Drug Channels

Medicaid Drug Rebate Program Summit

noreply@blogger.com (Adam J. Fein, Ph.D.) — Tue, 29 May 2012 12:00:00 +0000

I want to remind you about IIR's 17th Annual Medicaid Drug Rebate Program (MDRP) Summit, a Drug Channels sponsor. The event will be held from September 10 to 12 in Chicago, IL, at the Swissotel Chicago.

IIR is now projecting attendance by more than 500 public sector reimbursement professionals. The 2011 MDRP Summit sold out, so register soon. View a list of confirmed 2012 attendees, by company and job title.

IIR is offering a special 25% discount to Drug Channels readers—up to $850 in savings off the standard rate. Register with VIP code: XP1758DRUG. Thanks, IIR!
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Walgreens Rx for Growth: Beer! (rerun)

noreply@blogger.com (Adam J. Fein, Ph.D.) — Fri, 25 May 2012 12:00:00 +0000

In advance of Memorial Day weekend, I'm rerunning one of my favorite posts, originally published in February 2011. Amid our festivities, let's all raise a glass for the brave men and women who died while serving in the United States Armed Forces.

"Ah, beer. The cause of and the solution to all of life's problems."—Homer Simpson.

Walgreens (NYSE: WAG) has expanded the definition of "medicine" once again with the introduction of its own private label beer called Big Flats 1901. A six-pack sells for $2.99—less than the cost of a $4 prescription!

The beer's tagline: "It’s the water that makes it." (Legal disclaimer: It does not say "...makes it good.")

Dr. Stephen T. Colbert, DFA, provides his review of this important industry development in the video clip below.

Question: Could this be revenge for CVS Caremark's (NYSE:CVS) first-mover advantage in the drugstore industry's Chia Obama wars?
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Express Scripts' George Paz Opines on Medco, Pharmacists, and Walgreen

noreply@blogger.com (Adam J. Fein, Ph.D.) — Wed, 23 May 2012 12:28:00 +0000

Today's Wall Street Journal has a provocative interview with George Paz, CEO of Express Scripts (NASDAQ: ESRX). See Express Scripts CEO's Take on the Drug Market.

In the interview, Mr. Paz weights in on Medco's cost structure, the value of pharmacist dispensing, and the Walgreen's (NYSE: WAG) dispute. Depending on your point of view, you will be either appalled or impressed by his viewpoints.

Read on for highlights along with commentary from your friendly neighborhood blogger.
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Oral Oncology Channel Battle: Payers vs. Providers

noreply@blogger.com (Adam J. Fein, Ph.D.) — Tue, 22 May 2012 12:00:00 +0000

The Zitter Group recently released Managed Care Oncology Index: Winter 2012, a 331-page multi-client report.

The report is packed with useful data. Given the large pipeline of oral oncolytics, I want to highlight some intriguing stats on the channels for these products.

Today, about half of all oral oncology volume goes through specialty pharmacy and almost one-third goes through traditional retail. The balance is split between other channels such as traditional mail-order and provider dispensing.
Payers would prefer that a lot more volume goes through the specialty pharmacy channel. In contrast, oncology practice managers would prefer that more volume go through on-site provider dispensing.

The differences of opinion highlight another facet of the ongoing battle for control of specialty drugs. Meanwhile, as I outline below, manufacturers face difficult decisions in commercial and channel strategies.
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CLM Solutions: Innovation vs. the Status Quo (Guest Post)

noreply@blogger.com (Adam J. Fein, Ph.D.) — Fri, 18 May 2012 12:00:00 +0000

Today’s guest post is from Craig Sharp, Editor at Eye for Pharma, a Drug Channels sponsor. Craig interviews David Kreutter, Vice President of Global Business Analytics and Insights at Pfizer, about the company’s Closed Loop Marketing (CLM) solution

The 2012 Sales Force Effectiveness & Commercial Excellence conference will be held June 12-14, 2012, at the Renaissance Woodbridge Hotel in Iselin, NJ. Click here for registration and Early Bird Specials.

Please contact Theo Fellgett (theo@eyeforpharma.com or 800-814-3459 Ext. 7591) with any questions about the event or this article.
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Drug Channel Profits in the 2012 Fortune 500

noreply@blogger.com (Adam J. Fein, Ph.D.) — Thu, 17 May 2012 12:00:00 +0000

Time once again for my annual review of the new Fortune 500 list. In this article, I explore the relative profitability of the largest drug wholesalers, chain pharmacies, pharmacy benefit managers (PBMs), and pharmaceutical manufacturers. I also compare these groups to independent pharmacies.

