Best Of Drug Channels

I'll be on vacation next week, so it's a good time for my annual round-up of classic posts over the past year or so.

Below are my selections to help you quickly find data and analysis of key industry issues. Since you may not want to spend the rest of your day reading my musings, you’ll be able to find this post again at the “Best Of” tab in the menu bar.

I grouped the posts into the following categories:

• Industry Data and Forecasts
• Pharmacy Economics and Prescription Profits
• Specialty Drugs
• Analysis of Key Market Participants
• Health Care Reform and Policy
• Fun Stuff

These posts are all still valid although some of the information may have been superseded by new developments. Links were working at the time of posting, so please email me if you find a broken link.

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The Unexpected Losers from New York’s Anti-Mail Bill

New York’s legislature was pretty busy last week. They named corn as the state’s official vegetable and legalized gay marriage. Oh yeah, they also overwhelmingly passed an anti-mail order pharmacy bill.

The Anti-Mandatory Mail Order Pharmacy Bill (New York Assembly Bill 5502‐B) would eliminate mandatory mail-order programs and prevent plans from using differential co-payments for mail pharmacies. As of this morning, the bill has not yet been signed into law by Gov. Cuomo, although I expect it will be soon.

Is this a big win for retail pharmacies and the health care system? Nope, not really. Almost everyone will lose from this legislation:

• The average consumer will face higher out-of-pocket costs because mail-order discounts will vanish by legislative fiat.

• Pharmacy Benefit Managers (PBMs) will have another headwind for mail order growth.

• Benefit plan sponsors will be forced to subsidize an already-saturated retail pharmacy industry, will lose the right to choose how to spend their own benefit funds, and will lose the economic advantages and control of mail pharmacy.

• Manufacturers of specialty drugs will find their channel strategies undermined by a new any-willing-provider mandate.

• Retail pharmacies may gain some incremental foot traffic, but will ultimately face more margin pressure as they fight to meet mail pharmacy reimbursement rates. I predict that pharmacy owners’ joy will fade once they realize that they are sacrificing their own profitability to spite PBMs. Be careful what you lobby for!
  

Read on for my $0.02 and then feel free to post your own comments below.

Walgreen and Express Scripts Play Chicken

Ah, summer! The weather is warm, the birds are chirping, the sun is shining, and Walgreen (NYSE:WAG) is playing chicken with a major PBM.

Yup. Walgreen announced its intention to drop out of Express Scripts’ (NASDAQ:ESRX) retail pharmacy network, citing a “breakdown in contract renewal negotiations” in this announcement: Walgreens Planning to Move Forward Without Express Scripts, Inc. Pharmacy Provider Network in 2012

Express Scripts responded coolly in Express Scripts Strives to Make Prescription Drugs Affordable and Accessible to American Families. Kudos for not escalating the battle.

This isn't a rerun of last year’s CVS Caremark (NYSE:CVS)-Walgreen Brouhaha. Express Scripts has less to lose than CVS Caremark did last summer, especially because there's no need for Express to "prove" the value of its business model. However, the outcome is likely to be similar. Express Scripts can’t live without Walgreen, and vice-versa. Cluck!

Read on for more on the dispute and my best guess at the likely outcome.

More New Data on Specialty Drug Coverage and Strategy

This week's latest data on the specialty market comes from the 2011 edition of the EMD Serono Specialty Digest™, a timely and useful report on payer and managed care strategies for specialty drugs. The report is free, but has a bizarre registration process. (Why exactly do I need a super-secret password to download a free report?)

The results provide intriguing fact-based insights about specialty channels, benefits, and commercial models. A few highlights:

• There is no consensus among plan sponsors on how to define a drug as a “specialty pharmacy” product.
• Benefit coverage, patient out-of-pocket costs, and reimbursement methods for specialty drugs are all over the place.
• Plan sponsors have not yet settled on the best way to manage specialty drugs.

The complexity makes it hard for payers to get full visibility on specialty drug spending or manage drug utilization effectively. From what I have seen, this complexity can also play havoc with a manufacturer’s go-to-market commercial planning.

Let me offer a hearty Drug Channels "Thank You" to EMD Serono for again sponsoring this research. Read on for my quick tour through the weird and wonderful world of specialty drugs!

What’s Next for AmerisourceBergen

At last week’s HDMA Business Leadership Conference, Dave Yost, CEO of AmerisourceBergen (NYSE:ABC) received a well-deserved Nexus Award for Lifetime Achievement. Read all the details in R. David Yost Honored With 2011 Nexus Award For Lifetime Achievement.

Since he is retiring next month, I thought it might be a good time to check in on ABC’s current business and speculate on what’s next.

Incoming CEO Steve Collis will lay out an updated vision for the company in the coming months. But as I discuss below, he will also have to deal with important structural challenges to sustaining the company’s historical performance. Suffice to say, it won’t be as easy as 1-2-3 for ABC.

