Analysis

Yesterday afternoon, I was interviewed live on FOX Business about the AmerisourceBergen / Walgreens / Alliance Boots deal. The video is embedded below.

I was at the Philadelphia Fox affiliate, while Melissa Francis was in New York. This was my first live TV interview, which was fun and a bit scary. The actual interview was five minutes long, but it felt like 30 seconds.

My 16-year old daughter tagged along. When you see me randomly smile at 2:37, it's because she was standing behind the camera, reminding me to smile! (She's a sweetie.) Plus, she got to think her dad was (a tiny bit) cool.

Enjoy!

Posted by Drug Channels Institute, an HMP Global company on Friday, March 22, 2013

Labels: Blog Administration

Before the dust settles on the AmerisourceBergen / Walgreens / Alliance Boots news, let’s take a deeper look at the implications for drug channels. The Wall Street Journal’s Tim Martin and Jon Kamp did a very nice job of summarizing the basics in Deal Transforms Global Pill Pipeline.

In this longer-than-usual Drug Channels article, I probe:

• How does Walgreen benefit?
• What does ABC get?
• What does this mean for drug procurement?
• What should Cardinal do?
• How will the companies balance competing priorities?
• Will this become one mega-company?

Please add your own questions (and any answers!) in the comments below.

NOTE: I don’t address here how brand-name manufacturers should respond. If you are a brand-name manufacturer, email me to learn more.

Posted by Drug Channels Institute, an HMP Global company on Thursday, March 21, 2013

Labels: Wholesalers, Generic Drugs, Mergers and Acquisitions, International Drug Channels, Pharmacy

3/21/13 UPDATE: For more detailed analysis, please see Making Sense of ABC-Walgreens-Alliance Boots

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Remember all of those rumors and noise about Walgreens bypassing wholesalers and buying directly?

Never mind.

This morning, Walgreens (NYSE: WAG) announced a surprise 10-year supply deal with AmerisourceBergen (NYSE: ABC).

And in a move that should make everyone nervous: “Walgreens and Alliance Boots together have been granted rights to purchase an equity position in AmerisourceBergen.”

Highlights below. I’ll follow-up later this week as details become known.

Channel consolidation, thy name is Walgreens!

Posted by Drug Channels Institute, an HMP Global company on Tuesday, March 19, 2013

Labels: Wholesalers, Mergers and Acquisitions, International Drug Channels, Pharmacy

Here's an update on Predictive Acquisition Cost (PAC), the drug pricing measure developed by Glass Box Analytics and distributed by Elsevier/Gold Standard. Elsevier/Gold Standard is a Drug Channels sponsor.

Elsevier/Gold Standard has just released a new PAC Proof of Concept Analysis for Payers and PBMs. It shows how PAC can be used to adjust the maximum allowable cost (MAC) paid to pharmacies. Elsevier is offering payers the opportunity to have their MAC list evaluated against PAC. See below for more details.

For background PAC vs. other drug pricing metrics, download Elsevier's white paper: Drug Price Types and Options For A Future Standard. (Free with registration.)

Posted by Drug Channels Institute, an HMP Global company on Monday, March 18, 2013

Labels: Sponsored Post

Supermarket chain Wegmans just extended its discount program for atorvastatin, the generic version of Lipitor. Through the end of 2013, the total prescription price is … nothing. Yes, you read that right: $0.00. Click here to read the story from the Philadelphia Inquirer.

As I document below, a pharmacy's profits on a generic Lipitor prescription are still double the brand-name prescription's profits. At this stage in the generic life cycle, few other pharmacies are foolhardy (or desperate) enough to give up these superior generic profits. Wegmans' willingness to race to the bottom illustrates the inexorable downward economics facing retail pharmacy in coming years.

What’s the implied value of pharmacy counseling when the prescription is free? Hint: You don’t need to compute the circumference over the diameter to figure out the answer.

