Drug Channels

SFE & Commercial Excellence Summit (sponsor)

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

I am pleased to welcome eyeforpharma’s 10th Annual SFE & Commercial Excellence Summit as a Drug Channels sponsor. The conference will be held at the DoubleTree in Somerset, NJ, June 12th – 14th. Read more in the official description below or download the brochure.

This event should be particularly valuable for Drug Channels readers with commercial, managed markets, or contracting responsibilities. Last year’s sessions covered topics such as specialty drugs, key account management, and demonstrating value to the payor. eyeforpharma is lining up an impressive roster of speakers again this year.

Please take a moment to check out this worthwhile event.
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Humana-Walmart Preferred Network Plan Wins Big in Part D

noreply@blogger.com (Adam J. Fein, Ph.D.) — Wed, 08 Feb 2012 13:30:00 +0000

The Centers for Medicare and Medicaid Services (CMS) just released the 2012 enrollment data for Medicare Part D Prescription Drug Plans (PDPs). These new data dispel any doubts about preferred pharmacy networks’ consumer appeal.

There are seven Part D PDPs with preferred pharmacy networks in 2012. (See table below.) Highlights from my data crunching:

Enrollment in preferred network plans grew twice as quickly as overall PDP enrollment.

Almost one-third of all PDP enrollees are now in a plan with a preferred pharmacy network design.

The Humana Walmart-Preferred Rx Plan, the preferred pharmacy network PDP launched in October 2010, is now the third-largest PDP.

Two of the three new preferred network plans in 2012 attracted more than 680,000 enrollees.

The PDP with Rite Aid as the preferred pharmacy was a bust.

Once again, we see how the power of competition is lowering drug costs for seniors. Needless to say, pharmacy owners who neglected to join a preferred network are complaining.
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Cardinal Fights a Misdirected DEA

noreply@blogger.com (Adam J. Fein, Ph.D.) — Mon, 06 Feb 2012 13:00:00 +0000

Does the Drug Enforcement Administration (DEA) understand the distribution system for legitimate, prescription drugs? It sure doesn't look that way.

The DEA once again went after Cardinal Health (NYSE:CAH) by suspending the company’s controlled substances license at its Lakeland, FL, facility. Late Friday, Cardinal successfully won a temporary restraining order against the DEA. See Cardinal Health’s statement.

Kudos to Cardinal Health CEO George Barrett for standing up to an overzealous DEA. When this happened in 2007, Cardinal’s tentative and indecisive response led to major business losses, from which the company has never fully recovered. I'm curious to see how CVS Caremark (NYSE:CVS) reacts to last Friday's raid at 2 of its Florida stores.

As I explain below, the DEA started targeting wholesalers and manufacturers because they can't stop the real criminals—the patients abusing prescription drugs, the physicians running “pill mills,” and the pharmacies dealing these drugs.

And don’t even get me started on how the DEA has created a shortage of ADHD meds by putting manufacturers under their thumb…
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More Analysis of the Proposed AMP Rule

noreply@blogger.com (Adam J. Fein, Ph.D.) — Fri, 03 Feb 2012 13:00:00 +0000

In Monday’s New AMP Rule Targets Bona Fide Service Fees, I highlight just a few of the many issues raised by the proposed rule regarding Average Manufacturer Price (AMP).

By April 2, CMS will receive many detailed comments. But who can wait that long?

So, here’s my pre-Super Bowl round-up of 5 especially useful and insightful analyses of the proposed rule. These reports and articles are written by lawyers and government pricing experts, so they are scarily-specific and have many more details than my cursory overview.

As a bonus, I also include a look at how much Americans will be eating (by food type!) on Sunday and share the new Ferris Bueller commercial. Ooooh yeah.
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VA Contract Odds Improving for McKesson

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

As I discussed in last week’s Big Trouble in the VA Contract: Who will win?, McKesson (NYSE:MCK) has been facing questions about “improper buying” under its Department of Veterans Affairs pharmaceutical prime vendor (PPV) contract.

Yesterday’s House Committee on Veterans’ Affairs hearing seems to exonerate McKesson. The VA took responsibility for the open market, non-contracted purchases and complimented McKesson on its performance. Good news for McKesson, bad news for taxpayers. Here’s the Washington Post’s summary: VA: Buying medications outside of contracts was just an effort to help veterans.

