A Reality Check on Amazon’s Pharmacy Ambitions (rerun)

This week, I’m rerunning some popular posts while I work on the forthcoming 2017-18 Economic Report on Pharmaceutical Wholesalers and Specialty Distributors. Click here to see the original post and comments from May 2017.

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CNBC reported last week that Amazon may enter the pharmacy and/or pharmacy benefit manager (PBM) market. Here’s the story: Amazon is hiring people to break into the multibillion-dollar pharmacy market.

The news made many people freak out and then begin speculating on all of the amazing ways that Amazon would change the drug channel. USA Today breathlessly mused: Could your next prescription come from Amazon?

Amazon has been successfully attacking the front-end business of chain drugstores. But could it really disrupt the pharmacy and PBM industries?

Below, I provide a reality check on how Amazon could compete—and what it is unlikely to do.

Which PBM Best Managed Drug Spending in 2016: CVS Health, Express Scripts, MedImpact, or Prime? (rerun)

This week, I’m rerunning some popular posts while I work on the forthcoming 2017-18 Economic Report on Pharmaceutical Wholesalers and Specialty Distributors. Click here to see the original post and comments from March 2017. 

ICYMI, I published a follow up analysis that includes OptumRx in Which PBM Best Managed Drug Spending in 2016: How Did OptumRx Compare?

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Four of the largest pharmacy benefit managers (PBMs)—CVS Health, Express Scripts, MedImpact, and Prime Therapeutics—have raised their swords and released their 2016 drug trend reports. (Links below.) That means it’s time for some Drug Channels-style fun! Below, I review what the reports reveal about drug spending—and which questions remain unanswered.

Drug trend measures the year-over-year changes in a plan sponsor’s pharmacy benefit drug spending. As you will see, all four PBMs reported that their drug trend percentages for 2016 were in low single digits. The unweighted average among them was a mere 3.5%. About one-third of PBM clients experienced year-over-year declines in drug spending.

Put more simply: The U.S. doesn’t have a drug spending problem. It's fake news.

Specialty drugs have doubled as a share of plan sponsors’ benefit costs. Since these products account for only about 1% of claims, pharmacy benefit management is increasingly focused on handling these patients and their complex, hard-to-treat diseases. Unfortunately, payers seem set on discriminating against people who receive these therapies.

Keep in mind that the PBMs’ reports are primarily marketing documents, not peer-reviewed research studies. But as many PBM executives have said: What we do in life echoes in eternity!

Profits in the 2017 Fortune 500: Manufacturers vs. Wholesalers, PBMs, and Pharmacies (rerun)

This week, I’m rerunning some popular posts while I work on the forthcoming 2017-18 Economic Report on Pharmaceutical Wholesalers and Specialty Distributors. Click here to see the original post and comments from June 2017. 

ICYMI, I published a corresponding per-prescription analysis in Follow the Dollar Math: How Much Do Pharmacies, Wholesalers, and PBMs Make From a Prescription?

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Time for my annual review of the Fortune 500 list. Every year, this is one of my most popular posts, because it helps us “follow the dollar” and understand how drug channel intermediaries make money.

The 2017 list contains the same seven drug channel companies that the 2016 list did: AmerisourceBergen, Cardinal Health, CVS Health, Express Scripts, McKesson, Rite Aid, and Walgreens Boots Alliance.

Using the Fortune data, I explore the profitability and shareholder returns of the largest public drug wholesalers, chain pharmacies, and pharmacy benefit managers (PBMs). I compare these companies with the Fortune 500’s ten pharmaceutical manufacturers and a separate survey of independent pharmacies.

The Fortune data remind us that many multi-billion dollar businesses profit as drugs move through the U.S. reimbursement and distribution system. We must recognize this complex system in order to tackle the price and affordability of drugs.

4th Annual Rare Disease Market Access and Commercialization Summit

4th Annual Rare Disease Market Access and Commercialization Summit
October 23-24, 2017 | Boston, MA
www.worldcongress.com/raredisease

Join your peers at the 4th Annual Rare Disease Market Access and Commercialization Summit for a deep examination of the challenges, innovations and techniques for achieving commercial success and navigating the payer landscape.

How will you benefit?

• Establish best practices when approaching value-based contracting, specifically for rare therapies
• Analyze recent policy and industry changes, paired with the rising status of the patient voice as a stakeholder, and their joint effect on the drug development lifecycle
• Payer guidance (Blue Cross Blue Shield of Minnesota) on the reimbursement conundrum
• Review Amgen and Harvard Pilgrim's outcomes-based contract for Repatha
• Explore Shire andPatientsLikeMe's collaboration expanding traditional clinical trial monitoring towards the use of real world data and consolidation in a single digital platform
• Gain insight from manufacturers' and Walgreens on how to develop a specialty pharma channel strategy for a rare disease product launch
• Hear specific examples of successful marketing strategies for recent rare disease product launches that satisfied stakeholders' needs

Register today – Use discount code DC200 and save $200!

Visit www.worldcongress.com/raredisease for more information.

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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.