Key observations from the 2012 Fortune 500 list:

Most drug channel companies rank more highly on the Fortune 500 because they are bigger (in revenues) than pharmaceutical manufacturers.
Drug channels companies are pretty profitable. In 2011, median profitability of drug channels companies was up slightly vs. 2010.
Beware of the "pennies in profit" fallacy, which reflects revenue double-counting within the channel system. Channel companies' profitability is about half of the profitability of pharmaceutical manufacturers when using an appropriate metric such as Return on Assets.
In 2011, investors earned higher returns from drug makers than from the drug channels group. This is a switch from previous years, although the drug channels group outperformed manufacturers over the past 10 years.
The profitability of a typical independent pharmacy is well above the median profitability of the 10 largest drug channels companies, including PBMs.

The technical notes are at the bottom. Add a comment or opinion below. Enjoy!
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Cardinal Settles with the DEA, while Senators ask for an Inquiry

noreply@blogger.com (Adam J. Fein, Ph.D.) — Tue, 15 May 2012 13:00:00 +0000

Cardinal Health (NYSE: CAH) made news again today by announcing a settlement with the Drug Enforcement Administation (DEA) regarding its Lakeland, FL, distribution center. See Cardinal Health Brings Resolution to Litigation with DEA Settlement.

Regular readers know that I've been very critical of the DEA's aggressive and misguided pursuit of pharmaceutical manufatcurers and wholesalers. For perspective on this current dispute and Cardinal's historical troubles, see February's Cardinal Fights a Misdirected DEA.

Read on for some more thoughts on this issue and details of how Senator Chuck Grassley and Senator Sheldon Whitehouse are trying to shine a light on the DEA's impact on drug shortages.
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BREAKING NEWS: Cardinal Health to Acquire DIK Drug

noreply@blogger.com (Adam J. Fein, Ph.D.) — Mon, 14 May 2012 13:00:00 +0000

In today's sorta surprising (but not really) M&A news, Cardinal Health (NYSE: CAH) has signed a letter of intent to acquire regional wholesaler Dik Drug. No press release yet, so consider this post to be another Drug Channels exclusive. (The news was confirmed to me by Cardinal's SVP of Public Relations.)

This deal is one more step in the long-running consolidation of the U.S. pharmaceutical distribution business. It also helps further boost Cardinal's business with smaller pharmacies. Dik is a closely-held and fairly secretive private company, so there's no official data on revenues, but most likely less than $2 billion. [UPDATE: I have learned that revenues are actually below $500 million.]

Industries do not consolidate forever (even drug wholesaling). Given the limited number of possible buyers and the pharmacy industry's pace of change, I expect that the remaining regional wholesalers will be looking for a reasonable exit strategy over the next few years, too. Read on for some additional background.
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Walgreens is Losing Its Battle with Express Scripts

noreply@blogger.com (Adam J. Fein, Ph.D.) — Thu, 10 May 2012 11:30:00 +0000

Last week, Walgreen (NYSE: WAG) reported another month of dismal sales following its exit from the Express Scripts (NASDAQ: ESRX) pharmacy network. See Walgreens April Sales Decrease 3.7 Percent.

The chart below highlights the ignominy of watching Rite Aid (NYSE:RAD) grow more quickly than Walgreens. That must hurt. Last December, Walgreen’s management presented rosy scenarios in which they retained as much as 70% of the Express Script’s business. My back-of-the envelope calculations suggest they actually retained about 15%.

Walgreen’s management is hoping for an unlikely miracle during the PBM selling season. When that doesn’t happen, expect some executive heads to roll and a deal to be made.
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Armada 2012: Reflections on the Evolving Specialty Marketplace

noreply@blogger.com (Adam J. Fein, Ph.D.) — Tue, 08 May 2012 11:00:00 +0000

Last week, I attended the always-energizing Armada Specialty Pharmacy Summit in Las Vegas. In violation of standard Vegas rules, I’ll tell you what happened there…or at least the part related to the specialty market.

As always, the Irene brothers put on a top-quality event at the Wynn, my personal favorite Vegas hotel. I came away impressed by the diversity and scale of the specialty pharmacy marketplace. Future directions for the specialty pharmacy industry were evident everywhere. Below are four observations from my conversations at the meeting.

