Analysis

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.

Posted by Drug Channels Institute, an HMP Global company on Tuesday, May 15, 2012

Labels: Enforcement, Wholesalers, Drug Shortages

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.

Posted by Drug Channels Institute, an HMP Global company on Monday, May 14, 2012

Labels: Wholesalers, Mergers and Acquisitions

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.

Posted by Drug Channels Institute, an HMP Global company on Thursday, May 10, 2012

Labels: Narrow Networks, PBMs, Pharmacy

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.

Posted by Drug Channels Institute, an HMP Global company on Tuesday, May 8, 2012

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

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?

Posted by Drug Channels Institute, an HMP Global company on Wednesday, May 2, 2012

Labels: Enforcement, Health Care Policy, Drug Counterfeiting, Average Sales Price (ASP), Pharmacy, Specialty Drugs

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.

Posted by Drug Channels Institute, an HMP Global company on Monday, April 30, 2012

Labels: Sponsored Post

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.

Posted by Drug Channels Institute, an HMP Global company on Wednesday, April 25, 2012

Labels: Generic Drugs, Pharmacy, Specialty Drugs, PBMs, Narrow Networks, Medicare Part D, Pharmacogenomics

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.

Posted by Drug Channels Institute, an HMP Global company on Tuesday, April 24, 2012

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

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... ;)

Posted by Drug Channels Institute, an HMP Global company on Monday, April 23, 2012

Labels: Specialty Drugs, Blog Administration

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.

Posted by Drug Channels Institute, an HMP Global company on Friday, April 20, 2012

Labels: Generic Drugs, Drug Shortages, 340B, Average Sales Price (ASP)