Below are some highlights from the testimony along with my updated but still-unscientific guess at which wholesaler will win the contract. BTW, there was also an interesting discussion about drug shortages and how McKesson manages supply and handles allocations.
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New AMP Rule Targets Bona Fide Service Fees

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

Late Friday, the Centers for Medicare and Medicaid Services (CMS) finally released its long-overdue proposed rule regarding Average Manufacturer Price (AMP) under the Patient Protection and Affordable Care Act (PPACA). Savor all of the bureaucratese for yourself in the Proposed Rule.

In the proposed rule, CMS doubles-down on its use of AMP in the Medicaid program and lays more groundwork for Actual Acquisition Cost (AAC) reimbursement methodologies.

Manufacturers should pay close attention to this proposed rule because of its potential impact on trade agreements with wholesalers and pharmacies. CMS is proposing important changes to its interpretation of bona fide service fees, while simultaneously choosing not to clarify key items.

Welcome to the ugly underbelly of healthcare reform!
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Big Trouble in the VA Contract: Who will win?

noreply@blogger.com (Adam J. Fein, Ph.D.) — Thu, 26 Jan 2012 13:00:00 +0000

Yesterday, Larry Marsh at Barclays Capital reported that the much-delayed Department of Veterans Affairs pharmaceutical prime vendor (PPV) contract has been pushed back again, at least until late March.

The delay appears to be caused by alleged “improper buying” from McKesson (NYSE:MCK), the current sole PPV. See Veterans agency knew of improper buying under McKesson contract. The House Committee on Veterans' Affairs will hold a hearing on the PPV next Wednesday called Examining VA's Pharmaceutical Prime Vendor Contract.

Below, I take a totally unscientific guess at which wholesaler will win the $4 billion VA contract, given odd rumblings in the wholesale customer markets. And since McKesson provides a steep 5.15% discount to the VA, it’s a good opportunity to chat about the oft-misunderstood cost-minus pricing model.
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Drug Channels News Roundup: January 2012

noreply@blogger.com (Adam J. Fein, Ph.D.) — Tue, 24 Jan 2012 13:00:00 +0000

This month’s selection of noteworthy news stories looks at broader health care cost containment debate.

Depressing news on disease management
A fascinating debate on ACOs
The sad realities of U.S healthcare spending

Plus, watch The Daily Show’s Jon Stewart lob softball questions at Secretary of Health and Human Services Kathleen Sebelius, who does some major pre-State of the Union spinning.

P.S. Reminder: The launch discount for the 2011-12 Economic Report on Retail and Specialty Pharmacies ends today!
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A Defense of Co-Pay Cards

noreply@blogger.com (Adam J. Fein, Ph.D.) — Thu, 19 Jan 2012 12:00:00 +0000

Pharmaceutical Executive just published a fascinating article by my friend Mason Tenaglia called Letting the Facts Get In the Way.

Based on his firm’s analysis of various data sources, Mason provides a spirited defense of co-pay offset programs. He argues that co-pay cards don't increase utilization of higher-cost brand-name drugs and don't reduce generic usage, but do increase adherence.

While the article lacks sufficient details to fully evaluate its empirical claims, it still makes a useful contribution by explaining how and why co-pay offset programs can be a valuable benefit management tool.

What do you think: good or evil?
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Is Pfizer's Lipitor Strategy Working?

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

Since November 30, the atorvastatin market has been split between Pfizer’s heavily-discounted brand-name Lipitor product, an authorized generic from Watson, and the first-to-file generic Ranbaxy. See Ranbaxy Makes Three: The Battle for Generic Lipitor Profits. Pfizer has been criticized for its unorthodox discounting strategy.

Surprisingly, Lipitor share is tracking below historical generic substitution patterns from the past few years, i.e., the brand-name version is losing share faster than a typical generic drug.

The chart below tells the story, which is about as unexpected as an overweight, butter-loving celebrity chef becoming the spokesperson for a manufacturer of diabetes medicine. Oh, wait...
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New Data on Specialty Pharmacy’s Challenge to Buy-and-Bill

noreply@blogger.com (Adam J. Fein, Ph.D.) — Tue, 17 Jan 2012 13:00:00 +0000

You should check out the new 2011 ICORE Medical Pharmacy and Oncology Trend Report (free download with registration). This 60-page report provides a wealth of interesting data on the specialty drug benefit management.

