Why CVS Health and Express Scripts Sold—and McKesson Bought—a Specialty Hub Business

ICYMI: In early November, McKesson paid CVS Health $735 million for the RxCrossroads patient services hub business. A few weeks later, Express Scripts sold its United BioSource Corporation (UBC) hub business to a private equity firm.

These intriguing transactions make sense for all of these key drug channel players. CVS Health and Express Scripts divest businesses that could be perceived to conflict with their pharmacy benefit manager (PBM) business. McKesson deepens its investment in non-wholesaling manufacturer services for specialty products.

Below, I review the market landscape for hub service providers and explain the business issues that motivated the two PBMs to sell and McKesson to buy. I also ponder a crucial question: Did the PBMs get out at the right time?

Drug Channels News Roundup, November 2017: Amazon’s Updated Plans, Premier’s Push-Back, Diplomat’s PBMs, and My $0.02 on Alex Azar

Hope you enjoyed the Thanksgiving holiday! I remain ever-thankful for your support and readership.

Now that you’ve stretched your stomach, stretch your mind with some food for thought. In this issue:

• ICYMI: Actually, Amazon will not distribute drugs (for now)

• Premier tries to preempt worries about Amazon and GPOs

• Have you heard? Diplomat bought two PBMs

Plus, I share some thoughts on Alex Azar, nominee to head the Department of Health and Human Services.

P.S. Follow my daily musings and links to neat stuff at @DrugChannels on Twitter.

Join Me at The PBMI 2018 Annual National Conference

PBMI 2018 Annual National Conference
March 5-7, 2018 | Palm Springs, CA

The pharmacy benefit management business is evolving rapidly. Stay current by joining me at the PBMI 2018 Annual National Conference next March.

I'll be delivering the keynote address: The Outlook for Pharmacy Benefit Management: Evolution or Disruption? 

Drug Channels readers can save $200 by using discount code PEM18 and registering before February 23, 2018.

I look forward to seeing you in sunny Palm Springs!

A MESSAGE FROM PBMI

PBMI invites you to join hundreds of industry thought leaders and benefit decision makers to its 23rd Annual National Conference. The meeting will be held at the Westin Mission Hills Golf Resort & Spa Hotel in beautiful Palm Springs, California.

Over the course of two and one-half days, attendees can get up to speed on the evolution of the pharmacy management industry and be educated on relevant issues and trends of drug cost management by industry experts.

The meeting will kick off with an opening keynote from industry expert Dr. Adam J. Fein as he provides you with his outlook for the pharmacy and PBM industries. He will:

• Explain the crucial trends reshaping the PBM market
• Describe key strategic responses by PBMs, payers, and other drug channel participants
• Examine the outlook for disruption of the current PBM business model
• Highlight implications for plan sponsors, PBMs, manufacturers, and others

New for the PBMI 2018 Annual National Conference is an expanded conference agenda. Attendees will now have the option to select from four track sessions as well as attend one of two pre-conference workshops to make the most of their conference experience. The conference tracks include:

• Track 1: Designing the Drug Benefit
• Track 2: Contracting and Industry Relations
• Track 3: Clinical and Trend Management
• Track 4: Innovation and Technology

Drug Channel readers will save $200 on conference registration fees when they use discount code PEM18 and register prior to February 23, 2018.

The PBMI team hopes you will join them in Palm Springs. To register, click here.

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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.

Will CMS Pop the Gross-to-Net Bubble in Medicare Part D With Point-of-Sale Rebates?

Last week, the Centers for Medicare & Medicaid Services (CMS) released its 713-page proposed policy changes and updates for the Medicare program. See the links below.

Buried in this document is a radical concept: Part D plans would be required to recognize the value of manufacturer rebates and pharmacy payments in retail prescription prices. These amounts are two key components of Direct and Indirect Remuneration (DIR) that are currently paid to plans. CMS is asking for feedback for future rulemaking but did not propose any specific changes. Any program modifications would not occur until at least 2020 or later.

However, it’s clear that CMS views the high-list-price/high-rebate system—what I term the gross-to-net bubble—to be a fundamental source of warped incentives and cascading problems. Before you check out for the holiday weekend, I unpack the complex structure of Medicare Part D to explain why CMS is proposing its pass-through solution. This will help you digest CMS’s proposal for disruptive change to pharmacy benefit managers’ (PBM) profit model and our current drug channel system.

A personal observation: Medicare Part D, like commercial pharmacy benefit plans, now operates like reverse insurance. The sickest seniors taking medicines for chronic, complex illnesses generate the majority of manufacturer rebate payments. These funds are then used to subsidize the premiums for healthier seniors. To me, this structure is the opposite of how insurance is supposed to function. It seems as if CMS concurs.

