Drug Channels News Roundup: April 2013

Baseball season is finally here! Oil up your glove, put on your cleats, and let's run the bases around this month's news stories. Remember: Sometimes you win, sometimes you lose, and sometimes it rains.

In this issue:

• Home Run: How Express Scripts and Medco won antirust approval
• Green Monster: MHA's billion-dollar price tag highlights GPO valuations
• Free Agents: Consumers are price-shopping for prescriptions
• Batter Up: A look at the latest national track & trace legislation

Plus, just in time for baseball season, The Onion profiles an electrifying new entrant into the Philadelphia Sports Hall of Fame. Go Phillies!

Medicaid Drug Rebate Program

Time to get ready for IIR’s 18th Annual Summit on the Medicaid Drug Rebate Program (MDRP)! This mega-event will be held at the Chicago Marriott Downtown Magnificent Mile in Chicago, Illinois on September 9-11, 2013.

The MDRP typically sells out, so you should register as soon as possible. The 2013 agenda looks very strong, so I expect this year's event to be extremely popular, too.

Where else can you attend such sessions as "AMPs, NARPs, NADACs, and FULs Oh My!" or play the "GP Geek Game - Wheel of Fortune"? (Yes, these topics are really on this year's jam-packed agenda.) See more details below or visit the MDRP site.

Drug Channels readers can register with promo code XP1858DRC and save $400 off the standard registrations rates. Thanks, IIR!

The Deal with Dirty Data

Today’s guest post is from Becky Holloway, Product Marketing Manager at Revitas. In this informative article, Becky describes the flaws of manual data management and the limits of outsourced data cleansing.

Becky highlights Revitas’s new Online Savings Calculator, a neat tool for assessing the savings from in-sourced prescription level data scrubbing

Please contact Becky Holloway (bholloway@revitasinc.com) with any questions about the article.

CVS Caremark Renews with Cardinal and McKesson

As expected, CVS Caremark (NYSE: CVS) said "never gonna give you up" and renewed its distribution agreements with Cardinal Health (NYSE: CAH) and McKesson (NYSE: MCK). Cardinal will continue to service the CVS retail stores and distribution centers, while McKesson will continue to service the Caremark mail facilities and some small retail business. Press release links below.

For Cardinal, this news is a big relief following the loss of Express Scripts and Walgreens. As I suggest in Making Sense of ABC-Walgreens-Alliance Boots, the loss of two large, low-profit customers could turn out to be a blessing in disguise.

The renewal also demonstrates wholesalers' value in the brand-name pharmacy supply chain. In theory, the largest self-warehousing chain drugstores and mail pharmacies have the size and scale to perform the functions of drug wholesale distribution. Yet in 2012-13, these larger companies all elected to buy brand-name drugs via a drug wholesaler rather than directly from a manufacturer.

No details about the economics. We can presume that CVS Caremark got a slightly better deal vs. its current agreement, although the economics are not as straightforward as you might expect. Read on for some quick context.

The Top 50 Retail Pharmacies, according to Drug Store News

Drug Store News (DSN) just released it latest list of the top pharmacy retailers in the regally-titled PoweRx Players: Profiles of the Kings of Retail Pharmacy. (free download)

I highly recommend the PoweRx list to anyone who competes with, sell to, or interacts with retail pharmacies. This useful resource provides brief profiles of the top 50 companies. These range from Walgreens (#1, with $45.3 billion in prescription sales) to Ritzman Pharmacy (#50, with $57 million in prescription sales). Put another way, the largest chain drugstore dispenses nearly 800 times as much as the 50th largest drugstore.

DSN's top 20 largest pharmacies are shown below. I explain why the DSN list differs from our 2012 Market Share of Top Pharmacies.

Regardless of how you count, it’s good to be the king.

Commercial Contracts and Chargeback Management

The agenda for CBI’s 2013 Commercial Contracts and Chargeback Management forum has just been released. Lots of good topics, including: 340B, chargeback computations, class-of-trade development, and (of course) healthcare reform.

Speakers come from such companies as American Health Care, Amerinet, Apexus/340B Prime Vendor Program, Auxilium Pharmaceuticals, Cardinal Health, Celgene, Compliance Implementation Services, Daiichi Sankyo, Eisai, Eli Lilly & Company, GS1 Healthcare US, Healthcare Supply Chain Association (HSCA), Horizon Pharma, McKesson, Novo Nordisk, Pfizer, PSS World Medical, Purdue Pharma, Revitas, and more.

Drug Channels readers can register with code FZT663 and save $500. Thanks CBI!