Special thanks to the many, many Drug Channels readers who introduced themselves to me during the Summit. I feel privileged to have such loyal and thoughtful readers.
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Drug Channels News Roundup: May 2012

noreply@blogger.com (Adam J. Fein, Ph.D.) — Wed, 02 May 2012 12:30:00 +0000

It’s May! The trees are blooming, the sun is shining, and the birds are singing. But you’d rather stay inside and enjoy my monthly look at noteworthy news stories from the Drug Channels universe, right?

News stories...Assemble!

A new benefit design for Stark Industries? Humana and Walmart launch a preferred pharmacy network for the commercial market.

Loki would be proud. The FDA reminds 108 physician practices not to buy from dubious sources. Really?!?

Hulk Smash Buy-and-Bill! UnitedHealth’s Lee Newcomer makes the case against current reimbursement models. Just don't make Dr. Newcomer angry. You wouldn't like him when he's angry.

Plus, The Onion reports on Walgreen's unusual new social media tool. I wonder if it's the same technology used by the Strategic Homeland Intervention, Enforcement and Logistics Division?
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Medicaid Drug Rebate Program Summit (sponsor)

noreply@blogger.com (Adam J. Fein, Ph.D.) — Mon, 30 Apr 2012 11:00:00 +0000

I am pleased to welcome IIR's 17th Annual Medicaid Drug Rebate Program (MDRP) Summit as a Drug Channels sponsor. The event will be held from September 10 to 12 in Chicago, IL, at the Swissotel Chicago.

The 2012 agenda looks great, so I expect this year's event to be extremely popular. The agenda is filled with CMS, OPA, OIG, DOJ and VA officials. Plus, where else will you find hundreds of other people who want to chat about the proposed Average Manufacturer Price (AMP) rule or play "GP Geek Family Feud"?

IIR is offering a special 25% discount to Drug Channels readers—up to $850 in savings off the standard rate. Register with VIP code: XP1658DRUG. Thanks, IIR!

FYI, the 2011 MDRP Summit sold out, so you should register as soon as possible. Full details from IIR below. You can also sign up for the event's LinkedIn group.
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Decoding the Clues to Express Scripts' Strategy

noreply@blogger.com (Adam J. Fein, Ph.D.) — Wed, 25 Apr 2012 12:30:00 +0000

As a follow-up to Insights from the 2011 Express Scripts Drug Trend Report, let's delve into what’s said—and unsaid—in the report about Express Scripts' strategy.

Going beyond the numbers, the report tells us a lot about the company's industry view and the now-biggest PBM’s future business model. Below, I consider four key topics:

The post-2015 showdown in generic launches
The specialty boom
Pharmacy network design
Personalized medicine

I picked these topics because they spotlight emerging opportunities for Express Scripts along with the risks associated with the PBM business model evolution. See if you agree.
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Insights from the 2011 Express Scripts Drug Trend Report

noreply@blogger.com (Adam J. Fein, Ph.D.) — Tue, 24 Apr 2012 11:30:00 +0000

Express Scripts just released its 2011 Drug Trend Report. (Free with registration.) I find PBM drug trend reports to be incredibly useful for understanding patient behavior, pricing, utilization, and therapeutic competition.

The divergence between traditional and specialty drugs was bigger than ever. In 2011, spending on traditional drugs was essentially flat (up only 0.1%), while spending on specialty drugs grew by 17.1%. Below, I discuss the factors behind these figures and look at the new forecasts.

As always, the Express Scripts report also reveals a lot about the future strategic directions of the biggest PBMs. Tune in tomorrow for my thoughts.
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Meet me at the Armada Specialty Pharmacy Summit

noreply@blogger.com (Adam J. Fein, Ph.D.) — Mon, 23 Apr 2012 11:00:00 +0000

Next week, I’ll be attending the Armada Specialty Pharmacy Summit at the wonderful Wynn Las Vegas. I always enjoy meeting Drug Channels readers, so please introduce yourself if you see me during the meeting. (Click here if you don't know what I look like. Hint: I'm taller than I appear on the interwebs.)

I expect another well-attended and valuable networking event for the specialty industry. To help you get ready, there are links below to four useful articles on the specialty market. You can also read my comments about the 2011 summit in Post-Armada Reflections on the Specialty Market.