The ICORE payer data confirms that the specialty pharmacy channel is displacing buy-and-bill in the physician office market. As I discuss below, this shift is occurring via white bagging of specialty drugs.

Buy-and-bill will not end for all physician-infused drugs, but there are substantial pressures for certain therapies. White bagging has important implications for specialty distributors, pharmacy benefit managers (PBMs), and providers.

And if you're a manufacturer planning for a new specialty drug's commercial launch, then you need to be the "channel steward" and design a strategy to ensure patient access supported by appropriately motivated partners.
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An Update on Pharma Sales Reps: The Sitcom

noreply@blogger.com (Adam J. Fein, Ph.D.) — Fri, 13 Jan 2012 11:00:00 +0000

Here at Drug Channels, we try to keep you informed about important industry news. That's why, in May, I told you about Pharma Sales Reps: The Sitcom, an ABC show called Work It. As far as I know, it's the very first TV comedy about two men who dress as women to land jobs as pharmaceutical sales reps. (Yes, really. That's the show's premise.)

Well, the first episode just aired. The good news? It won't last long based on the reviews:

Hollywood Reporter: "Awful and Embarrassing for ABC"
Entertainment Weekly: "So bad, you felt a little sorry for it"
TV Guide: "insulting to anyone of any gender with half a brain and a lick of taste"

The bad news? The show wasted no time in portraying an ignorant, outdated, and (worst of all) unfunny view of the pharma industry.

The video clip below shows a "sales call" by one of the main characters. Go ahead, waste 2 minutes of your life and see what Hollywood thinks about the pharma industry. Perhaps it will cure your paraskevidekatriaphobia.
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Healthcare Reform Hits U.S. Drug Spending in 2010

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

Good news, pharmaceutical economics nerds! The data gnomes at the Centers for Medicare and Medicaid Services (CMS) just released the 2010 National Health Expenditure data. Read all the juicy details in this Health Affairs article: Growth In US Health Spending Remained Slow In 2010; Health Share Of Gross Domestic Product Unchanged From 2009 (free download).

Total U.S. expenditures on retail prescription drugs were $259.1 billion, a historically low 1.2% annual increase vs. 2009. Prescription drug expenditures were the slowest growing part of the U.S. health care system, which grew by 3.9%. (See Exhibit 2 of the Health Affairs article.)

The Patient Protection and Affordable Care Act (PPACA) had an impact on the 2010 numbers, although the biggest effects are still to come. Three observations from my number-crunching:

Consumer’s paid a record-low share of U.S. drug expenditures.
CMS paid for almost one-third of drugs, another new record.
Healthcare reform reduced Medicaid expenditures and shifted about $1 billion in Part D costs to the government.

Read on for a detailed look at who paid for prescription drugs in 2010.
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The 2011-12 Economic Report on Retail and Specialty Pharmacies

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

I am pleased to announce the availability of my new report the 2011-12 Economic Report on Retail and Specialty Pharmacies. We’re offering 10% off the regular price if you purchase before January 24, 2012.

This year's report is 134 pages...42 pages longer than the 2010-11 report. It includes expanded coverage of specialty pharmaceuticals, new market data, and more-detailed analyses of reimbursement trends. The 2011-12 report also updates 5 key trends that will affect the market structure and economics of the retail and specialty pharmacy industries.

All information is updated through 2011, including 62 data-packed exhibits. True hardcore Drug Channels readers can savor 183 endnotes (!), most of which have hyperlinks to original source materials.

I'm sure you'll enjoy the latest edition. As a special bonus, see below for a picture of me with the heretofore unacknowledged inspiration behind this new report.
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Risk-Sharing and Innovative Contracting Models for Bio/Pharmaceuticals (sponsor)

noreply@blogger.com (Adam J. Fein, Ph.D.) — Mon, 09 Jan 2012 15:43:00 +0000

I am pleased to welcome CBI's 3rd Annual Risk-Sharing and Innovative Contracting Models for Bio/Pharmaceuticals conference as a Drug Channels sponsor. The conference will be held at the Doubletree Hotel in Philadelphia on March 22 and 23. Read more in the official description below or view the website.