Drug Channels News Roundup, August 2017: Amazon, Express Scripts, Walgreens, PharMerica, Rebates, and Bezos Business Wisdom

The eclipse has passed! Now it’s time to enjoy this blinding collection of curious questions, filtered through the all-seeing Drug Channels viewfinder.

• What are Amazon’s actual prospects in the drug channel?

• What does Express Scripts think about Amazon's prospects?

• Why did Walgreens partner with KKR to buy PharMerica?

• What happens to patients when plans favor brand-name drugs over generics?

Plus, Jeff Bezos shares words of wisdom for budding entrepreneurs.

P.S. If everything under the sun is in tune, then you'll follow @DrugChannels on Twitter for my daily links to all that you love.

CBI’s Gross-to-Net Summit

CBI’s Gross-to-Net Summit
November 15-16, 2017 | Philadelphia, PA
www.cbinet.com/GTN

A recent Drug Channels blog post focused on a QuintilesIMS report, discussing how the total value of pharmaceutical manufacturers’ off-invoice discounts, rebates, and other price concessions has more than doubled over the past five years, from $59 billion 2012 to an astonishing $127 billion in 2016.

What is the best way to position your organization to manage this increase? How are your colleagues from across the industry achieving success? Find out at CBI’s GTN Summit! Drug Channels readers will save $400 off of the standard registration rate when they use discount code SDP676.*

The 7th annual meeting covers a broad range of subjects related to strategic GTN forecasting, accounting estimates, data analytics and financial reporting specifically for life science companies. Some hot topics will be addressed, such as health care reform, GTN impacts of coupons and copay programs, revenue recognition based on the new standard, pipeline reserve accruals and much more! There are also session breakouts specifically for Pharma/Established Brands, Generics and Emerging Biotech/New Launch.

Featured Sessions

• Redefining Gross-to-Net – Moving Beyond Theory for Profitability, Streamlined Data, Organizational Transparency and Control
• Business Process Excellence – Instituting Best in Class Processes, Communication Flows and Data Frameworks for GTN
• Talent, Leadership and Organization Design – Prioritizing GTN
• Beyond Excel — GTN Data, Technology and Documentation: Sound-Off, Size-Up and Scale with Various Approaches to Systems and Automation

Workshops and Learning Streams on:

• Profitability and Managed Markets Strategy
  
• Inventory and Channel Forecasting
  
• Robotics and Artificial Intelligence in GTN
  
• Internal Controls and SOX Compliance
  
• Accounting and Reporting
  
• Financial Planning and Analytics
  
• Contract Strategy and Operations
  

Be one of the first to see the agenda here, and visit www.cbinet.com/GTN for further details and to register. Drug Channels readers will save $400 off of the standard registration rate when they use discount code SDP676.*

*Cannot be combined with other offers or used towards a current registration. Cannot be combined with special category rate or non-profit 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.

Diplomat Sees Declining DIR Fee Impact—and Perhaps Readies a PBM Strategy

Last week, Diplomat Pharmacy released its quarterly earnings, which included new details about the financial impact of Direct and Indirect Remuneration (DIR) fees. I provide some background on DIR fees below.

Diplomat, as a public company, is the only entity that is obligated to publish truthful information about DIR fees. While reviewing its data, let’s recall our Drug Channels philosophy, courtesy of the late senator Daniel Patrick Moynihan: "Everyone is entitled to his own opinion, but not his own facts."

As you will see below, Diplomat’s exposure to DIR fees remains relatively modest. DIR fees as a share of its gross profit has even declined since last year. This shift is driven by an evolving business mix along with better accounting of and management control over DIR fees.

In part to counter DIR fees and other payer pressures, Diplomat is signaling its intention to play a more significant role in the pharmacy benefit management (PBM) business. Let the rumors begin!

Electronic Benefit Verification & Prior Authorization Summit

Electronic Benefit Verification & Prior Authorization Summit
October 24-25, 2017 | San Francisco, CA
www.cbinet.com/eBenefit

CBI’s Electronic Benefit Verification & Prior Authorization Summit provides attendees with an understanding of key issues and developments in electronic patient services, including electronic benefit verification, real-time benefit verification, prior authorizations, health records and prescribing services.

Gain Critical Insights and Strategies to Improve Patient Access

• Examine challenges associated with ePA implementation, and understand planning and operational considerations associated with technology adoption
• Understand the implementation steps needed to achieve real-time benefit verification
• Compare innovations in electronic patient service technology to identify what solutions fit within company strategies
• Determine how to leverage patient support programs to overcome formulary barriers, help patients stay on therapy and drive positive physician coverage perception
• Discuss how to streamline electronic benefit verifications and prior authorization solutions into a hub model
• Facilitate efficient information exchange between key stakeholders, including manufacturers, health plans, health systems, PBMs and physicians

REGISTER TODAY!

Visit www.cbinet.com/eBenefit for more information. Drug Channels readers will save $400 off the standard registration rate when they use discount code PSK783*

*Discount expires October 24, 2017; applies to standard rates only and may not be combined with other offers, category rates, promotions or applied to an existing registration. Offer not valid on workshop only or academic/non-profit registrations.

