Amazon Buys PillPack: Six Pharmacy and Drug Channel Implications

It’s official! After more than a year of speculation and rumors, Amazon has entered the pharmacy business with its acquisition of PillPack, a small mail pharmacy. Consider this move to be the end of the beginning for the pharmacy industry's evolution.

The stock prices of pharmacies and pharmacy benefit managers (PBMs) predictably plunged yesterday as everyone freaked out. CVS Health, Walgreens Boots Alliance, and Rite Aid collectively lost more than $11 billion in stock market value.

Below, I offer my initial observations on the transaction and its impact.

But let’s all keep some perspective here. This is a small first step that will let Amazon begin growing a pharmacy dispensing business.

We are still a long, long way from a fundamental restructuring of the complex U.S. drug channel. The incumbents still have opportunities to defend their position, capture value from internet technologies, and streamline distribution. However, the prospects of a retail pharmacy shakeout over the next 10 years have just increased.

Why Retail Pharmacies Still Overcharge Uninsured Patients—And What That Means for Amazon (rerun)

This week, I’m rerunning some popular posts before the holiday week. Click here to see the original post and comments from April 2018.

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Consumer Reports recently published a fascinating survey of pharmacies’ cash prices for five common generic drug prescriptions.

The results were startling. Prescription prices ranged from $66 to $1,351—a nearly 2,000% difference. The big three retail drugstore chains—CVS, Walgreens, and Rite Aid—consistently had higher average prices compared with those of other pharmacies. Independent pharmacies had some of the lowest prices, but also some of the highest prices.

Our analysis of prescription profits highlights the pharmacy industry’s unfortunate pricing strategy for cash-pay prescriptions. Average profit margins ranged from $8 to $264 per prescription for the five drugs. We can only hope that consumers didn’t pay the pharmacies’ sky-high cash prices.

The results expose the insane soak-the-poor mentality baked into the U.S. pharmacy industry’s historical pricing models. The data also highlight the potential pharmacy opportunity for Amazon.

P.S. Before other states follow Maryland and pass laws against price gouging by generic manufacturers, perhaps they should take a closer look at the behavior of their own states’ pharmacies.

Meet The Power Buyers Driving Generic Drug Deflation (rerun)

This week, I’m rerunning some popular posts before the holiday week. Click here to see the original post and comments from February 2018.

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Wholesalers and retailers have deepened their relationships via generic purchasing consortia—and generic drug makers are feeling the pain. Example: Novartis’ Sandoz business unit reported that its fourth-quarter 2017 sales dropped by 17% "due to increased industry-wide pricing pressure and continued customer consolidation.” (source)

Below, we examine the four generic drug mega-buyers behind this pressure: Red Oak, Walgreens Boots Alliance, McKesson and ClarusOne, and Express Script’s EconDisc.

We estimate that in 2017, these four organizations accounted for an astounding 90% of total U.S. generic drug purchases from manufacturers. Read on for our market share estimates, business profiles, and the outlook for 2018. Spoiler alert: The forecast calls for generic pain.

Today’s post is a sneak peek at our forthcoming 2018 Economic Report on U.S. Pharmacies and Pharmacy Benefit Managers. The new edition will be bigger than better than ever. Look for it on February 27!

The Gross-to-Net Bubble Topped $150 Billion in 2017 (rerun)

This week, I’m rerunning some popular posts before the holiday week. Click here to see the original post and comments from April 2018. 

You can also reach this post at www.GrossToNetBubble.com. ;)

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In 2017, the gross-to-net bubble—the ever-growing pile of money between a manufacturer’s list price for a drug and the net price after rebates and other reductions—hit a new high.

Based on new data from IQVIA, manufacturers of brand-name drugs in 2017 reduced list price revenues by an astonishing $153 billion. Those reductions came primarily from rebates, discounts, and other payments to the drug channel. That figure has grown by 10% from the 2016 figure, even though net prices for brand-name drugs grew by only 1.9%.

We can no longer ignore the warped incentives created by our bubble buddy. As regular readers know, I think plan sponsors and insurers should be more transparent about what they do with the billions collected via pharmacy benefit managers (PBMs) from manufacturers—or even be forced to pass through these rebates to point of sale. Read on and let me know what you think.