CBI’s 13th Trade and Channel Strategies

CBI’s 13th Trade and Channel Strategies
December 11-12, 2017 | Philadelphia, PA
www.cbinet.com/trade

This December 11-12 in Philadelphia, join stakeholders from across the life science industry for in-depth education on trade and channel strategy management. Trade, market access, account strategy and brand professionals will dive deep into rewriting the playbook on product-specific network design, contracting and specialty distribution strategy. You can read all about it here.

Drug Channels readers will save $300 off of the standard rate when they use discount code XHT546 and register prior to December 1st.*

Led by chairman Jeff Henderson, VP, Managed Markets, Intarcia Therapeutics, Inc., the 13th Annual Life Sciences Trade and Channel Strategies meeting features a broad range of perspectives:

• Drug Channels Update–Things to Watch in 2018: Adam J. Fein, Ph.D., President, Pembroke Consulting, Inc.; Author, Drug Channels
• Fragmentation and Customization Comes to Pharmaceutical Channels: William Roth, Founding Partner, Blue Fin Group
• Payer Dynamics and Drug Utilization Management: Tracey McGuire, Specialty Services Directors, MedImpact Healthcare Systems, Inc.
• Word on Wall Street Exchange: Goldman Sachs, Marathon Asset Management, and RBC Capital Markets
• IDN Partnerships Affecting Patient Journey and Outcomes: Jerry Buller, Director, Specialty Pharmacy Services, Vanderbilt University Medical Center
  
• State of the Industry – Politics Impacting Pharma: Gail Sibert, Director, Corporate Accounts, Ferring Pharmaceuticals, Inc.

You’ll also benefit from three tailored content tracks:

• Specialty Distribution and Channel Optimization
• Serialization and Traceability
• Specialty Product Data Strategies

Plus! Develop a playbook during the first-ever product specific strategic showcase. Navigate and optimize distribution strategy based on product type, reimbursement and site of care. Visit www.cbinet.com/trade for further details and to register.

Drug Channels readers will save $300 off of the standard rate when they use discount code XHT546 and register prior to December 1st.*

See you there!

 *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.

If Employers Are So Unhappy with Their PBMs, Why Can’t They Change the Model?

The National Pharmaceutical Council (NPC) recently released Toward Better Value, a fascinating survey of employers’ views about their pharmacy benefit managers (PBMs). (free download)

According to the results, employers are unhappy with PBMs’ performance on crucial services. (The PBMs were not identified by the survey.) Employers apparently also want to reform the rebate system at the heart of our complex distribution and reimbursement system.

These results imply a significant but as-yet-unexplained market failure—one that that somehow prevents employers from negotiating better deals and writing more effective contracts. Below, I review the NPC results and speculate on what they mean for the PBM industry and possible disruption of the PBM model.

Specialty Pharmacy’s New Frontier: How to Deliver and Document Therapy Outcomes

Specialty Pharmacy’s New Frontier: How to Deliver and Document Therapy Outcomes
A free webinar hosted by Therigy
Wednesday, December 13, 1pm-2pm EST
Register here.

Therigy is pleased to announce a free webinar exploring therapy outcomes on Wednesday, December 13, 1pm-2pm EST.

Therigy’s speakers will present background data and published insights to support the premise that specialty pharmacy services need further differentiation. The speakers will analyze the crucial roles of both predictive analytics and specialty pharmacy services in the actual delivery and documentation of patient outcomes.

Featured speakers include:

• Jon Hamrick, MBA, Chief Strategy Officer, Therigy
• Sheena Babin, Pharm D, Manager, Clinical Services and Business Development, Ochsner Specialty Pharmacy
• Brian Smith, Pharm D, Vice President, Clinical Services and Quality, Shields Healthcare Solutions

Featured topics include:

• Historical Specialty Pharmacy Activities and Impact on Adherence
• The role of specialty pharmacy in Outcomes
• Differentiating specialty pharmacy services
• The Evolution of Specialty Pharmacy Services
• Two case studies
• Lipid Identification and the Diabetic Patient
• Specialty Pharmacy’s Role in Disease Activity in Rheumatoid Arthritis

Case studies will provide examples of specialty pharmacy services which go beyond basic patient onboarding, adherence support and reporting to the next level of identifying at-risk patients. The case studies will identify opportunities for specialty pharmacies to actively impact patient outcomes.

Visit Therigy’s registration page for additional information 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.

Drug Spending in 2017: The CEO of Prime Therapeutics Responds to Drug Channels

A few weeks ago, I highlighted the latest drug spending data in Reality Check: New Prime Therapeutics Data Show Very Low Drug Spending Growth in 2017. As I see it, these data contradict the public rhetoric about excessive growth in drug spending and prices. I concluded that drug spending is not actually "out of control."

