A Pharmacist's View from Haiti

I have a special treat for you today. Below is a Guest Post from Ro Brual, a pharmacist and longtime Drug Channels reader.

Ro recently returned from a humanitarian mission to Haiti as part of the Haiti Medical Mission Team at St. Elizabeth Ann Seton Catholic Church. He has a fascinating and inspiring story that is well worth your time. Ro also sent me some heart-breaking photos from his trip.

Please consider making a donation to support Ro's work with the Haiti Medical Mission team. Details at the St. Elizabeth Seton Haiti webpage.

Drug Channels News Roundup: April 2010

Time for my monthly review of noteworthy news stories from the Drug Channels universe.

In this edition, we look at reports of a PBM price war started by CVS Caremark (NYSE:CVS), the big hit to Eli Lilly (NYSE:LLY) from Medicaid drug rebates, and why RFID is dead. Plus, I give you some insights into Philly sports fans.

Enjoy!

USPS: Bad News for Mail Pharmacies

The U.S. Postal Service (USPS) wants five day delivery, promising an estimated $3 billion savings annually. Check out this USPS web page explaining why “Five-day delivery is part of the solution to declining revenue, volumes.”

Pharmacy Benefit Managers (PBMs) with mail-order pharmacies are not too pleased about this proposed change and are lobbying against the move. I suspect PBMs may be in for a tough battle. How many of us still write and mail actual, physical letters?

Five-day delivery could end up being another inhibitor to mail-order prospects. Independent pharmacies are supporting the five-day schedule, hoping to make mail order pharmacy less attractive. Both mail order and independent pharmacies lost share of prescriptions to retail chains in 2009, so the benefit to independents may be minimal. (See Chains Win Big in 2009.)

Transparent Pricing Benchmarks Update (sponsor)

Below is a brief update from ChainDrugStore.net about their upcoming Transparent Pricing Benchmarks Conference. This conference is a sponsor of Drug Channels.

The goal of the conference is straightforward and timely: “Identify and discuss the emerging strategies for implementing a transparent prescription drug pricing benchmark and motivate attendees to begin to solve the problem together as an industry.”

Specialty Drugs: The Medical vs. Pharmacy Benefit Muddle

The 6th edition of the EMD Serono Specialty Digest™ was just released. The EMD Digest is the most timely and useful report on the specialty market that I have come across recently. (The report is free, but the required registration process uses an irritating Web 0.5 interface.)

Download the report so you can start thinking about the critical future strategic battleground facing manufacturers, payers, and drug channels: Who will win the “Medical Benefit versus Pharmacy Benefit” battle?

Unlike traditional oral drugs, a specialty drug can be covered under a medical benefit, a pharmacy benefit, or both. This diversity of payment and dispensing options makes it hard for payers to get full visibility on specialty drug spending or manage drug utilization effectively. Specialty drug trend is growing at 15% to 20% to year, so this complexity is a large and growing pain point for payers.

The topics I highlight below would be great discussion starters for:

• Managed markets strategy development at a pharma manufacturer
• Market positioning by a Pharmacy Benefit Manager (PBM) or specialty pharmacy
• Benefit design decisions at a payer

Enjoy!

Drug Channels Earnings Calendar: 2010Q1

Starting tomorrow, the big 3 drug wholesalers and the Big 3 Pharmacy Benefit Managers (PBMs) will begin reporting their latest financial results. These financial reports and accompanying conference calls provide invaluable insights into the strategies and economics of companies within U.S. drug channels.

As a service to Drug Channels readers, I'm providing the latest quarterly update of the upcoming calendar along with links to the earnings conference call webcasts for each company. If you don’t have time to listen to the calls, free transcripts show up on Seeking Alpha within a few days.

Pembroke Consulting retainer clients should feel free to contact me for post-game analysis on any of these reports. Gerson Lehrman Group customers can make a request via their GLG client representative.

Medicaid Drug Rebate Program (sponsor)

I am pleased to welcome back IIR as a Drug Channels sponsor for the 15th Annual Medicaid Drug Rebate Program Summit. The event will be held September 15-17 in Chicago.