CBI’s Bio/Pharma Forum on the State of Medicare Reform

CBI’s Bio/Pharma Forum on the State of Medicare Reform
August 21, 2018 | Arlington, VA
www.cbinet.com/Medicare

Exclusive Offer for Drug Channels Readers: Register Now to SAVE $300* using discount code REF300

CBI’s CPE and CLE accredited Bio/Pharma Forum on the State of Medicare Reform is a one day intensive providing tangible knowledge and strategies necessary to gain clarity on the current political landscape impacting bio/pharma manufacturers with regards to Medicare.

Taking place on August 21 in Arlington, VA, CBI invites you to take this opportunity to come face-to-face with government, associations, health plans and bio/pharma professionals to get the answers to your most pressing questions about navigating uncertainty. You and your team will walk away from the conference with solid tactics for overcoming Medicare policy challenges and an online playbook filled with presentations to utilize as a best practices resource.

Distinguished Speaking Faculty Includes:

• Cynthia G. Tudor, Ph.D., President, The Tudor Group, LLC, Former Deputy Director, Center for Medicare, CMS
• Kelly Brantley, Vice President, Avalere Health
• Andrew Zebrak, Executive Director, Public Policy, Therapeutic Areas, and Advocacy, Boehringer-Ingelheim
• Loren Adler, Associate Director, Center for Health Policy, The Brookings Institution
• John Gorman, Founder, Gorman Health Group
• Steven Pitts, Senior Director, Payer Accounts, Jazz Pharmaceuticals
• Mallory O’Connor, Director, Healthcare Policy & Federal Programs, Biotechnology Innovation Organization – BIO
• And more!

Visit www.cbinet.com/Medicare to view the complete speaker and session lineup, then register using discount code REF300 for this exclusive savings of $300* off.

*CPE and CLE credits pending approval. Discount expires 8/21/18; cannot be combined or applied to existing registration. 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.

Drug Channels News Roundup, June 2018: Fake News from AHIP, Azar Blasts Rebates, Sanofi’s Pricing, Asembia in Vegas, and Justice for Gingers

Summer is here! Before you launch your incredible vacation, please enjoy these super Drug Channels stories:

• AHIP misrepresents drug spending data

• HHS Secretary Azar tells Congress about “a system without rebates”

• Sanofi discloses a major gross-to-net gap and declining drug prices

• Asembia shares video highlights from Las Vegas

Plus: a major social justice win for your humble correspondent.

P.S. Follow my daily links to neat stuff at @DrugChannels on Twitter. Recent tweets have covered new drug spending data, M&A news, pharmacy benefit manager (PBM) activities, retail clinics, copay accumulators, track-and-trace, and more.

How Walgreens Got Taken: Read This Fantastic New Book About Theranos

Here’s your must-read summer book: Bad Blood: Secrets and Lies in a Silicon Valley Startup. It’s the thought provoking and gripping cautionary tale of Theranos, a business that raised $900 million to “disrupt” the lab testing business.

Alas, Elizabeth Holmes, the company’s founder and CEO, and her former chief commercial officer appear to have misrepresented and falsified almost everything about the company and its technology. Last week, they were both indicted by the Justice department.

Bad Blood is one of the best non-fiction business books I have ever read. Drug Channels readers may enjoy some schadenfreude about the hapless behavior of Walgreens’ previous management team. I’ve selected a few choice highlights below. But trust me: The whole book is a great read.

CBI’s 340B Manufacturer Summit

CBI’s 340B Manufacturer Summit
August 21-22, 2018 | Arlington, VA
www.cbinet.com/340B

2018 brings an unprecedented focus by Congress and the Trump Administration on the size, purpose and integrity of the 340B program. At CBI’s 340B Manufacturer Summit, hear from national experts as the policy discussions and opportunities for input continue to evolve. From the President’s Blue Print on Drug Prices to the recently released HHS RFI, 340B remains a hot topic.

Break down and clarify impending regulations, gain strategies to develop comprehensive self-disclosure response and auditing processes, while establishing best practices to collaborate with contract pharmacies and covered entities.

