a test run at CVS stores in Chicago, Tampa and San Francisco. Check out the ad: This is not a political endorsement or a comment on health care reform....

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Walgreen's Future Profit Potential

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

Walgreen (NYSE:WAG) posted better than expected sales and announced major progress in its cost-cutting efforts, leading its stock to pop about 10% on Tuesday. Here’s the official release: Walgreen Co. Reports Fourth Quarter 2009 Earnings of 44 Cents Per Diluted Share Walgreen’s strategic moves are in sync with two important industry trends that I analyze in my (hint, hint) new U.S. Pharmacy Industry: 2009 Economic Report and Outlook: The growing advantage of low-cost prescription fulfillmentThe expansion of channel-neutral dispensing modelsBoth factors—dispensing efficiency and integrated...

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Download My New Pharmacy Industry Report

afein@pembrokeconsulting.com (Adam J. Fein, Ph.D.) — Wed, 30 Sep 2009 04:01:00 +0000

I am pleased to announce the release of my new downloadable report U.S. Pharmacy Industry: 2009 Economic Report and Outlook. Here’s the Dow Jones story: Report: US Pharmacy Revenues To Surpass $350 Billion By 2015. I’m really proud of the report and think you’ll find it to be a valuable planning tool. I want to tell you a bit about the content and give blog readers a sneak peek at the seven major trends. I also want to offer something special for you, my blog readers. I will randomly select 5 of first 25 Corporate License purchasers for a confidential 60 minute conference call with me to...

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AWP Goes Boom

afein@pembrokeconsulting.com (Adam J. Fein, Ph.D.) — Fri, 25 Sep 2009 04:01:00 +0000

Tomorrow’s the day that First DataBank’s Average Wholesale Price (AWP) goes boom. See What Happens When AWP Goes Boom for background. My view is that there's not going to be much of a difference after Sept. 26. As I see it, the net impact on total U.S. drug spending will be relatively small and certainly far below the initial multibillion-dollar predictions from a few years ago. The Medicaid issue is more complex, but not fatal. So far, New Jersey has already announced a reimbursement change that will partly neutralize the impact. (See this NACDS press release.) And as for the future of...

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