Follow the Dollar: Measuring Who Profits From a Brand-Name Prescription (rerun)

Let's wrap up 2016 with a super popular chart that untangles prescription economics—the perfect present for a curious member of your family.  Click here to see the original post and comments from October 2016.

You should also check out Follow the Dollar: The Movie. See you in 2017!

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Now, here’s something I hope you’ll really like!

I recently collaborated with Julie Appleby at Kaiser Health News (KHN) to explain the flow of funds between a pharmaceutical manufacturer and the patient.

The resulting graphic (below) uses a typical brand-name prescription to show the profits earned by key drug channel participants: manufacturers, pharmacy benefit managers (PBMs), wholesalers, and pharmacies. It also illustrates the payer’s net costs and manufacturer’s net price.

KHN’s well-produced design complements the less pretty Rube Goldberg diagram that I shared in Follow the Dollar: The U.S. Pharmacy Distribution and Reimbursement System. The KHN chart may look like a PTCTU*, but it will help you understand the method to the madness.

How Specialty Pharmacy Is Penetrating Buy-and-Bill Oncology Channels (rerun)

Last week, CMS officially scrapped its ill-conceived Medicare Part B Payment Model "experiment."  That's good news (for now) for oncology practices that buy-and-bill provider-administered drugs. (Click here to follow the buy-and-bill dollar.)

Today's rerun highlights specialty pharmacies' significant role in disrupting this buy-and-bill channel. As a companion article, check out The Decline and Fall of Physician Buy-and-Bill For Specialty Drugs, which shows how higher-cost hospital outpatient settings have been crowding out lower-cost physician offices.

Don't let the CMS move make you complacent. Buy-and-bill will be changing. (Click here to see the original post and comments from July 2016.)

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The distribution channel for provider-administered oncology drugs is undergoing significant change—notwithstanding the Centers for Medicare & Medicaid Services’ (CMS) misguided and controversial Part B Drug Payment Model.

As you will see below, pharmacies—via white and brown bagging—have displaced buy-and-bill distribution channels for about one-quarter of oncology products. For the remaining purchases, community oncologists still rely on traditional buy-and-bill wholesale distribution channels. Hospital-based practices, however, are more likely to source products from the hospital’s pharmacy.

This shift has important implications for manufacturers’ channel strategies, specialty pharmacies’ business growth, distributors’ share of channel volume, and the expansion of 340B pricing to non-340B providers. When you eliminate the impossible, whatever remains, however improbable, must be the truth.

Why the Walgreens/Prime Deal Could Transform the PBM Industry (rerun)

Yesterday, Fred's Inc. announced its acquisition of 865 Rite Aid stores, thereby clearing the way for the Walgreens-Rite Aid deal to close. Today's rerun reviews Walgreens' new alliance with Prime Therapeutics. Fun fact: This article was the most viewed Drug Channels post of 2016! Click here to see the original post and comments from September2016.

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ICYMI: Last week, Walgreens Boots Alliance (WBA) and Prime Therapeutics rolled out a highly innovative partnership. It could have wide-ranging implications for the drug channel’s next phase.

This novel union aligns a pharmacy benefit manager (PBM), retail pharmacy chain, and health plans via joint ownership of a new mail and specialty pharmacy company. If executed properly, it will be a best-of-breed business model that could reshape the PBM and pharmacy industries. For manufacturers, organized customer management just got even more complicated.

The new business could also pose a serious challenge to pure-play PBMs that lack a health insurer partner or an economically-aligned retail dispensing channel. Below, I compare the capabilities of the new business those of the four largest PBMs.

Jim DuCharme, president and CEO of Prime Therapeutics, told me: “The PBM business model needs transforming. Prime wants to have a significant influence on transforming the PBM business before others try to fix it.” I am normally immune to hype, but he could be right. Read on and see if you agree.