Posted by Drug Channels Institute, an HMP Global company on Thursday, March 14, 2013

Labels: Average Acquisition Cost (AAC), Generic Drugs, Costs/Reimbursement, Pharmacy, Pharmacy Economics

Here’s some unexpected news: Walgreens (NYSE: WAG) has apparently shifted controlled substances distribution from its own Perrysburg, OH, distribution center to Cardinal Health (NYSE: CAH). This morning, the always-insightful Tom Gallucci at Lazard Capital Markets broke the story publicly in a research note. UPDATE: Read the official comment from Walgreen in the comments below.

Regardless of Walgreen’s stated distribution strategy goals, shifting responsibility for controversial product shipments sure makes it looks like wholesalers still provide value in the channel.

Read on for more details and possible implications for the Walgreens-Cardinal contract renewal.

Posted by Drug Channels Institute, an HMP Global company on Tuesday, March 12, 2013

Labels: Wholesalers, Channel Management, Pharmacy

Drug Channels is pleased to welcome a new sponsor: eyeforpharma’s 4th Annual Oncology Market Access & Marketing Summit 2013 (Oncology USA 2013). The event is being held at the Hyatt Harborside in Boston, MA, on May 8 and 9, 2013.

The agenda looks very strong. Speakers come from such companies as Aetna, Amgen, Bayer, Bristol-Myers Squibb, Cardinal Health, D3 Oncology Solutions, DARA Bioscience, Eli Lilly, Foundation Medicine, Genentech, International Oncology Network Solutions, NCCN, New Century Health, Novartis-Genoptix, Oncology Business Review, Onyx Pharmaceuticals, Janssen, Sanofi Oncology, Sanofi US, Seattle Genetics, and more.

Check out the official description below or visit the Oncology USA 2013 site for complete details.

Posted by Drug Channels Institute, an HMP Global company on Monday, March 11, 2013

Labels: Sponsored Post

In yesterday’s Insights from the 2012 Express Scripts Drug Trend Report, I highlight the fact that 2012 spending on traditional drugs dropped for the first time on record.

Last year marked a similar milestone for retail drugstores. For the first time, revenues at U.S pharmacies and drugstores declined on a year-over-year basis. See the chart below.

Given the superior profitability of new generics, retail pharmacies’ top-line pain is being offset with bottom-line joy. But when generic launches slow down in 2016, the pharmacy industry's traditional dispensing profits will be hit hard. Drugstores must either embrace the low-cost generic revolution or figure out how to penetrate the specialty market. Otherwise, they'll find it hard to climb out of the rabbit hole.

Posted by Drug Channels Institute, an HMP Global company on Thursday, March 7, 2013

Labels: Generic Drugs, Industry Trends, Pharmacy, Pharmacy Economics

Express Scripts just released the latest iteration of its long-running Drug Trend Report. Instead of a convenient downloadable report, the report is now a confusing “interactive” web page. (3/20/13 UPDATE: Click here to download the full report.) You can also read the press release.

This year’s report includes both Express Scripts and legacy-Medco covered lives, so it’s the most comprehensive look at pricing and utilization. Once again, specialty drug trend of 18.4% dominated traditional drug trend of -1.5%.

Yes, you read that right. Spending on traditional drugs declined, for the first time ever. Below, I look at the factors behind these figures and provide some historical context.

Tune in tomorrow, when I look at these trends’ impact on the pharmacy industry.

Posted by Drug Channels Institute, an HMP Global company on Wednesday, March 6, 2013

Labels: Specialty Drugs, Costs/Reimbursement, Industry Trends, PBMs

So, the federal government’s mandated spending cut took effect. The world didn’t end, consistent with the Wall Street Journal’s prescient February 6 editorial titled The Unscary Sequester.

Physician-administered drugs under in Medicare Part B will get a 1.6% payment cut, because of a reduction in the reimbursement rate from ASP+6% to ASP+4.3%. (Check the math. It’s a cut from 106% to 104.3% of ASP.)

While I view the sequester as incredibly poor public policy, let’s keep some perspective. As I explain below, total drug revenue per full-time equivalent hematology/oncology physician will drop by less than $27,000.

Even President Obama is busy walking back his administration’s comments of complete disaster. KCCO.

Posted by Drug Channels Institute, an HMP Global company on Monday, March 4, 2013

Labels: Specialty Drugs, Buy-and-Bill, Health Care Policy, Average Sales Price (ASP)