Jim DuCharme, president and CEO of Prime Therapeutics, emailed me with an alternative and much more critical interpretation of the drug spending situation. Fortunately, he didn’t seem to mind my artistic choices.

Jim was kind enough to allow me to share his thoughts with the Drug Channels audience. Read on for his perspective.

Shopping for Prescriptions: How Deductibles Will Reshape the Pharmacy Industry

In a previous analysis (Employer Pharmacy Benefits in 2017: More Cost-Shifting to Patients As Tiers and Coinsurance Expand), I examined the structure of employers’ 2017 pharmacy benefit plans.

Today, I examine the growing role of deductibles. The growth of separate prescription deductibles has become a significant change in patient cost sharing for prescription drugs.

For 2017, about 8 out of 10 U.S. workers must meet a general annual deductible before their plan pays for most healthcare services. Prescriptions are typically excluded from the deductible.

However, this year’s survey shows that one-third of workers in high-deductible plans now faces a separate prescription drug deductible. These plans shift 100% of the prescription cost to the patient until the deductible is met.

After reviewing the latest data, I offer some observations on how deductibles are altering the pharmaceutical and pharmacy industries. The bottom line: Patients who must cover the costs of their drugs shop for better deals and cheaper pharmacies. Get ready for the consumerization of the pharmacy industry!

Employer Pharmacy Benefits in 2017: More Cost-Shifting to Patients As Tiers and Coinsurance Expand

It’s time for our annual analysis of the Kaiser/HRET 2017 Employer Health Benefits Survey, which you can read online for free. The survey delves into employer-sponsored health coverage at more than 2,000 companies.

In the charts below, I summarize employers’ 2017 pharmacy benefits by examining (1) cost sharing tier structures, (2) average copayments, by formulary tier, (3) type of cost sharing (coinsurance and copayment), and (4) coinsurance structures. I’ll investigate the growing role of deductibles in a follow-up article.

This year’s results show massive cost-shifting for specialty drugs. For the first time, a majority of plans have four tiers. Economically-debilitating coinsurance—in some cases with no limit on out-of-pocket expenses—is common.

When people complain about “drug costs,” they are actually thinking about the share of costs that they pay. Last week, I highlighted Prime Therapeutics’ data showing very slow growth in post-rebate drug spending. Given the new Kaiser/HRET survey, it looks like patients may not always be getting the benefit of lower costs.

Read on for my analysis along with another annual Drug Channels tradition: tiers/tears puns!

CBI’s 15th Specialty Therapies – A Forum for Payers

CBI’s 15th Specialty Therapies – A Forum for Payers
January 25-26, 2018 | Las Vegas, NV
www.cbinet.com/specialtytherapies

CBI announces that registration is open for the Specialty Therapies Forum!

Join stakeholders from across the healthcare industry – health plans, PBMs, pharmacies, and drug manufacturers – to take a deep dive into managing cost, expanding access and improving patient services and care delivery for specialty therapies.

Exchange ideas on:

• Latest trends for conquering diseases that were once considered untreatable
• Addressing the challenges of controlling costs
• Providing access for new therapies
• And more!

Sign up to receive the agenda here. Visit www.cbinet.com/specialtytherapies for further details and to register.

Drug Channels readers will save $500 off of the standard rate when you use discount code QQQ952 and register prior to November 22nd.*

CBI will see you there!

More reasons to attend!

“Class act!” - Director of Specialty Pharmacy Programs, Blue Cross Blue Shield South Carolina

“I found the program to be well-designed and stimulating, well worth my time.” -Executive Director, MidAtlantic Business Group on Health

“The specialty pharmacy arena is constantly evolving. Quality Conferences like CBI’s Specialty Therapies Forum for Payers allows payers and industry alike to hear from KOL’s and prepare for the challenges that they are currently dealing with or will be facing in the near future.” -Director, Clinical Pharmacy, Blue Cross Blue Shield of Tennessee

“The conference provided a unique insight into the payer viewpoint and allowed attendees to observe complex discussions between interested parties.” -Manager of Specialty Clinical Services, Fairview Specialty Pharmacy

*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.

The Latest on Amazon’s Pharmacy Ambitions—And a Possible Express Scripts Collaboration

Speculation about Amazon’s intentions for the drug channel has reached a new high. Below, I briefly review the recent news and hype.

Amid the hubbub, you may have missed intriguing comments from Tim Wentworth, president and CEO of the pharmacy benefit manager (PBM) Express Scripts. On an earnings call last week, he explained how Amazon could partner with the largest (for now) PBM via Inside Rx, the Express Scripts-GoodRx drug discount partnership. I explain the economic logic for both companies below.

Amazon will reportedly decide on its pharmacy and/or PBM strategy by Thanksgiving. We’ll see if I have been talking turkey or am just full of stuffing.