News Roundup, November 2014: Salix, Merck, Co-Pay Cards, Part D Preferred Networks, and an Insurance Cartoon

Here's a pre-Thanksgiving news roundup, to stretch your mind before stretching your stomach next week. In this issue:

• Stuffing—Salix Pharmaceuticals reminds investors why wholesaler agreements matter

• Pumpkin Pie (in the Face)—How Merck beat co-pay card litigation

• Gobble, Gobble—An important update on retail chains’ participation in Part D plans’ preferred networks

Plus, I share a surprisingly useful cartoon that explains the U.S. health insurance system. Next week, show it to your family, so they understand more about your job and the world around us. Happy Thanksgiving!

You Have How Much Inventory? Salix Takes Investors Down the Rabbit Hole, The Wall Street Journal/Pharmalot

Here’s a story that will make you party like its 1999.

Two weeks ago, Salix Pharmaceuticals informed investors that “inventories for key products were at much higher levels than had been believed – up to nine months versus 10 to 12 weeks’ worth, depending upon the product. The disclosure prompted a 38% plunge in Salix shares and some harsh criticism of the company.” Oops! In a press release, the company said: “Salix believes its lack of distribution services arrangements with wholesalers has contributed to the Company’s difficulty in forecasting revenue on a quarter to quarter basis, and in projecting and appropriately budgeting for the level of wholesaler discounts to be incurred in any reporting period. As a result, Salix is currently negotiating with its principal wholesalers to enter into distribution services agreements for each of the products in its portfolio.” Wow.

If you unfamiliar with the history and importance of well-structured manufacturer-wholesaler agreements, see “Buy-Side Margin from Distribution Service Agreements” (starting in page 50 of the 2014-15 Economic Report on Pharmaceutical Wholesalers and Specialty Distributors.) Judging by the public announcements, it sounds like Salix execs should have read the report.

Update to Walmart and Walgreens Dominate 2015 Part D Preferred Networks, With Independents Close Behind, Drug Channels

Last month, I examined the pharmacy chains in the major Medicare Part D preferred networks. The table has been updated with two corrections to my analysis—one minor, one major:

• Aetna Medicare notified me that I inadvertently omitted Safeway from its four plans (Aetna Medicare Rx Saver, Aetna Medicare Rx Premier, First Health Part D Value Plus, and First Health Part D Premier Plus). Sorry for the oversight.

• More troubling, I learned that Symphonix Health published inaccurate information about the preferred pharmacies in its network. In contrast to its online directories, Symphonix Health does not include Walgreens, Walmart or Target in its preferred networks. The company’s CEO told me that its "PBM made an error (multiple, in fact) in producing the directories." Hmmm.

As of today, the company has fixed some, but not all, of the online directories. I guess we can’t believe everything that you read on the Internet. Who knew? I wonder if any seniors signed up for a Symphonix plan after relying on the inaccurate online directories to identify preferred pharmacies. (Symphonix didn't respond to my request for a comment.)

The Future of Drug Coupons and Co-Pay Cards – Part 2, Managed Market Access

Check your contracts. That’s the message of this valuable and sort of amusing summary of recent co-pay card and coupon program litigation.

A group of union benefit plans filed a proposed class action lawsuit in 2012 against Merck, challenging Merck’s co-pay subsidy programs that utilized drug coupons and co-pay cards. However, an intrepid Merck attorney discovered network pharmacy contracts that directly refuted the allegations made by the plaintiff welfare benefit plans. Case dismissed, with prejudice! (BTW, part 1 is also worthwhile.)

Health Insurance Explained, Kaiser Family Foundation
This short cartoon explains health insurance basics, including a (very) high-level look at differences between payers. I particularly enjoyed the antics of skateboarding millennial dude, pictured at the right.

Click here if you can’t see the video.