My Visit to Boots UK: An International Pharmacy Photo Essay (rerun)

This week, I’m rerunning some popular posts. Let’s get ready for Walgreens’ new U.S. beauty strategy by revisiting my holiday photos from a Boots UK store visit. Click here to see the original post and comments from September 2013. (Yes, this is a deep cut from the archives!)

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In August, my family and I spent a wonderful 9 days in a surprisingly sunny London. In addition to the usual tourist haunts, I visited a few Boots pharmacies. (Of course I did!) I gained valuable insight into a key overseas pharmacy player that is now part of Walgreens.

Below are my observations on how Boots compares with U.S. drugstore chains. From my photos, you’ll see some similarities but also very intriguing differences. And by publishing this post, I can convert my entire vacation into a business expense. (Shhh, don’t tell the IRS.)

Bonus: I’ve included a photo of my amazing visit to (full-size) Stonehenge. Drug Channels goes to 11!

Partnering with IDNs BioPharma Strategy Summit

Partnering with IDNs BioPharma Strategy Summit
March 1-2, 2017 | Scottsdale, AZ
www.cbinet.com/IDNStrategySpring

As health systems continue to grow and merge to form larger Integrated Delivery Networks (IDNs), manufacturers are tasked with learning how to best contract with, and sell to, these evolving systems to ensure product success. With conflict of interest policies in place and restricted access to physicians, manufacturers are changing their sales approach to better reach and engage these new customers.

CBI’s Partnering with IDNs BioPharma Strategy Summit brings together manufacturers and IDNs to discuss tow to create a mutually beneficial partnership for continual care coordination, strategic product management and improved access.

Do Not Miss These Insights:

• Engaging panels discussing the IDN model of patient care coordination and what it can do to improve the patient experience on behalf of the provider, manufacturer, payer and other stakeholders
• A luminary showcase around the pros and cons of national specialty pharmacies versus IDN specialty pharmacies
• Changes in the hospital reimbursement model, focused on quality tied to outcomes measures
• Effective ways manufacturers can partner with health systems and support their goals
• And More!

REGISTER TODAY!

Visit www.cbinet.com/IDNStrategySpring for more information. Drug Channels subscribers will save $400 off the standard registration rate when they use discount code XTG398.*

*Cannot be combined with other offers or used towards a current registration. Cannot be combined with special category rates. Other restrictions may apply.

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The content of Sponsored Posts does not necessarily reflect the views of Pembroke Consulting, Inc., Drug Channels, or any of its employees.

Things to Watch in 2017's Drug Channels

Well, that was…a year.

Beyond the obvious political shocks, I was quite surprised to find the spotlight shining on our humble little world of channel economics. Not quite as unexpected as last year’s lap dance from Amy Schumer—but pretty close!

I’m pleased to report that Drug Channels had a yuuuuge year. We now have more than 15,000 subscribers, including more than 3,300 @DrugChannels Twitter followers. In 2016, total page views on the site will be almost 900,000—up 25% compared with 2015.

Thank you, dear readers, for welcoming me into your inboxes and browsers. I’ve had fun and hope you did, too. I’m grateful to our many sponsors and guest writers. Special thanks to the brave souls who joined in the spirited discussions below the articles.

Below you’ll find a bonus stocking stuffer: the Drug Channels Update: Things to Watch in 2017 slides from my recent keynote presentation to a group of trade and channel executives from pharmaceutical manufacturers. It’s a sneak peek at some of next year's likely hot topics.

Drug Channels will return in 2017! In the meantime, please enjoy our annual tradition—a video holiday greeting from me and Paula, my wife and business partner.

We wish you and your family a peaceful and healthy 2017,
Adam

Five Industry Trends for U.S. Drug Wholesalers in 2017

Modern Distribution Management recently published my article 2016 MDM Market Leaders | Top Pharmaceuticals Distributors. It is an excerpt from the 2016-17 Economic Report on Pharmaceutical Wholesalers and Specialty Distributors.