I'm very impressed by the agenda. The keynote speaker is Mark McClellan, former Administrator of CMS. Speakers include executives from Cephalon, Biogen IDEC, Daiichi Sankyo, Dr. Reddy's, Eli Lilly, Johnson & Johnson, Ortho-McNeil-Janssen, Sandoz, Sanofi-Aventis, Upsher-Smith, Xanodyne, and many more. View the complete Agenda.

IIR is also providing a special 15% discount for Drug Channels readers. Just mention VIP code XP1558DRUGCH for 15% off the standard rate when registering. Thanks, IIR!

Chains Win Big in 2009

The pharmacy market continued to undergo structural changes in 2009 that shifted market share between dispensing channels, while overall growth in retail prescriptions remained modest.

Chains were the big market share winners in 2009, while all other formats—independents, supermarkets with pharmacies, and mail-order pharmacies—lost share. The mail-order results are especially surprising. My summary analysis and interpretation appear below.

And from the Department of Shameless Self-Promotion, I note the 2009 data are consistent with the predictions in my pharmacy industry economic report.

Latest IMS Data Shrinks Pharma by $26 Billion

You surely saw news stories based on this press release: IMS Health Reports U.S. Prescription Sales Grew 5.1 Percent in 2009, to $300.3 Billion.

What you may not know is that IMS Health also restated sales data from 2005 through 2008, resulting in a $25.7 billion, four-year drop in U.S. market size versus previous reports. No, this is not a belated April Fool's joke. IMS' explanation for the updated data is included below.

Chain stores and Non-Federal Hospitals had the biggest downward adjustments over the period, while Independents and Mail Pharmacies had small adjustments. I’ll comment more on share movement by distribution channel in an upcoming post. In the meantime: Caveat marketor!

Phantom Pharmacies: Glad they get paid promptly!

You absolutely must read a scary (but kinda entertaining) letter from Senator Charles Grassley (R-IA) to the U.S. Secretary of Health and Human Services about phantom pharmacies—“empty store fronts, apparently without customers, that nonetheless billed millions of dollars to private insurers.”

What’s even more amazing is the fact that a private insurer spent a year trying to get CMS to address the fraud. Meet the new boss!

The Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) requires Part D plans to pay pharmacies within 14 calendar days for electronically-submitted prescription claims. Should I feel better that e-fraud has now been streamlined?

Reality Check on Supply Chain Security

Last Thursday, The New York Times published Are You Buying Illegal Drugs?, a scary-sounding editorial by Katherine Eban (author of Dangerous Doses) and Aaron Graham (ex-Purdue Pharma). The authors explain the economic logic behind prescription drug theft and advocate a national track-and-trace technology infrastructure.

Yes, we do need a national system for tracking and tracing pharmaceuticals, although the risks are much lower today than 10 years ago. However, I wonder about the real-world potential for track-and-trace technologies.

Tag all you want, but if no one checks the tag, it's a waste of money. "Don't ask, don't tell" is the mantra of people who buy diverted products from unsavory resellers. Pedigree laws and track-and-trace technologies only work if pharmacy buyers refuse to buy outside legitimate channels and agree to authenticate (scan) an electronic tag.

Adding insult to potential injury, the FDA’s recent guidelines for serialization will do little to address our crazy patchwork of state rules and regulations for the supply chain.

IntegriChain (sponsor)

I am pleased to welcome a new sponsor to Drug Channels—IntegriChain, a pharmaceutical industry information services company.

This is a cool company. I’m a big fan of IntegriChain’s solutions. A number of my manufacturer clients use IntegriChain’s data and services to gain visibility into product demand from the factory to the pharmacy. I know first-hand that their approach provides unique insights into channel activity and can help to better target sales efforts.

In the spirit of full disclosure, I want to let you know that I participated on IntegriChain’s Advisory Board when the company was launched. However, I have no formal involvement with the company's management or operations right now.

Read more in the company's official description below.

Hidden Requirements in New Health Care Bill

Like you, I’ve been poring over the 2,409-page full text of The Patient Protection and Affordable Care Act (“PPACA”) .

There are lots of less well-known requirements buried in the legislation. Here’s a summary of what I found that will affect the pharmacy and pharmaceutical industry.