Stuffing Yourself with Noteworthy News

Here are 3 interesting articles to go with your cranberry sauce. No more blogging this week because of the holiday.

Have a Happy Thanksgiving!

A New Opportunity to Reach the Drug Channels Audience

Many people ask me about the readership of Drug Channels. This post shares new details about the companies visiting Drug Channels along with traffic statistics since March 2007.

I am also announcing the availability of two sponsorship opportunities for companies interested in connecting with the Drug Channels community. The number of sponsors will be limited to two companies at any one time and will be allocated on a first-come, first-served basis. I include some high-level details below, but drop me a line to discuss the opportunity.

Regular readers shouldn’t fret—I won’t compromise the content for sponsorship.

Drug Prices and Pharmacy Profits

I’m sure most of you read Sunday’s New York Times article on drug prices: Drug Makers Raise Prices in Face of Health Care Reform.

The NYT story is based on the AARP’s latest analysis of prescription drug list prices: Rx Watchdog Report: Drug Prices Continue to Climb Despite Lack of Growth in General Inflation Rate.

Comparing list prices for a single product category to a computed, non-list price index for a broad basket of goods (CPI-U) is mathematically illogical. After all, the CPI-U for prescription drugs increased at a rate less than half the rate of list prices. But we all know appropriate comparisons don't get you on the front page of the New York Times.

Anyway, let’s assume the AARP computations are mathematically accurate and consider the following Drug Channels-related question:

Have pharmacy profits from brand drug prescriptions gone up, gone down, or stayed the same as average list prices have increased?

The answer may surprise you.

Healthcare Reform Options for AMP

Have you been wondering what’s going on with our old friend Average Manufacturer Price (AMP)?

Never fear, Drug Channels is here!

I recently came across a useful summary from the law firm of Reed Smith in Health Reform Update: Focus on Prescription Drug Price Regulation. See the second page of their briefing for an overview of how AMP would be handled under the House or Senate healthcare bills.

To understand the business implications of AMP, I humbly suggest that you read the sections titled “Risks to the Superior Profitability of Generic Drugs” and “Replacing the Average Wholesale Price Benchmark” in my U.S. Pharmacy Industry: Economic Report and Outlook.

PBMs Go Global for Growth

Express Scripts (NASDAQ: ESRX) is featured in an unusual press release from Chinese company SeaRainbow Holding Corp., Ltd. (SZSE: 000503) announcing Express Script's entry into the fast-growing China market. See Express Scripts, SeaRainbow to Pioneer PBM Business in China.

There will be plenty of growth for Pharmacy Benefit managers (PBMs) in the good ol’ US of A, especially given current health reform proposals and prospects for PBM consolidation. But the global opportunity is even bigger because those markets are much less sophisticated in the management of pharmacy benefits, especially when it comes to generic dispensing rates. Injecting PBMs into the evolution of emerging markets will accelerate convergence with more established markets.

I’m not so sure that manufacturers of brand pharmaceuticals will be cheering the creation of a global PBM industry, although it could be a big positive for generic drug makers.

Gray Market: I'm Not Dead Yet

Secondary market appears to be alive and well. Whether or not patients remain alive and well is a whole different question.

Check out Profiteers peddling flu vaccine from newspapah-of-recahd The Cape Cod Times, which notes:

The seasonal flu vaccine is in short supply, but licensed pharmacists and medical professionals can purchase it on a so-called "gray market" — for as much as eight times the manufacturers' original price.

Unfortunately, the illegitimate secondary market will exist as long as there are willing buyers for products with questionable heritage.

Manufacturers and the Evolving Pharmacy Channel

Pharmaceutical Commerce just published my article on the implications of the evolving retail pharmacy industry for pharmaceutical manufacturers. You can read the article for free on the PC site: The Evolving Retail Pharmacy Channel: Implications for Manufacturers.

The article is based on my U.S. Pharmacy Industry: Economic Report and Outlook.

CVS Caremark: Pharmacy Gain, PBM Pain

CVS Caremark disclosed unexpected problems in its PBM business yesterday, spooking investors and sending its stock down by 20%. See Dow Jones’ coverage: CVS' Pharmacy Benefit Struggles Renew Merger Benefits Debate

Judging by the financials, it sure looks like CVS Caremark has sacrificed its PBM business for the benefit of the retail pharmacy business. They are also having trouble explaining how a PBM customer gains when a brick-and-mortar pharmacy is paired with a benefit management business.

Adding insult to injury, CVS Caremark also disclosed that the Federal Trade Commission (FTC) has opened a formal inquiry into its business. Ouch.

Pembroke Consulting retainer clients and Gerson Lehrman Group customers should feel free to schedule phone calls with me for additional comments beyond what's in this post.

Dilbert on Drug Marketing

As a follow-up to Tuesday's post, management guru Scott Adams shows how promotion by a pharmaceutical manufacturer affects physicians' prescribing decisions.



Of course, this topic may not be funny for much longer given 40,000 recently announced job cuts by Johnson & Johnson, Pfizer, and Astra-Zeneca or the 16,000 cuts planned by Merck.

How Generics Change the Market

I just came across an intriguing new study that examines how generic drug entry affects prescription volume and manufacturer revenues. See TIME RELEASE: The Effect of Patent Expiration on U.S. Drug Prices, Marketing, and Utilization by the Public

The paper poses an interesting question and contains some neat data on post-generic market evolution—brand market share, prices, promotional expenses. I’m a bit underwhelmed by the author’s conclusions. So, I suggest that you enjoy the pretty pictures and perhaps incorporate the conceptual ideas into your forecasting models.