Below, I republish the section highlighting five significant industry trends affecting the U.S. drug wholesaling industry. I think Drug Channels readers will enjoy this summary as we look toward an eventful 2017.

New Data Show Prescription Profits Under Pressure at Independent Pharmacies

Time for my annual look at independent pharmacy owners’ business economics, drawn from the recently released 2016 National Community Pharmacists Association (NCPA) Digest, Sponsored by Cardinal Health. Here's the press release: Independent Community Pharmacies Vital to Patient Medication Access, NCPA Digest Finds.

Below, I review our latest estimates on pharmacy economics and margins. The data reveal that independent pharmacy owners are starting to perform poorly. In 2015, the average pharmacist owning a single pharmacy earned about $200,000. It’s the second year in which the average owner’s compensation declined. The number of independent pharmacies and gross margins also are trending downwards.

Surprisingly, the NCPA data also show that independent pharmacies are underperforming with generic substitution.

Read on for my look at pharmacy profits and my advice for pharmacy owners.

The 2nd Annual Government Programs Summit

The 2nd Annual Government Programs Summit
February 27-28, 2017 • Arlington, VA • Sheraton Pentagon City Hotel

Implementation of the AMP Final Rule | Compliance with 340B Regulations | Implications of MDRP | Outline of FSS Requirements for Manufacturers

The 2nd Annual Government Programs Summit provides an opportunity for industry executives to come together for timely discussion around best practices and implementation to navigate this evolving regulatory landscape. Insights from leading pharmaceutical and government organizations in the Medicaid and Government Pricing arena present vital content to develop strategies that ensure compliance and understanding of the AMP Final Rule, 340B regulations, and the future of Government Pricing.

Join your industry peers February 27-28 in Arlington as we bring together multiple stakeholders with different perspectives discussing strategies for responding to regulatory and implementation challenges. As your ecosystem evolves and operating in silos is no longer an option join the conversation, with health plans, MCOs, providers and government agencies all under one roof as we convene a forum with three co-located health care meetings, taking discussions and peer-to-peer learning to a whole new level!

REGISTER TODAY!

Please visit www.worldcongress.com/govprograms to register or for more information. Those who register will receive a $300 savings when they use promo code DC300.

2017 Topics Discussions Include:

• Dissect AMP Final Rule FAQs to Reassess Strategies for Implementation
• Share Implementation Experiences in the Aftermath of the AMP Final Rule
• Increase Clarity Around the AMP Final Rulings by Collaborating with Peers
• Work Together to Achieve Success and Create Unity Between Products, Pharmacy, Policy, and Operations in Government Programs
• Examine a Potential Redesign of MDRP and Suggested Policy Changes
• Insight, Considerations, and Trends around HRSA and OPA Integrity Provisions
• Learn from Enforcement Trends Uncovered through Recent LitigationEnsure Implementation and Compliance with 340B Procedures
• OIG Perspective: Gain First-Hand Insight on the OIG Study Addressing the Impact Part B Rebates Would Have on the Health Care Industry
• Forecast Discount Liabilities to Ensure Gross to Net Profit
• Discuss the Pricing and Contracting Implications of Health Care’s Shift from FFS to Value-Based Care and Medicaid Managed Care
• Pre-Summit Workshop: Understand the Factors and Manage the Surge in State Medicaid Disputes

Visit www.worldcongress.com/govprograms to view the full agenda and to register.

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The content of Sponsored Posts does not necessarily reflect the views of Pembroke Consulting, Inc., Drug Channels, or any of its employees.

Plan Sponsors Like More Transparent PBMs—Yet Not All Choose Transparency

Pharmacy benefit managers (PBMs) are facing unprecedented criticism about their business practices and levels of transparency. Which got me wondering: What do plan sponsors—the PBMs’ customers—think about their PBMs?

