Analysis

Cost plus reimbursement…the final frontier…

On June 1, CMS officially launched its wagon train to the stars—the National Average Drug Acquisition Cost (NADAC) survey. CMS is now surveying 2,500 pharmacies per month, gathering invoices to compute a public average acquisition cost (AAC) for pharmacy reimbursement.

The plan is unlikely to work. Here’s why:

• The pharmacy industry doesn’t think CMS has the right to collect these data.
• Participation is voluntary, so many pharmacies will simply ignore the survey.
• CMS’ methodology allows the AAC data to be easily inflated, rendering the information useless.

Good luck, CMS. And if you think you have trouble with tribbles, you haven’t seen anything yet.

Posted by Drug Channels Institute, an HMP Global company on Tuesday, June 5, 2012

Labels: Average Acquisition Cost (AAC), Health Care Reform, Health Care Policy, Costs/Reimbursement, Pharmacy Economics

Today’s post responds to reader requests for a monthly Drug Channels wrap-up. Every month, I’ll highlight the previous month’s five most frequently viewed and/or most interesting articles.

Here are the winners from May 2012. Below, I provide some additional comments and reflections on each article.

• Walgreens is Losing Its Battle with Express Scripts
• Express Scripts' George Paz Opines on Medco, Pharmacists, and Walgreen
• Oral Oncology Channel Battle: Payers vs. Providers
• Armada 2012: Reflections on the Evolving Specialty Marketplace
• Drug Channel Profits in the 2012 Fortune 500

Thanks to everyone who responded to the survey! If you haven’t done so, please take a moment to fill out the 2012 Drug Channels Reader Survey and tell me what you think about the site.

Posted by Drug Channels Institute, an HMP Global company on Monday, June 4, 2012

Labels: Specialty Drugs, Channel Management, Industry Trends, PBMs

It's time once again to tell me what you think about Drug Channels!

I am conducting a very brief reader survey to learn what you like and dislike about the site. There are just 4 questions, so it should only take you about 5 minutes to complete. You can answer anonymously. Here's the link:

The 2012 Drug Channels Reader Survey

There is also an optional spot to add a testimonial, which I hope you will feel inspired to do.

If you choose to provide an email address, you'll be entered in a drawing to win a free corporate license of either the 2011-12 Economic Report on Retail and Specialty Pharmacies or the 2011-12 Economic Report on Pharmaceutical Wholesalers and Specialty Distributors. If you win, you'll be contacted to choose which report you want.

Thank you in advance for helping me improve Drug Channels.

Posted by Drug Channels Institute, an HMP Global company on Friday, June 1, 2012

Labels: Blog Administration

On May 17, Plavix (clopidogrel) lost its marketing exclusivity when the FDA approved multiple generic versions, i.e., no 180-day exclusivity period. Plavix is 2012’s biggest generic launch, per Pfizer's Lipitor Strategy and the 2012 Generic Monster.

Prices are going down, down, down. According to this Consumer Reports article, pharmacies are already offering 80% to 90% discounts to cash-pay customers. The generic price war rages on.

How low can they go? Well, the latest Average Manufacturer Price (AMP) data, from the Center for Medicare and Medicaid Services (CMS) show wholesalers and large pharmacies purchasing most generic drugs for less than 10 cents per pill. Clopidogrel will get there quickly, judging by the self-inflicted MAC pricing by retail pharmacies.

The pharmacy industry's marketing is making generic drugs look more and more like every other consumer product. Manufacturers should incorporate these dynamics into loss-of-exclusivity (LOE) brand planning, while pharmacies and PBMs should limber up for the industry's inexorable downward economics.

Posted by Drug Channels Institute, an HMP Global company on Wednesday, May 30, 2012

Labels: Average Manufacturer Price (AMP), Generic Drugs, Costs/Reimbursement, Pharmacy, Pharmacy Economics

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!

Posted by Drug Channels Institute, an HMP Global company on Tuesday, May 29, 2012

Labels: Sponsored Post

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.

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"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?

Posted by Drug Channels Institute, an HMP Global company on Friday, May 25, 2012

Labels: Pharmacy, Fun Stuff

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.

Posted by Drug Channels Institute, an HMP Global company on Wednesday, May 23, 2012

Labels: Mergers and Acquisitions, PBMs, Narrow Networks, Pharmacy, Pharmacy Economics

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.

Posted by Drug Channels Institute, an HMP Global company on Tuesday, May 22, 2012

Labels: Specialty Drugs, Channel Management, Benefit Design, Pharmacy

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.

Posted by Drug Channels Institute, an HMP Global company on Friday, May 18, 2012

Labels: Sponsored Post, Guest Post

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!

Posted by Drug Channels Institute, an HMP Global company on Thursday, May 17, 2012

Labels: Wholesalers, Industry Trends, PBMs, Pharmacy