You can read all about it here. Drug Channels readers will save $300 off the standard rate when they use discount code YDR528 and register prior to July 20th.

Critical Updates, Interactive Discussions and Valuable Takeaways:

• Hear from industry experts as they navigate 2018 legislative, regulatory and legal attempts to course correct 340B
• Uncover best practices to respond to covered entities and initiate “good faith” financial remediation
• Explore the impact of patient definition outlined in the repealed Mega-Guidance
• Recognize scenarios which lend themselves to miscommunication due to inconsistency in the terminology used by manufacturers versus other stakeholders
• Determine what manufacturers are protected against related to diversions and duplicate discounts
• Ask questions and engage in discussion to explore solutions to top manufacturer challenges
• Plus, observe a Point/Counter-Point Patient Definition Debate between a manufacturer attorney and a covered-entity attorney

Speakers include representatives from the The Alinea Group, Apexus, Arnold & Porter, AstraZeneca, Bristol-Myers Squibb, CiiTA, LLC, Feldesman Tucker Leifer Fidell LLP, Gilead Sciences, High Point Solutions, King & Spalding, North Carolina Department of Health and Human Services, Pfizer, Sidley Austin, University of Rochester Medical Center and more.

Visit www.cbinet.com/340B for further details and to register. Drug Channels readers will save $300 off the standard rate when they use discount code YDR528 and register prior to July 20th.

CBI will 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.

Specialty Pharmacy Management of Migraine Patients

Today’s guest post comes from Lily Duong, Chief Clinical Officer at Therigy.

Lily discusses new migraine treatments that treat or prevent chronic and episodic migraine headaches. She highlights how these therapies will challenge specialty pharmacies.

Therigy has developed a migraine therapy management solution to assist specialty pharmacies with patient management. To learn more, schedule a live demo of the TherigySTM™ migraine care plan.

Read on for Lily’s insights.

Profits in the 2018 Fortune 500: Manufacturers vs. Wholesalers, PBMs, and Pharmacies

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. Our analysis also provides crucial background for understanding the Trump administration's drug pricing blueprint.

Fortune’s 2018 list contains the same seven drug channel companies that the 2017 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 eleven pharmaceutical manufacturers and with a separate survey of independent pharmacies.

Alas, this may be our final review of the list, because by this time next year two companies—Express Scripts and Rite Aid—may no longer exist as independent public companies. In the meantime, let’s enjoy the crazy complexity of the U.S. drug distribution and reimbursement system.

ExL Events' 2nd Real-World Evidence Forum

2nd Real-World Evidence Forum
July 16–17, 2018 | Philadelphia, PA

ExL Events invites you to the 2nd Real-World Evidence Forum, taking place on July 16–17 in Philadelphia. This intimate forum will bring together leading marketing experts and senior-level executives to discuss patient and HCP engagement strategies to build effective disease awareness campaigns to disseminate educational information.

Register here and use Discount Code C1040DC to save $200 off your registration!

Attendees will gain a better understanding of how electronic data sources are changing the way real-world data are collected. This conference will offer attendees insight on how real-world evidence will help decrease costs and development timelines, define innovative outcomes, and minimize the number of patients exposed to less useful medications.

The forum’s elite-speaking faculty will discuss how to utilize real-world evidence to demonstrate both clinical effectiveness and cost-effectiveness of your product.

[Click to Enlarge]

Speakers Include:

• Christopher Boone, Ph.D., FACHE,Vice President, Real-World Data and Analytics Center of Excellence, Patient and Health Impact, PFIZER
• Bart Barefoot, Director, VEO and RWE Policy, Advocacy, and External Collaboration, GLAXOSMITHKLINE
• Nneka Onwudiwe, Pharm.D., Ph.D., MBA, PRO/PE Regulatory Review Officer, FOOD AND DRUG ADMINISTRATION
• Elizabeth (Betsy) MacLean, Pharm.D., Ph.D., Director Global Health and Value/U.S. Outcomes and Evidence — Oncology, PFIZER

Register here and use Discount Code C1040DC to save $200 off your registration!