I expect this to be another worthwhile event. Participating speakers come from such companies as Bristol-Myers Squibb, Generation Health, Johns Hopkins HealthCare, Premera Blue Cross, Prime Therapeutics, Savient Pharmaceuticals, and Shire.

CBI is offering a special $400 discount to Drug Channels readers. Just register with Promo code NGQ475. Thanks, CBI!
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2011 Market Share of Top Pharmacies

noreply@blogger.com (Adam J. Fein, Ph.D.) — Wed, 04 Jan 2012 12:00:00 +0000

Happy 2012!

Next week, we'll be releasing the 2011-12 Economic Report on Retail and Specialty Pharmacies. Here's a sneak peek at my list of top pharmacies, ranked by total prescription revenues.

The exhibit below, one of 62 in my new report, shows my estimates for market share of prescription revenues by company for calendar year 2011. I estimate that the top six dispensing retail and specialty pharmacies—CVS Caremark, Walgreens, Medco Health Solutions, Walmart, Rite-Aid, and Express Scripts—will account for 64% of U.S. pharmacy dispensing revenues in 2011.

The future may look very different, as I explain below.
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A Holiday Greeting

noreply@blogger.com (Adam J. Fein, Ph.D.) — Tue, 20 Dec 2011 12:00:00 +0000

Dear Drug Channels reader,

Wow. Hard to believe that 2011 is almost over!

Thank you for welcoming me into your inboxes and browsers this year. It's been an eventful 12 months, with no shortage of interesting topics and controversial news. I appreciate the many people who took time to engage in often-spirited discussions below the articles.

I want to give a special thank you to my consulting clients. I'm very grateful for the opportunity to work with you. I learn so much from our interactions and hope I offered as much value in return.

Drug Channels will be back in 2012. In the meantime, please enjoy the video greeting below from my disco dancin' alter ego!

All the best,
Adam
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New York's Anti-Mail Bill and the Coming Generic Price War

noreply@blogger.com (Adam J. Fein, Ph.D.) — Wed, 14 Dec 2011 12:00:00 +0000

Yesterday, Governor Andrew Cuomo signed New York’s controversial Anti-Mandatory Mail Order Pharmacy Bill (New York Assembly Bill 5502‐B). See New Law Bans Mail-Order Drug Mandates from The New York Times.

This law may appear to be a big victory for pharmacies, but they shouldn't pop the champagne yet. Governor Cuomo stipulated that “a retail pharmacy must agree in advance to accept the same reimbursement rate and applicable terms and conditions established for mail order pharmacies.”

Put another way, Cuomo called the pharmacy lobby’s bluff by requiring retail pharmacies to compete directly with mail, even though a retail pharmacy's costs and service model is different.

This bill is one more step towards an inevitable race-to-the bottom generic price war. If other states pass similar bills, expect to see profits drop even faster at pharmacies, PBMs, and wholesalers. The generic wave may turn out to be less profitable than everyone is expecting.
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Generic Drug Prices are Rising, according to latest AMP data

noreply@blogger.com (Adam J. Fein, Ph.D.) — Tue, 13 Dec 2011 12:00:00 +0000

In case you haven’t been paying attention, the Center for Medicare and Medicaid Services (CMS) continues to pump out monthly Average Manufacturer Price (AMP) data. The September 2011 data was just released.

The data confirm that generic drugs remain very inexpensive. More than half of generic drugs are sold by the manufacturer for less than 15 cents per unit. Remember, these are actual transactional prices, not list prices.

For fun, I created an index of generic prices. Based on the first three months of AMP data, this Index of Generic Weighted Average AMPs (IGWAAMPS, pronounced “igg-whamps”) rose by 4.9% from July to September.

Read on for the surprising details.
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Government Programs Summit (sponsor)

noreply@blogger.com (Adam J. Fein, Ph.D.) — Mon, 12 Dec 2011 12:00:00 +0000

I am pleased to welcome back IIR as a Drug Channels sponsor for its 4th Annual Government Programs Summit. The event will be held March 14-16, 2012, in Baltimore.

IIR bills the Summit as "the nation's largest gathering of government programs, compliance experts, and drug pricing executives." In addition to industry speakers, you'll also hear first-hand from 25 Government officials from CMS, OIG, OPA, PVP, PSSC, VA, DoD, and State pharmacy boards.