The Latest Data on Specialty Pharmacy Reimbursement

Let’s take a look the just-released 2013 edition of the EMD Serono Specialty Digest, a great report on payer and managed care strategies for specialty drugs. The report is free, but has a bizarre site registration process. Why do I need a super-secret password (plus a password hint) to download a free report? Anyway...

As far as I know, the EMD Serono reports provide the only public specialty drug reimbursement data for pharmacy and medical settings. Some highlights:

• Health plans pay 82.9% of Average Wholesale Price (AWP) to specialty pharmacies. Retail pharmacies receive slightly more.
• Physician offices are still being compensated using a mix of reimbursement methodologies: Average Sales price (ASP), AWP, or provider capitation.
• When using Average Sales Price (ASP), health plans pay mark-ups that are twice the (pre-sequester) Medicare Part B rate.
• With a little math, the survey results show when white-bagging is cheaper than buy-and-bill.

Thanks again to EMD Serono for again sponsoring this valuable research. Read on for the wonkeriffic reimbursement details.

Is Caremark really better than Express Scripts at managing drug trend?

Last week, CVS Caremark (NYSE:CVS) released the 2013 Insights Report, its drug trend report for 2012. I review the comparable Express Scripts (NASDAQ:ESRX) report in Insights from the 2012 Express Scripts Drug Trend Report.

The numbers appear to show a clear advantage for CVS Caremark in managing drug trend—the change in prescription drug expenditures of a third-party payer. For commercial plan sponsors in 2012, overall trend for CVS Caremark customers was 0.3%, while trend for Express Scripts customers was a comparatively lofty 2.7%. The gap was especially large for traditional (non-specialty) drugs.

So, is CVS Caremark really better? Probably not, but who really knows? A deeper looks highlights hidden methodological discrepancies that make it impossible to determine the best PBM.

A PBM’s drug trend report is the bikini of pharmaceutical economics. What it reveals is interesting, but what it conceals is essential. Read on and see if you agree.

Managed Care Rebate Agreements

I'm pleased to welcome CBI’s Managed Care Rebate Agreements event as a new Drug Channels sponsor. This one-day seminar is being held at the DoubleTree hotel in Philadelphia, PA, on June 18, 2013.

The agenda has lots of practical advice for negotiating, structuring, and managing rebate agreements. Speakers come from such companies as Acorda Therapeutics, Activus, Connolly LLC, GlaxoSmithKline, IMS Health, ModernHEALTH, PharmaMetrics, PriorityHealth, Ventegra, and more. You can get ready for this event with the benchmarking data in A Peek at Manufacturers’ PBM Rebates.

Drug Channels readers can register with discount code XGE392 and save $300. Thanks CBI!

Employers Get Tougher on Specialty Drugs

If you are interested in specialty drug management, I suggest you download the extensively-titled 18th Annual Towers Watson/National Business Group on Health Employer Survey on Purchasing Value in Health Care. (Free download.) This new report provides great insight into employer-sponsored health care, including: cost trends, premiums, employee contribution strategies, and healthcare reform.

For the first time, the report also summarizes employer strategies for specialty pharmacy. The news isn’t pretty, with employers planning more aggressive specialty drug utilization management. The report doesn’t delve deeply into more exotic strategies, such as coordinating medical and pharmacy benefits or implementing tighter specialty channel shifts.

Pharmaceutical manufacturers should start planning for tighter specialty pharmacy management. Unique specialty therapies do not usually contract for access, but that will change as the rules tighten.

Hospitals' Extraordinary 340B Pharmacy Profits from Insured Patients

Senator Charles Grassley (R-IA) has uncovered some very uncomfortable truths about the out-of-control 340B drug discount program. The Charlotte Observer has a summary: NC hospitals reap profits from discount drugs.  (Original source documents linked below.)

The latest disclosures from three North Carolina hospitals should make everyone rethink the 340B program’s purpose, functioning, and oversight. For instance, about 90% of 340B patients have insurance from Medicare, Medicaid, or a commercial payer. What’s more, hospitals earn large profits from the already-insured prescriptions of these patients. Duke University Health System’s gross profits from the 340B program were almost $300 million over the past 5 years. Duke’s 340B pharmacy gross margin was 53%.

Defenders of the 340B program claim that these outcomes are perfectly fine. Yet, we don't even know whether hospitals are providing adequate data so that pharmaceutical manufacturers can avoid double-paying rebates on commercial and Medicare prescriptions.

Did Congress really intend for pharmaceutical manufacturers to subsidize part of the general charity care provided by highly profitable, multi-billion dollar health systems? Read the evidence below and post a comment with your reactions.