Please email me if you’d like to schedule a one-on-one meeting to chat about my consulting work helping pharmaceutical manufacturers with commercial and channel strategies for specialty drugs. Perhaps I'll even share my secret for never losing money at blackjack... ;)
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Ending Drug Shortages by Fixing Reimbursement

noreply@blogger.com (Adam J. Fein, Ph.D.) — Fri, 20 Apr 2012 11:30:00 +0000

When drug shortages were in the news last fall, I (among others) cited the perverse economic incentives from Average Sales Price (ASP) as a key factor behind our very fragile generic injectable supply chain. See What’s Behind the Drug Shortage Epidemic.

To my surprise, politicians have heard the message. Senator Orrin Hatch (R-UT) is now drafting the “Patient Access to Drugs in Shortage Act,” which will change reimbursement for generic injectables from ASP + 6% to Wholesale Acquisition Cost (WAC) for injectable generics with 4 or less manufacturers. See Senator Hatch Releases Discussion Draft on Drug Shortages Legislation.

Meanwhile, a new working paper from a Stanford business school professor provides some intriguing empirical evidence that the introduction of ASP is a factor behind drug shortages.

Read on for the details. Let’s hope this important legislation makes progress in the current Congressional climate. I know patients would be glad if it becomes law.
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The SXC-Catalyst Merger: Initial Thoughts On the Deal

noreply@blogger.com (Adam J. Fein, Ph.D.) — Wed, 18 Apr 2012 13:30:00 +0000

Well, that didn't take long!

This morning, SXC Health Solutions (NASDAQ:SXCI) announced its acquisition of Catalyst Health Solutions (NASDAQ:CHSI), bringing together the two largest, fastest-growing mid-market PBMs. Read the press release or view this morning's presentation.

File this deal under "inevitable surprise," given that the ink is barely dry on Express Scripts’ (NASDAQ: ESRX) acquisition of Medco Health Solutions. An SXC-Catalyst combination will be well-positioned to compete with the larger PBMs.

Read on for my first-take observations on the deal.
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Drugstore Margins Remain Stable in Latest Gov’t Data

noreply@blogger.com (Adam J. Fein, Ph.D.) — Tue, 17 Apr 2012 12:30:00 +0000

The U.S. Census Bureau just released its 2010 Annual Retail Trade Report. These government-collected data provide the most complete picture of revenues at all store-based retail drugstores, not just the larger public companies.

Contrary to what you may have heard, the financial position of retail drugstores has not deteriorated in recent years. Here are some surprising facts from the government’s latest official data:

In 2010, total gross profits of drugstores and pharmacies were $53.3 billion, up $1.8 billion (+3.5%) vs. 2009. Gross profits have increased every year since 2000.
Gross margins (gross profits as a % of sales) averaged about 26% from 1993 through 2006, and averaged about 24% from 2007 through 2010. Gross margins were stable from 2007 to 2010.

Below, I speculate on what happened in 2006 that changed the trend. Feel free to add your own guesses in the comments.
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The Great Mail Pharmacy Slowdown

noreply@blogger.com (Adam J. Fein, Ph.D.) — Fri, 13 Apr 2012 12:30:00 +0000

As a follow up to How the Pharmacy Industry Changed in 2011, here’s a deeper dive into the surprisingly weak mail pharmacy numbers.

The 2011 downturn in mail pharmacy prescriptions is part of a multi-year trend. As I show below, the slowdown is also reflected in the mail penetration rates at the big 3 (2?) Pharmacy Benefits Managers (PBMs).

Following the FTC’s approval for the Express Scripts/Medco merger, the Wall Street Journal wrote: Merger to Mean More Rx by Mail. I’m not so sure. And if I'm right, it will have big implications for pharmacy competition, PBM profits, and manufacturer trade strategies.

Hopefully, today's analysis will mollify your paraskevidekatriaphobia!
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McKesson Wins the VA…at Cost minus 8.65%!

noreply@blogger.com (Adam J. Fein, Ph.D.) — Thu, 12 Apr 2012 11:30:00 +0000

Last night, the Department of Veterans Affairs announced that McKesson had retained the much-delayed pharmaceutical prime vendor (PPV) contract. Here’s the press release: McKesson Selected By Department Of Veterans Affairs As Prime Pharmaceutical Supplier To VA Healthcare System.

Based on the pricing (details below), McKesson REALLY wanted to win the contract, which will now contribute about 40% less in earnings per share.