IIR is offering a special 25% discount to Drug Channels readers. Just register with your VIP code: XP1751DRUG. Thanks, IIR!

Full details from IIR below.
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The Shootin' Pharmacists

noreply@blogger.com (Adam J. Fein, Ph.D.) — Fri, 09 Dec 2011 12:00:00 +0000

In Young Scientists Take Aim, the Wall Street Journal profiles one of the country's top NCAA rifle teams—the pharmacy students at Philadelphia's University of the Sciences.

Yes, you read that correctly. Last season, the USciences pharmacy team was ranked equal to the Virginia Military Institute. Yikes!

In the video below, an intrepid reporter probes the burning question: "Should the armed forces be recruiting marksmen from pharmacy schools?" (Uh, no?)

Hmmm, I wonder if CMS employees will think twice before implementing the new AMP-based FULs...
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Drug Channels News Roundup: December 2011

noreply@blogger.com (Adam J. Fein, Ph.D.) — Wed, 07 Dec 2011 12:00:00 +0000

Time for my monthly look at noteworthy news stories from the Drug Channels universe. Perfect reading before you head to the mall. In this issue:

The Battle for Control of Specialty Drugs: An article by yours truly
No Go for ACO? So Says an FTC head honcho
Cash-n-carry: The generic drugs price war gains momentum
Pfizer’s Plan: My NPR interview on the generic market

Plus, an amusing and informative video explaining why we should get rid of the penny. Hmm, I wonder how this will affect 340B penny-pricing?
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Pharmacy Market Share for Specialty Drugs, 2010

noreply@blogger.com (Adam J. Fein, Ph.D.) — Fri, 02 Dec 2011 12:00:00 +0000

In early January, Pembroke Consulting will release the updated 2011-12 Economic Report on Retail and Specialty Pharmacies.

I want to give you a sneak peek at the updated market share computations for specialty pharmaceuticals.

In 2010, $39.2 billion of specialty drugs were dispensed by retail, mail, and specialty pharmacies.
Pharmacy dispensing revenues from specialty drugs grew by 15.3% from 2009 to 2010.
Pharmacy dispensing of specialty drugs remains more concentrated than the overall pharmacy industry.

The company revenues, market shares, and rankings (shown below) have changed since our previous estimates. Below, I explain what's behind these differences.
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Ranbaxy Makes Three: The Battle for Generic Lipitor Profits

noreply@blogger.com (Adam J. Fein, Ph.D.) — Thu, 01 Dec 2011 13:25:00 +0000

The generic Lipitor story got even more interesting yesterday with the news that Ranbaxy would enter the US market after all. See Ranbaxy’s Lipitor Copy in U.S. Stores Threatens Pfizer Sales.

Atorvastatin now becomes a three horse race between Pfizer’s heavily-discounted brand-name product, an authorized generic from Watson, and the first-to-file generic Ranbaxy.

The claims and counterclaims about savings are hard to sort out. But Ranbaxy’s presence in the market will most likely boost profits for pharmacies, PBM, and wholesalers.
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Wholesaler Profits in the Generic Wave

noreply@blogger.com (Adam J. Fein, Ph.D.) — Tue, 29 Nov 2011 12:00:00 +0000

Tomorrow, Lipitor loses exclusivity and faces generic competition. For an overview of Pfizer’s strategy, see Pfizer Uses Coupons, PBM Deals, Possible OTC Conversion to Head Off Generic Lipitor from Drug Benefit News.

Tomorrow also marks the kick-off of a five year period when $80+ billion of branded revenues will face generic competition, as shown in Medco’s Latest Update on the Generic Wave.

What will this mean for the big three pharmaceutical wholesalers—AmerisourceBergen (NYSE:ABC), Cardinal Health (NYSE:CAH), and McKesson (NYSE:MCK)? My take:

The substitution of brand-name drugs for generic drugs will reduce drug wholesalers’ revenue growth.
Wholesalers, however, will benefit significantly from this wave since a majority of their profits come from generic drugs.

In this article, I describe a simple metric—Operating Profit as a Percentage of Gross Profit—that highlights wholesalers' changing financial economics. For each company, I illustrate this metric for 2008, 2011, and 2014 (projected).

So, the next time a wholesale executive whines about “low profit margins,” you can whip out this article for a more fact-based discussion.
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