Drug Channels News Roundup, June 2016: PBM Clawbacks, Ritzman Pharmacy, Frank W. Kerr (RIP), Valeant, and TED talks

Brexit, schmexit. It’s time for us to celebrate our independence—and not just by rapping like founding fathers Alexander Hamilton and George Washington.

Before you celebrate our country’s birthday, please enjoy these Drug Channels fireworks:

• The bizarre PBM practice of copayment clawbacks

• Entrepreneurial reinvention at Ritzman Pharmacy

• Drug wholesaler Frank W. Kerr closes its doors forever

• A fascinating peek behind Valeant’s collapse

Plus, a very droll takedown of insufferably pompous TED talks...or perhaps your secret guide to thought leadership?

P.S. Join the nearly 2,800 people who follow @DrugChannels for my Twittertastic daily links to valuable news and insights.

Filling a prescription? You might be better off paying cash, Kaiser Health News
Julie Appleby of Kaiser Health News digs into a rare, but very odd, PBM practice. Here’s what’s apparently going on:

“At the pharmacy counter, patients pay their share of the cost--the copay—as set by their PBM and insurance plan. Days or weeks later, the PBM firm takes back a portion of that patient payment from the pharmacy after the PBM determines what it will actually pay for the drug—a practice sometimes called a "clawback." That money does not go to the consumer, but is generally kept by the PBM.”

In other words, the consumer overpays for a prescription, and the extra money flows back to the PBM.

This practice was recently publicized by an eye-opening series of stories via TV station WVUE New Orleans. As a result of these articles, UnitedHealth Group’s OptumRx business stated that it will be ending clawbacks, and Louisiana has outlawed the practice.

The situation highlights the complexity within the U.S. drug reimbursement and distribution system. As I told Julie in her KHN story:

“ ‘In some cases, consumers are blaming high drug prices on manufacturers, but really the cause of their costs may be the insurance company or the pharmacy or the pharmacy benefit manager,’ said Adam J. Fein, who follows the drug industry for management advisory firm Pembroke Consulting in Philadelphia. ‘It's very hard to figure this information out.’ ”

Yes, even your friendly neighborhood blogger is puzzled by these clawbacks.

Pioneering Vintage Care: How Ritzman Pharmacy Created a Pharmacy of the Future, Elements
Here’s a fascinating story about entrepreneurial reinvention by Ritzman Pharmacy, a privately held small chain. These quotes caught my eye:

“We want to redefine the experience that people have with their community pharmacy and their pharmacist,” said George Glatcz, COO of Ritzman Pharmacy, an independent community pharmacy chain with 23 locations in northeast Ohio.

“Independent community pharmacy has become extremely commoditized,” which, Glatcz said, is an unsustainable model for independent pharmacies. “We did a lot of research with customers and found that if we don’t change, we won’t likely survive in the next five to 10 years.”

“So, we asked ourselves, ‘How do we differentiate ourselves in the marketplace? What do we do differently?’ ” he said. “We came up with a strategy that we call pioneering vintage care.”

Remember my mantra for consolidating industries: Get big, get focused, or get out. Ritzman provides a wonderful example of how independent pharmacies can get focused on success.

Novi-based drug wholesaler Frank W. Kerr Co. to close after 103 years, Crain’s Chicago Business
The changing drug channel finally caught up with Frank W. Kerr, which shut down unexpectedly after more than 100 years in business. It’s rare for a small full-line pharmaceutical wholesaler to close rather than be acquired. As far as I know, the last major example was 20 years ago. In 1996, McKesson acquired Foxmeyer Drug, then the fifth-largest wholesaler, which had filed for bankruptcy protection from creditors. Frank W. Kerr is a cautionary tale about small companies that don’t reinvent themselves in an evolving industry.

The Valeant Meltdown and Wall Street’s Major Drug Problem, Vanity Fair
Fans of schadenfreude will enjoy this well-written story about the rise and fall of Michael Pearson, Valeant’s former CEO and the architect of its flawed strategy. A good read.

Self-proclaimed 'Thought Leader’ Gives Talk on 'Thought Leadership', CBC's This is That

I really enjoyed this brilliant deconstruction of bogus TED talks. Click here if you can’t see the video.