New AMP Rule Targets Bona Fide Service Fees

Late Friday, the Centers for Medicare and Medicaid Services (CMS) finally released its long-overdue proposed rule regarding Average Manufacturer Price (AMP) under the Patient Protection and Affordable Care Act (PPACA). Savor all of the bureaucratese for yourself in the Proposed Rule.

In the proposed rule, CMS doubles-down on its use of AMP in the Medicaid program and lays more groundwork for Actual Acquisition Cost (AAC) reimbursement methodologies. 

Manufacturers should pay close attention to this proposed rule because of its potential impact on trade agreements with wholesalers and pharmacies. CMS is proposing important changes to its interpretation of bona fide service fees, while simultaneously choosing not to clarify key items.

Welcome to the ugly underbelly of healthcare reform!

Big Trouble in the VA Contract: Who will win?

Yesterday, Larry Marsh at Barclays Capital reported that the much-delayed Department of Veterans Affairs pharmaceutical prime vendor (PPV) contract has been pushed back again, at least until late March.

The delay appears to be caused by alleged “improper buying” from McKesson (NYSE:MCK), the current sole PPV. See Veterans agency knew of improper buying under McKesson contract. The House Committee on Veterans' Affairs will hold a hearing on the PPV next Wednesday called Examining VA's Pharmaceutical Prime Vendor Contract.

Below, I take a totally unscientific guess at which wholesaler will win the $4 billion VA contract, given odd rumblings in the wholesale customer markets. And since McKesson provides a steep 5.15% discount to the VA, it’s a good opportunity to chat about the oft-misunderstood cost-minus pricing model.

Drug Channels News Roundup: January 2012

This month’s selection of noteworthy news stories looks at broader health care cost containment debate.

• Depressing news on disease management
• A fascinating debate on ACOs
• The sad realities of U.S healthcare spending

Plus, watch The Daily Show’s Jon Stewart lob softball questions at Secretary of Health and Human Services Kathleen Sebelius, who does some major pre-State of the Union spinning.

P.S. Reminder: The launch discount for the 2011-12 Economic Report on Retail and Specialty Pharmacies ends today!

A Defense of Co-Pay Cards

Pharmaceutical Executive just published a fascinating article by my friend Mason Tenaglia called Letting the Facts Get In the Way.

Based on his firm’s analysis of various data sources, Mason provides a spirited defense of co-pay offset programs. He argues that co-pay cards don't increase utilization of higher-cost brand-name drugs and don't reduce generic usage, but do increase adherence.

While the article lacks sufficient details to fully evaluate its empirical claims, it still makes a useful contribution by explaining how and why co-pay offset programs can be a valuable benefit management tool.

What do you think: good or evil?

Is Pfizer's Lipitor Strategy Working?

Since November 30, the atorvastatin market has been split between Pfizer’s heavily-discounted brand-name Lipitor product, an authorized generic from Watson, and the first-to-file generic Ranbaxy. See Ranbaxy Makes Three: The Battle for Generic Lipitor Profits. Pfizer has been criticized for its unorthodox discounting strategy.

Surprisingly, Lipitor share is tracking below historical generic substitution patterns from the past few years, i.e., the brand-name version is losing share faster than a typical generic drug.

The chart below tells the story, which is about as unexpected as an overweight, butter-loving celebrity chef becoming the spokesperson for a manufacturer of diabetes medicine. Oh, wait...

New Data on Specialty Pharmacy’s Challenge to Buy-and-Bill

You should check out the new 2011 ICORE Medical Pharmacy and Oncology Trend Report (free download with registration). This 60-page report provides a wealth of interesting data on the specialty drug benefit management.

The ICORE payer data confirms that the specialty pharmacy channel is displacing buy-and-bill in the physician office market. As I discuss below, this shift is occurring via white bagging of specialty drugs.

Buy-and-bill will not end for all physician-infused drugs, but there are substantial pressures for certain therapies. White bagging has important implications for specialty distributors, pharmacy benefit managers (PBMs), and providers.

And if you're a manufacturer planning for a new specialty drug's commercial launch, then you need to be the "channel steward" and design a strategy to ensure patient access supported by appropriately motivated partners.