Sunshine & Aggregate Spend Forums

Drug Channels is pleased to welcome CBI’s West Coast and East Coast Sunshine & Aggregate Spend Forums as a new sponsor.

Check out the April 23rd West Coast agenda. The event features speakers from such organizations as Bull’s Eye Innovations, California Attorney General’s Office, CareFusion, Compliance Implementation Services (CIS), Dendreon Corporation, Edwards Lifesciences, Endologix, Health Market Science (HMS), Medivation, PhRMA, Polaris, Porzio Life Sciences, PwC, Sanofi, Shire, Takeda Pharmaceuticals, and more.

Part D Drug Prices are Increasing Very, Very Slowly

The Medicare payment Advisory Commission (MedPAC) just released its latest Report to the Congress: Medicare Payment Policy (March 2013). As always, this annual report is a dream come true for Medicare policy wonks. (You know who you are!)

Chapter 15 (starting on page 355) provides a valuable Medicare Part D data dump, including information on program design, enrollment trends, benefit design, costs, and prices. Below, I pluck out the surprising news about Medicare Part D prices. Key highlights:

• From 2006 to 2010, Medicare Part D drug prices grew by only 0.5% per year. (Since rebates are excluded from the computations, the data probably overstate price increases.)
• To increase generic substitution, Part D plans used very aggressive benefit designs, which contributed to the slow price rise.
• Drugs in Part D’s six protected classes weren’t very protected from generic substitution.

These results provide one more reason why we should be hesitant to alter the highly successful Part D program, per my comments in the February news roundup. And by using underlying CMS data, the new report thoroughly refutes the politically-motivated and inaccurate Part D pricing studies conducted by the AARP and the University of Minnesota. An ounce of data is worth a pound of opinions.

Will CMS Crack Down on Part D Preferred Pharmacy Networks?

On Monday, the Center for Medicare and Medicaid Services (CMS) released its 2014 Rate Announcement and Final Call for Medicare Advantage and Part D plans. For MA plans, the big news is a surprising 3.3% rate increase, rather than a 2.2% cut.

CMS also had some tough talk for preferred pharmacy networks in Medicare Part D Prescription Drug Plans (PDPs). Below, I explain CMS’s biggest concerns, which include network entry, pharmacy fees, and beneficiary communications. Plan sponsors: You have been warned!

P.S. Stay tuned for my forthcoming Pharmaceutical Executive article explaining why manufacturers should be worrying about narrow pharmacy networks.

Oncology Management: Real World Changes in Cancer Care

Drug Channels is pleased to welcome IIR’s Collaborative Summit for Oncology Management as a new sponsor. This event is being held at Chicago's Wit Hotel on June 17-18, 2013.

Check out the agenda, which features a good mix of speakers from such organizations as Aetna, the Cancer Treatment Centers of America, Cardinal Health Specialty Solutions, Community Oncology Alliance (COA), Manhattan Institute for Policy Research, Moffitt Cancer Center, National Comprehensive Cancer Network (NCCN), Northwest Georgia Oncology Centers, Physician Network (iPN), Roche, UBC, United HealthCare and more.

Drug Channels readers can register with promo code XP1814DRC and save $400 off the standard registration rates. Thanks, IIR!

Walmart Adds Low-Cost Surgical Procedures

Hospitals better get ready for some new competition! This morning, Walmart announced plans to offer discount surgical procedures, with an initial focus on liposuction. Liposuction procedures typically costs more than $6,000, but Walmart will price lower and upper abdomen liposuction at $249.99. Clearly, Walmart is following the price leader strategy that allowed it to become the country's fourth-largest pharmacy.

Here’s a telling comment from the press release:

“We view liposuction as a true lifecycle product for Walmart consumers,” said David St. Hubbins, M.D., chief medical officer at Walmart’s Health and Wellness Division. “As America’s number one seller of lard-based snack products, Walmart has provided unparalleled support for the nation’s obesity epidemic. Now, we can provide a low-cost solution to this ever-growing market segment.”

Walmart claims to be the retailer of choice for 83% of Americans who weigh more than 350 pounds. The company expects 29% of its liposuction customers to be "double dippers"—consumers who will take advantage of Walmart’s low food prices to regain the weight, and then purchase a second lipo procedure.

Another positive tailwind is favorable legislation, such as Mississippi’s new law outlawing the sale of soft drinks in containers smaller than 20 ounces.

Read my comments below for speculation on what this means for hospital marketing and med-surg distribution channels.