For the answer, I turned to Pharmacy Benefit Management Institute (PBMI) 2016 Pharmacy Benefit Manager Customer Satisfaction Report (available for purchase.) It rates 11 PBMs based on feedback from more than 500 plan sponsor customers.

The data show a strong association between a PBM’s perceived transparency and a plan sponsor’s satisfaction. As you will see in the charts below, plan sponsors are more satisfied with PBMs that are more transparent.

Yet the causality of this relationship isn’t entirely clear. Smaller plan sponsors tend to work with smaller PBMs, which are rated more highly on transparency and alignment of goals. Are more transparent PBMs truly better? Or, are we observing a selection effect, whereby plan sponsors with fewer internal resources choose PBMs with different business and profit models? And if PBM transparency is so wonderful, why don’t all plan sponsors insist on it?

Novo Nordisk Sheds New Light on PBM Rebates, the Gross-to-Net Bubble, and Warped Channel Incentives

Novo Nordisk just released new data on the channel economics and pricing for its insulin products. See Perspectives from NNI President Jakob Riis on pricing and affordability

Like many manufacturers of relatively undifferentiated products, Novo Nordisk is trapped by a gross-to-net rebate bubble. Its list prices soar, but the net realized price barely budges. Below, I review Novo’s evidence on channel economics and highlight the perverse incentives that keep inflating the bubble.

The debate is heating up about the warped incentives baked into our crazy drug channel. I continue to believe that traditional pricing approaches will not survive. Novo even promised that future list price increases will be "no more than single-digit percentages annually." The change will be disruptive to PBMs, wholesalers, and payers. Who knows? Maybe the patients will benefit, too.

CBI’s 8th Hub and SPP Model Optimization

CBI’s 8th Hub and SPP Model Optimization
February 22-23, 2017 | Philadelphia, PA

Don’t miss the 8th installment of the industry’s must-attend meeting for sharing breakthrough strategies surrounding service model design and enhancement to improve access and outcomes!

CBI’s Hub and Specialty Pharmacy Provider (SPP) Model Optimization boasts exceptional networking opportunities and forward-thinking content from a broad array of stakeholders. Join your peers as you prepare to launch, transition or reboot your corporate or product approach to hub services.

Hear Industry Trailblazers Speak on High-Impact Topics, Including:

• Industry Pulse on the Specialty Marketplace and the Changing Healthcare Landscape
• Patient Services Compliance – Zero in on the Top Risk Areas amidst an Era of Ambiguity
• Specialty Data Discovery Dive – Finding the Missing Link in Your Product’s Value Story
• Scorecarding Summit – Measuring Hub Performance and Value
• Advanced SP Contracting Course – Contract Design, Execution of Contract Amendments and Benchmarks to Renegotiate Terms of Agreement
• Payer Approach and Decision-Making Journey for Specialty Drugs
• Beyond Prior Authorization – Syncing Stakeholder Interests for Improved Patient Access
• Insource, Outsource, Hybrid? Utilizing the Best Hub Service Model for Your Product Portfolio and Tap the Top Transition Strategies

Showcasing a dynamic group of key stakeholders from companies including Amgen, Avella Specialty Pharmacy, Bayer Healthcare, Boehringer Ingelheim, CoverMyMeds, GlaxoSmithKline, Intarcia Therapeutics, Lash Group, a part of AmerisourceBergen, MedImpact Healthcare Systems, Nuvera Life Sciences Consulting, Ogilvy CommonHealth Worldwide, Sobi, Sonexus Health, VirMedica and Triplefin, this is an opportunity you can’t afford to miss!

For more information, please download the complete agenda or visit www.cbinet.com/hubs. Drug Channels readers will save $400 off of the standard registration rate when they use discount code FAZ895.*

*Cannot be combined with other offers or used towards a current registration. Cannot be combined with special category rates. Other restrictions may apply.

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The content of Sponsored Posts does not necessarily reflect the views of Pembroke Consulting, Inc., Drug Channels, or any of its employees.