While the VA contract is unique, McKesson’s biggest customers—CVS Caremark (mail), Rite Aid, Walmart, and Omnicare—will surely be curious to know more about this wacky math. Manufacturers, however, should feel a sudden urge to hold onto their wallets.
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How the Pharmacy Industry Changed in 2011

noreply@blogger.com (Adam J. Fein, Ph.D.) — Tue, 10 Apr 2012 12:30:00 +0000

Last week, IMS Health released its official 2011 data in The Use of Medicines in the United States: Review of 2011. The report has lots of useful data. Just be aware that the so-called "spending" figures represent neither actual expenditures nor pharmacy revenues.

My annual slice-and-dice of the prescription data highlights industry trends both familiar and new:

The total number of retail prescriptions dispensed grew by a paltry 0.3%, even slower than 2010’s depressing 1.2% rate.
Chains won big again, growing six times faster than the overall industry.
All other retail formats—independents, supermarkets with pharmacies, and mail-order pharmacies—shrank in both absolute size and market share.
Mail pharmacies lost more market share and scripts than did independent pharmacies.

Read on for a detailed summary of 2011 along with a five-year view. Tune in Thursday for a deeper dive into the surprisingly weak mail pharmacy numbers.
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8th Annual Commercial Contract and Chargeback Management Conference (sponsor)

noreply@blogger.com (Adam J. Fein, Ph.D.) — Mon, 09 Apr 2012 12:00:00 +0000

I am pleased to welcome CBI's 8th Annual Commercial and Chargeback Management Conference as a Drug Channels sponsor. The conference will be held at Doubletree Hotel in Philadelphia, PA, on June 19-20, 2012.

I expect this to be another worthwhile event. Participating speakers come from such companies as Sanofi U.S., Express Scripts, Johnson & Johnson, Daiichi-Sankyo, Teva Pharmaceuticals, Medco Health Solutions, McKesson, Cardinal Health, Revitas, and Walgreens. Read more in the official description below or visit the event website.

CBI is offering a special $400 discount to Drug Channels readers. Just register with promo code DSC400. Thanks, CBI!
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FDA Approves Stoogesta :)

noreply@blogger.com (Adam J. Fein, Ph.D.) — Fri, 06 Apr 2012 10:00:00 +0000

"Ever dropped a bell on a nun, ripped the armpit hair off an old man or stuffed a live lobster down a loved one’s pants?”

If so, then you'll be glad to hear about Stoogesta (nimbiscus dumbphondenol). See the "Ask your Doctor" video below for details.

I wonder if there are any drug-drug interactions with Despondex?

Paging Dr. Howard, Dr. Fein, Dr. Howard!
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ESRX-MHS: Analysis of the FTC Decision

noreply@blogger.com (Adam J. Fein, Ph.D.) — Mon, 02 Apr 2012 17:00:00 +0000

By a 3-1 vote, the Federal Trade Commission (FTC) approved Express Scripts’ (NASDAQ: ESRX) acquisition of Medco Health Solutions (NYSE: MHS). The FTC did not impose any conditions on the deal for antitrust approval, so there are no divestitures or conditions. Here’s the Wall Street Journal’s coverage: Express Scripts Closes Medco Acquisition.

Today, I review the FTC’s statement to explain the antitrust reasoning behind their decision. My predictions from last July (in ESRX-MHS: Antitrust Issues) turned out to be a pretty accurate guide to the FTC’s thinking. Pembroke Consulting clients and Gerson Lehrman Group clients can schedule phone calls with me for additional comments beyond what I discuss below.

And, no, this is not an April Fool’s post.
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7 Reasons Why Specialty Drug Dispensing Will Boom

noreply@blogger.com (Adam J. Fein, Ph.D.) — Wed, 28 Mar 2012 12:30:00 +0000

In advance of next week’s Specialty Pharmacy Business Forum, let’s take a look at the future of the specialty pharmacy market.

Below are seven key reasons behind the coming boom in specialty drug dispensing. As I see it, the projected growth in specialty drug dispensing is encouraging market entry, drawing investment capital into the pharmacy industry, and increasing competition for specialty pharmacy services. Dispensing of specialty pharmaceuticals will become less concentrated as regional chains and independents penetrate this market. Manufacturers will face enormous pressure to broaden limited distribution networks.

Next week, I’ll be at the Specialty Pharmacy Business Forum in Las Vegas. Send me an email if you’d like to meet one-on-one to talk about specialty pharmacy’s future, or chat about my work helping pharmaceutical manufacturers with commercial and channel strategies for specialty drugs. I'd also be pleased to play a few hands of blackjack with you!
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