Analysis

Last week, Myers and Stauffer, the contractors collecting pharmacy acquisition costs and revenue data for the Center for Medicare and Medicaid Services (CMS), unexpectedly presented average per-prescription pharmacy profit margins, by payer and prescription type. Click here to view the slide deck. (See pages 64-67.)

Nobody expected this CMS inquisition. They didn't wait very long to follow through on the implied visibility to pharmacies’ prescription economics, as I predicted in Transparency is Here! CMS Exposes Pharmacy Prescription Profit Margins.

Below, I summarize the new gross profit and margin computations based on NADAC and NARP data, along with adjusted numbers that account for the acquisition cost survey’s flaws. Highlights:

• A pharmacy’s average gross profit per prescription is $12.50.
• Gross margins on brand prescriptions average about 10%, while gross margins on generic prescriptions average about 50%.
• Pharmacies continue to earn more from Medicaid than other third-party payers.
• Cash pay prescriptions, most of which are generic, yield higher margins than third party prescriptions.
• The response rate for the acquisition cost survey is surprisingly high, especially among independent pharmacy owners.

Perhaps we shouldn't be surprised. After all, CMS’ chief weapon is surprise and fear. No, wait, their two weapons are fear, surprise, and ruthless efficiency. No, no, their *three* weapons are...Wait, I'll start again...

Posted by Drug Channels Institute, an HMP Global company on Tuesday, December 11, 2012

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

I am pleased to welcome PCMA’s Specialty Pharmacy Business Forum (SPBF) as a Drug Channels sponsor. The event will be held at the wonderful Wynn Las Vegas on March 26-28, 2013.

Based on last year's inaugural event, I consider the SBPF to be a must-attend meeting for anyone connected to the specialty channel—manufacturers, pharmacies, payers, PBMs, wholesalers, and others. Full details from PCMA below.

Hope to see you in Las Vegas!

Posted by Drug Channels Institute, an HMP Global company on Monday, December 10, 2012

Labels: Specialty Drugs, Sponsored Post

According to press reports, CVS plans to samba to Brazil by acquiring Onofre, the eight-largest pharmacy chain in Brazil. See CVS said in talks to buy Brazil Onofre for $313M. If you can read Portuguese, see Grupo CVS negocia a compra da Onofre.

According to IMS Health, Brazil's market (as measured by manufacturers' revenues) was $29.9 billion in 2011, and is projected to grow by 12-15% through 2016.

As far as I know, this would be CVS' first major international expansion. It's a sensible expansion of their strong core pharmacy business and provides a clear contrast to Walgreen's approach. The deal is tightly focused on retail pharmacy (without any distracting wholesale assets). Onofre can be readily acquired without any complex financial arrangements and provides a manageable platform to learn about this fast-growing market.

Full story below. Que gostoso!

Posted by Drug Channels Institute, an HMP Global company on Friday, December 7, 2012

Labels: Mergers and Acquisitions, International Drug Channels, Pharmacy

Today’s guest post is from Becky Holloway, Product Marketing Manager at Revitas, a Drug Channels sponsor. In this post, Becky describes the compliance and contract management challenges facing mid-sized pharmaceutical manufacturers.

On December 13, Revitas will be sponsoring a live webinar entitled “A Survival Guide for Emerging Growth Pharmaceutical Companies”. Becky will be joined by Eric Newmark of IDC Health Insights to discuss the state of the pharmaceutical mid-market today. Becky will also talk with Stephanie Kupski of Cangene Corporation, an emerging pharmaceutical manufacturer. Check it out!

Posted by Drug Channels Institute, an HMP Global company on Thursday, December 6, 2012

Labels: Sponsored Post, Guest Post

The Sanofi Managed Care Digest Series just released its 2012-13 HMO-PPO Digest, a great compendium of facts and data about the world of Health Maintenance Organizations (HMOs). The report is free with site registration.

The 2012-13 Digest provides interesting— and as far as I know, unique—how HMOs work with Pharmacy Benefit Managers (PBMs). A few highlights:

• HMOs are more than one-quarter of the total insurance market. Medicare and Medicaid HMOs are the fastest-growing part of the HMO business.
• HMOs increasingly outsource benefit management services to PBMs.
• HMOs rarely adopt a PBM’s national formulary.

Hopefully, this post will give the wonks among us (ahem) useful publicly-available insights on PBM’s relationships with their clients. Let me offer a hearty Drug Channels "Thank You" to sanofi-aventis for again sponsoring this research.

Posted by Drug Channels Institute, an HMP Global company on Wednesday, December 5, 2012

Labels: PBMs, Health Maintenance Organizations (HMOs)

Last week, the Congressional Budget Office (CBO) released an important new memo: Offsetting Effects of Prescription Drug Use on Medicare’s Spending for Medical Services.