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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.

Generic Deflation Roils the Channel—And Will Get Worse

Deflation in generic drug prices dragged down second quarter earnings for drug wholesalers and generic manufacturers. Here’s a useful summary from The Wall Street Journal, which captures the grim marketplace realities in Falling U.S. Generic Drug Prices Hurt Manufacturers, Wholesalers. Yesterday, Mylan's earning release noted "high-single-digit erosion expected in North America."

Below, I review the state of the generic drug market. As you will see, the overall market for mature generic drugs is deflating by about 10% per year. Many generic drugs have dropped significantly in price over the past four years.

Surprisingly, the prices for about one in five generic drugs remain elevated. Scott Gottlieb, M.D., the new head of the Food and Drug Administration (FDA), has prioritized actions that should squeeze the remaining generic inflation out of the system. I expect generic drug deflation to continue—and possibly accelerate—over the next 12 to 24 months.

Payers and consumers will be the ultimate winners, but the drug channel faces significant disruption. In the meantime, let’s all hope that these price declines don’t trigger shortages if generic drug makers flee this sinking market.

Follow the Dollar Math: How Much Do Pharmacies, Wholesalers, and PBMs Make From a Prescription?

Yesterday,The Wall Street Journal published an intriguing article by Jonathan Rockoff titled Behind the Push to Keep Higher-Priced EpiPen in Consumers’ Hands.

The article includes a graphic attributed to me (cited as Pembroke Consulting). It shows that the drug channel—pharmacy benefit managers (PBMs), wholesalers, and pharmacies—receive more than $37 in gross profit for a brand-name drug with a $300 list price. PBMs capture about half of this amount.

The WSJ article doesn’t describe how I arrived at the figures. But now you, Drug Channels reader, will get the inside scoop.

Below, I go inside the box and trace these crucial computations. They determine the revenues and profits of the drug channel participants that operate between a brand-name drug maker and the patient. I also reveal how the figures affect the net prescription cost for a third-party payer.

As with many things, you'll have to observe the system to figure out the superposition.

CBI’s PAP Legal Update

CBI’s PAP Legal Update
September 25-26, 2017 | Arlington, VA
www.cbinet.com/PAPUpdate

PAP Legal Update 2017 - Please join the patient assistance and access community for this critical update meeting which will provide important insight into key legal issues, including recent advisory opinions from the OIG, developments in the changing healthcare and regulatory landscapes, and opportunities for industry collaboration in the face of an increased need for risk mitigation. Learn more here.

Compelling Discussions, Pivotal Insights and Interactive Sessions for Forward-Thinking Compliance

• Hear an analysis of recent OIG advisory opinions related to PAPs
• Examine the legal and enforcement environment impacting the relationships between manufacturers and 501(c)(3)s
• Hear insights from advocates on efficient and effective PAPs and identify ways to strengthen your PAP with stakeholder engagement
• Improve brand image and messaging for PAPs in the era of public scrutiny
• Discuss policies for reducing risks associated with working with Medicare and Medicaid patients
• Remain compliant with design and development of co-pay assistance programs

Download the complete agenda here. Visit www.cbinet.com/PAPUpdate for further details and to register. Drug Channels readers will save $300 off of the standard registration rate when they use code RKN333.*

*Cannot be combined with other offers or used towards a current registration. Cannot be combined with special category rate or non-profit 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.

What’s In, What’s Out: The New 2018 CVS Health and Express Scripts Formulary Exclusion Lists (Plus: A Sneak Peek From Prime)

This week, the two largest pharmacy benefit managers (PBMs)—Express Scripts and the CVS/caremark business of CVS Health—released updates to their 2018 formulary exclusion lists. They are available below for your downloading pleasure.

For 2018, Express Scripts was more aggressive, expanding its list to 159 excluded products. At CVS Health, however, the total number of excluded remained steady. The Prime Therapeutics list won’t be available until September, but it will apparently exclude more drugs that either of its PBM peers.

Read on for my 2018 head-to-head comparison, including comments on inflammatory conditions, multiple sclerosis, epinephrine, biosimilars, and more. I also review the reported savings from formulary exclusions. I conclude with some questions about patients. Remember them?

If I have missed anything important, please comment below.

New Part B Buy-and-Bill Data: Physician Offices Are Losing to Hospital Outpatient Sites

The Medicare Payment Advisory Commission (MedPAC), the independent agency that advises Congress on the Medicare program, recently released its June 2017 Data Book: Health Care Spending and the Medicare Program. The report is a 201-page wonktastic data dump. Chapter 10 focuses on prescription drugs.

In 2015, the most recent year available, Part B spending on drugs reached $25.7 billion. Hospital outpatient sites now constitute more than one-third of Medicare spending and have been crowding out physician offices. Part B payments to physician practices are growing much more slowly than payments to hospitals.

For some time, I have been tracking the evolution of the buy-and-bill system for provider-administered drugs. These new data confirm my predictions that physician offices’ will account for a declining share of the buy-and-bill market. Still unknown: Is this good or bad for patients?