And for today’s special bonus, check out the picture below of me posing with an HDMA DIANA award.

Drug Channels News Roundup: June 2011

Here is my monthly look at noteworthy news stories for the discriminating Drug Channels reader:

• UnitedHealth without Medco—Tough talk about the upcoming renewal

• Service Fees without Penalties—OIG gives the thumbs-up to a manufacturer

• AMP without Guidance—CMS will perhaps release the rules soon (maybe)

• A World without Chains—You may not like it

Plus, a GlaxoSmithKline employee becomes America's Funniest Compliance Officer!

Strategic Distribution Planning for Specialty Products (sponsor)

I am pleased to welcome back CBI as a Drug Channels sponsor for the 2nd Annual Forum on Strategic Distribution Planning for Specialty Products. The event will be held in Philadelphia on September 22-23, 2011.

CBI is offering a discount for Drug Channels readers of $400 off the registration fee. Just use promo code YXY984 when you sign up. Thanks, CBI!

This looks to be a worthwhile and timely event with appeal to many Drug Channels readers. The conference speakers include executives from manufacturers, specialty distributors, specialty pharmacies, and service providers. Topics include logistics, reimbursement hubs, REMS, contracting, and more. Click here to check out the agenda or see more details from CBI below.

My consulting clients know that commercial models for specialty products are near-and-dear to my heart. You can review publicly-available studies and information under the Specialty Drugs topic tag on Drug Channels.

Will Exchanges Crowd Out Employer Coverage?

An intriguing new analysis by McKinsey & Co projects a much bigger shift away from employer-sponsored insurance (ESI) under healthcare reform than the Congressional Budget Office (CBO) projected last year. Read it here: How US health care reform will affect employee benefits.

The article is worthwhile reading for anyone trying to understand the future of managed markets contracting and payer marketing.

Their headline projection—30 percent of employers will definitely or probably stop offering ESI after 2014—implies a massive shift from today’s world of managed markets. Not only will the uninsured gain coverage, but McKinsey projects that the individual insurance market will explode via the highly-regulated exchanges created by the PPACA.

How will exchanges contract with pharmaceutical manufacturers? Will plans offered on the exchanges contract more like Medicare Part D Prescription Drug Plans (PDPs), like commercial plans, or be something totally different? No one knows yet, so I’ll just highlight a few insights and guesses for now.

The Future of Buy-and-Bill According to Payers and Oncology Practices

The new issue of Specialty Pharmacy Times has a must-read article for those who develop commercial strategies for specialty drugs: Payer Management of Oncology Gets Serious.

The article has some neat data from The Zitter Group’s (TZG) most recent survey of payers, oncologists, and oncology practice managers. The good folks at TZG provided me with the full report so that I can share some additional details with you.

Here are three noteworthy conclusions about buy-and-bill for infused cancer drugs:

• Expected: The majority of infused cancer therapy volume is still distributed through buy-and-bill channels, although buy-and-bill continues to drop.

• Hmmm... About one-third of practice managers report that insurers are limiting buy-and-bill through contract terms.

• Really?!? A majority of payers and almost half of oncology practice managers want buy-and-bill to end for infused cancer therapies.

It’s clearly ludicrous to believe that buy-and-bill will end completely given the prevalence of infused products. But it’s also dangerously naïve to insist that buy-and-bill is “here to stay” and will remain the same in the future. And you don't even have to read my mind to find out.

Medicaid Drug Rebate Program (sponsor)

Be sure to check out IIR's 16th Annual Medicaid Drug Rebate Program (MDRP) Summit. The event will be held September 14-16 in Chicago. The 2011 agenda looks awesome, so I expect this year's event to be extremely popular.

IIR is offering a special 25% discount to Drug Channels readers—that’s up to $800 in savings off the standard rate. All you have to do is register with your VIP code: XP1658DRUG. Thanks, IIR!

FYI, the 2010 MDRP Summit actually sold out and apparently the 2011 Summit may sell out also, so you should register as soon as possible.

IIR is still offering you a chance to win an iPad 2 if you can guess the keynote speaker. (No, it's not me.)

Full details from IIR below.

See You at the HDMA Next Week + Special Report Discount

FYI, I'll be at HDMA 2011 Business and Leadership Conference next week on June 6 and 7 in Phoenix. Florida Governor Jeb Bush will give the keynote address. We'll see how he compares to his older brother, who gave a great talk at the Armada Summit last month.

I will not be speaking at the event, but please email me if you’d like to arrange a one-on-one meeting. Or, just say hello if you see me.

FYI, we will be releasing the 2011-12 Economic Report on Pharmaceutical Wholesalers in September. Until then, the 2011-11 Economic Report on Pharmaceutical Wholesalers will be on sale at 40% off the regular price!

I packed enough into the report to make it incredibly valuable whether you sell to wholesalers, buy from wholesalers, analyze the wholesale industry, or just want to understand how the industry really works. Click here for full details or check out the Table of Contents and List of Exhibits.