After reviewing the evidence, the CBO concluded that prescription drugs can reduce overall healthcare costs—at least in Medicare. The CBO can now officially account for prescription drugs’ beneficial effects in budget forecasts. For example, the cost of closing the Medicare Part D coverage gap just dropped by 41%!

But by supporting the economic benefits of prescription drugs, the CBO may have inadvertently provided an argument to reverse the long-standing federal program ban on co-pay offset programs, a.k.a., co-pay cards, co-pay coupons. Two-thirds of Medicare Part D prescription drug plans (PDPs) have five-tier designs with high out-of-pocket co-insurance. Does the CBO’s change of heart mean co-pay offset programs should be encouraged, not banned, from federal programs?

Read on and let me know if you agree.

Posted by Drug Channels Institute, an HMP Global company on Tuesday, December 4, 2012

Labels: Specialty Drugs, Co-pay Offset Programs, Health Care Policy, Marketing

Need stocking stuffers for the channel economics nerds on your holiday shopping list? Good news! The Center for Healthcare Supply Chain Research, the research arm of the Healthcare Distribution Management Association (HDMA), just released two useful new reports: the 2012-2013 HDMA Factbook and the 2012 Specialty Pharmaceuticals: Facts, Figures and Trends.

These reports combine surveys of wholesalers and distributors with compilations of external research. Both are valuable data resources on the economics of full-line pharmaceutical wholesaling and specialty distribution. You’ll have to work to extract meaning from the data avalanche in these reports, but there is gold to be mined. I highlight one such interesting nugget about specialty distributor sales below.

If you like this sort of stuff, then be sure to join me at the 8th Annual Trade and Channel Strategies Conference next week. It’s a great networking opportunity for trade and channel executives. I’m delivering the keynote address and moderating a panel of Wall Street analysts. Use promo code ESX239 for a $300 discount!

Posted by Drug Channels Institute, an HMP Global company on Thursday, November 29, 2012

Labels: Specialty Drugs, Wholesalers

While you were brining your turkey last week, the Center for Medicare and Medicaid Services (CMS) published a flock of proposed rules for implementing the Patient Protection and Affordable Care Act (PPACA), including new proposed rules for Essential Health Benefits (EHB): Patient Protection and Affordable Care Act; Standards Related to Essential Health Benefits, Actuarial Value, and Accreditation. It’s a sprightly 119 pages.

In this article, I look at the proposed EHB regulations for prescription drugs. These requirements will apply to plans within health insurance exchanges as well as non-grandfathered private health insurance options in the individual and small group markets. Here are a few highlights:

• States have some flexibility in defining the “typical employer plan” chosen as the EHB benchmark for pharmacy benefit design.
• Unlike Medicare Part D, there will be no protected drug classes.
• Plans can cover as few as one drug per therapeutic category, but will probably end up covering more.

Compared with Medicare Part D, this proposal gives pharmacy benefit managers (PBMs) and health plans greater negotiating leverage over brand-name pharmaceutical manufacturers. Depending on each state’s benchmark plan, the downside could be a loss of patient and prescriber choice.

Read on for a brief review of EHB, the proposed rule, and a few discussion questions for the managed markets team at a pharmaceutical manufacturer.

Posted by Drug Channels Institute, an HMP Global company on Tuesday, November 27, 2012

Labels: Health Care Reform, PBMs, Benefit Design, Health Insurance Exchanges

I’m pleased to announce Drug Channels’ new site redesign!

We’ve updated the blog’s graphic design, streamlined the layout, improved loading speed, and added new information about the site’s traffic and readers. You’ll also notice the announcement of Drug Channels Institute, our new e-learning subsidiary. Look for more details on DCI soon.

Our look may be new, but I remain committed to in-depth analysis, pop culture mastery, and top-quality snark. Just check out the music video below, which I made with a few friends to celebrate Hanukkah. Enjoy!

Posted by Drug Channels Institute, an HMP Global company on Monday, November 26, 2012

Labels: Blog Administration, Fun Stuff

Here's a pre-Thanksgiving news roundup, to stretch your mind before stretching your stomach later this week. In this issue:

• Debunking ACOs: A must-read article
• Attacking ASP: Blaming shortages on reimbursement economics
• Fearing the DEA: Now attacking shipping companies. Seriously!?!
• Reviewing Track & Trace: A holiday wish for a national system

Plus, the bizarre-but-true story of how former Kinray owner Stewart Rahr just got banned from upscale sushi chain Nobu. Absolutely hilarious!

Posted by Drug Channels Institute, an HMP Global company on Tuesday, November 20, 2012

Labels: Enforcement, Health Care Reform, Pedigree, Accountable Care Organizations (ACOs), Average Sales Price (ASP), Drug Shortages