News Roundup, October 2014: Walgreens, Cardinal Health, Generics, Marley Drugs, and Roger Daltrey

Eeek! Time for my Halloween-themed roundup of Drug Channels news stories. In this issue:

• Icky: Walgreen’s ex-CFO alleges defamation

• Spooky: Generic inflation is changing benefit design

• It’s alive! An independent pharmacy thrives with a unique strategy

As your treat, watch a video of Cardinal Health CEO George Barrett jammin’ on stage with The Who’s Roger Daltrey. (Not a trick. Really.)

Walgreen's Former CFO Alleges Defamation, Courthouse News Service
In August, The Wall Street Journal published a shocking cover story (Walgreen Shakeup Followed Bad Projection) that revealed behind-the-scenes details about a "billion-dollar forecasting error." Based in part on the WSJ article, former CFO Wade Miquelon filed a lawsuit claiming breach of contract, defamation, and tortious interference. This Courthouse News Service article contains surprising and embarrassing allegations about Walgreens’ internal management.

FYI, Walgreen has since challenged Mr. Miquelon’s version of events, claiming that “the former executive was responsible for the disappointing financial forecast that preceded his departure.” For criticism of Walgreen’s PR response, read Crisis of the Week: A Nasty Breakup at Walgreens.

Reform Update: Generic drugs' high prices spur fears of failed drug adherence, Modern Healthcare
This article provides more evidence that generic inflation is scrambling traditional pharmacy benefit management strategies. Given the trends in Retail Generic Drug Inflation Reaches New Heights, third-party payers are creating new tiers and using preferred generic formulary lists. Here’s an example from the article: “Group Health Cooperative of South Central Wisconsin no longer defines tiers in terms of generics and brands. While most generics remain in tier 1, the lowest tier, the plan has moved more expensive generics up to tier 2. Meanwhile, it has shifted some preferred brand-name drugs down to tier 1.” By contrast, Blue Cross and Blue Shield of Kansas is “…not currently planning to tier generic drugs or prefer a brand name over a generic.” More to come?

For Seniors Only: An Independent Drug Store Based on Providing Excellent Service, The Chronicle
Check out this fascinating article about Dave Marley, owner of Marley Drugs. Instead of fighting with third-party payers, Marley added an innovative, cash-only, generic drug program. His one-location pharmacy offers a 3, 6, 9, or 12 month supply of 50 different generic medications for $20, $37, $55, or $70 dollars. Though based in North Carolina, Marley Drug offers free shipping to 22 other states. Dave told me that self-pay (cash) prescriptions now account for 38% of his pharmacy’s business, compared with only 10% cash business at a typical independent pharmacy.

Over the years, my message to pharmacy owners has been simple: Get big, get focused, or get out. Winning in the retail pharmacy industry requires scale or differentiation. (Otherwise, cash out gracefully.) Marley provides an outstanding example of strategic differentiation.

Squeeze Me
At Cardinal Health’s recent Retail Business Conference in Washington, D.C., CEO (and now coolest executive in the pharma industry) George Barrett joined Who frontman Roger Daltrey for Squeeze Box. Start watching at 3:40. Your move, Mr. Hammergren! Click here if you can’t see the video.