An Update on Pharma Sales Reps: The Sitcom

Here at Drug Channels, we try to keep you informed about important industry news. That's why, in May, I told you about Pharma Sales Reps: The Sitcom, an ABC show called Work It. As far as I know, it's the very first TV comedy about two men who dress as women to land jobs as pharmaceutical sales reps. (Yes, really. That's the show's premise.)

Well, the first episode just aired. The good news? It won't last long based on the reviews:

• Hollywood Reporter: "Awful and Embarrassing for ABC"
• Entertainment Weekly: "So bad, you felt a little sorry for it"
• TV Guide: "insulting to anyone of any gender with half a brain and a lick of taste"

The bad news? The show wasted no time in portraying an ignorant, outdated, and (worst of all) unfunny view of the pharma industry.

The video clip below shows a "sales call" by one of the main characters. Go ahead, waste 2 minutes of your life and see what Hollywood thinks about the pharma industry. Perhaps it will cure your paraskevidekatriaphobia.

Healthcare Reform Hits U.S. Drug Spending in 2010

Good news, pharmaceutical economics nerds! The data gnomes at the Centers for Medicare and Medicaid Services (CMS) just released the 2010 National Health Expenditure data. Read all the juicy details in this Health Affairs article: Growth In US Health Spending Remained Slow In 2010; Health Share Of Gross Domestic Product Unchanged From 2009 (free download).

Total U.S. expenditures on retail prescription drugs were $259.1 billion, a historically low 1.2% annual increase vs. 2009. Prescription drug expenditures were the slowest growing part of the U.S. health care system, which grew by 3.9%. (See Exhibit 2 of the Health Affairs article.)

The Patient Protection and Affordable Care Act (PPACA) had an impact on the 2010 numbers, although the biggest effects are still to come. Three observations from my number-crunching:

• Consumer’s paid a record-low share of U.S. drug expenditures.
• CMS paid for almost one-third of drugs, another new record.
• Healthcare reform reduced Medicaid expenditures and shifted about $1 billion in Part D costs to the government. 

Read on for a detailed look at who paid for prescription drugs in 2010.

The 2011-12 Economic Report on Retail and Specialty Pharmacies

I am pleased to announce the availability of my new report the 2011-12 Economic Report on Retail and Specialty Pharmacies. We’re offering 10% off the regular price if you purchase before January 24, 2012.

This year's report is 134 pages...42 pages longer than the 2010-11 report. It includes expanded coverage of specialty pharmaceuticals, new market data, and more-detailed analyses of reimbursement trends. The 2011-12 report also updates 5 key trends that will affect the market structure and economics of the retail and specialty pharmacy industries. 

All information is updated through 2011, including 62 data-packed exhibits. True hardcore Drug Channels readers can savor 183 endnotes (!), most of which have hyperlinks to original source materials.

I'm sure you'll enjoy the latest edition. As a special bonus, see below for a picture of me with the heretofore unacknowledged inspiration behind this new report.

Risk-Sharing and Innovative Contracting Models for Bio/Pharmaceuticals (sponsor)

I am pleased to welcome CBI's 3rd Annual Risk-Sharing and Innovative Contracting Models for Bio/Pharmaceuticals conference as a Drug Channels sponsor. The conference will be held at the Doubletree Hotel in Philadelphia on March 22 and 23. Read more in the official description below or view the website.

I expect this to be another worthwhile event. Participating speakers come from such companies as Bristol-Myers Squibb, Generation Health, Johns Hopkins HealthCare, Premera Blue Cross, Prime Therapeutics, Savient Pharmaceuticals, and Shire.

CBI is offering a special $400 discount to Drug Channels readers. Just register with Promo code NGQ475. Thanks, CBI!

2011 Market Share of Top Pharmacies

NOTE: For fresher data, see 2012 Market Share of Top Pharmacies.

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Happy 2012!

Next week, we'll be releasing the 2011-12 Economic Report on Retail and Specialty Pharmacies. Here's a sneak peek at my list of top pharmacies, ranked by total prescription revenues.

The exhibit below, one of 62 in my new report, shows my estimates for market share of prescription revenues by company for calendar year 2011. I estimate that the top six dispensing retail and specialty pharmacies—CVS Caremark, Walgreens, Medco Health Solutions, Walmart, Rite-Aid, and Express Scripts—will account for 64% of U.S. pharmacy dispensing revenues in 2011.

The future may look very different, as I explain below.