ExL Events looks forward to meeting you in Philadelphia in July!

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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.

Hidden Policies: The Search for Copay Accumulator Policies in Florida Qualified Health Plans

Today’s guest post comes from Carl Schmid, Deputy Executive Director of the AIDS Institute.

The AIDS Institute studied health plans in Florida and uncovered a troubling reality: Patients are often unable to find out if their plan has a copay accumulator adjustment program.

Even when the information was somehow available, it was vague and ambiguous.

The AIDS Institute’s research shows how unsuspecting patients can get stuck with exorbitant out-of-pocket expenses for specialty drugs that have no generic or therapeutic alternatives. That’s why I told CNBC this week that accumulators are “as much of a cash grab from patients as I can possibly imagine.”

It’s an important article about the misleading marketing and incomplete disclosure of a crucial benefit detail. Read on and see what you think.

McKesson’s Choppy Cs: Consolidating Customers and Challenging Contracts

Pharmaceutical wholesalers are no longer growth companies. They are struggling with ever larger customers, ongoing generic deflation, and the downsides of specialty pharmacy.

McKesson has illustrated these challenges in the financial results for its 2018 fiscal year. (See the links below.) The company projects that its 2019 fiscal year distribution profits will be flat to negative, due to customer losses and/or lower margins from contract renewals.

Below, I consider McKesson’s challenges with many of its largest customers, including:

• CVS Health
• Rite Aid
• Albertsons
• Ahold Delhaize
• Cigna

Like its peers, McKesson faces an uncomfortable conflux of uncommon customer crosswinds. Investors are surely hoping that rough seas make good sailors.

CBI’s 4th Annual PBM Contracting

CBI’s 4th Annual PBM Contracting
August 22-23, 2018 | Chicago, IL
www.cbinet.com/pbmcontracting

Now in its 4th year, CBI’s PBM Contracting event is dedicated to the complexity and challenges of negotiating and implementing contracts between PBM’s and payers, employee groups, government entities, specialty pharmacies and manufacturers. Delegates will gain insights into the latest market and legal complexities affecting PBM contract negotiations, learn how to enhance the value of contracts by gaining a deeper understanding into issues like contractual terms and negotiated obligations, specialty drugs, value based contracts and much more.

Register by 6/29/2018 and receive $400* off the standard rate 

with discount code DCS400.

Hear the latest insights and innovations from industry thought leaders:

• Cheryl Larson, President and CEO, Midwest Business Group on Health
• Matthew Gibbs, Chief Commercial Officer, EnvisionRx
• Natalya Ormanzhy, Director Performance Improvement, AIDS Healthcare Foundation
• Dan DiStefano Pharm, Vice President, Curexa Pharmacy
• Nick Page, PharmD, Vice President Specialty & Clinical Operations, US Specialty Care
• Tariq Butt, M.D., Vice President of Health Affairs, Access Community Health Network (ACCESS)
• Sean Walsh, Vice President of Pricing Strategy, BeneCard PBF
• Garrett Brown, J.D., Assistant General Counsel, Employers Health Coalition

Featured Topics Include:

• Value Based vs Reference Based Contracts
• RFPs — Establishing Categories for Comparison of Vendors including Strategy, Objectives and Requirements
• Innovative Models for Managing Pharmacy Benefits
• Value Based Drug Pricing — Using the ICER Value Price Threshold of $150,000 per Quality Adjusted Life-Year (QALY)
• Impact of Acquisitions and Horizontal Integration in the PBM Industry
• Maintain Mutual Organizational Goals through Implementation of Regular PBM Assessments
• Strategies for Controlling Costs of Specialty Therapeutics
• Specialty Clinical Management — Evaluating PBM versus Third-Party Managers for Savings on Drug Spends

Don't be left out of the critical conversation. Register by 6/29/2018 and receive $400* off the standard rate with discount code DCS400.

*Offer expires June 29, 2018; applies to standard rates only and may not be combined with other offers, category rates, and promotions or applied to an existing registration.

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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 Pursuit of Excellence: Implementing an Integrated High Performing Specialty Pharmacy Model

Today’s guest post comes from Joseph Morse, CEO of Therigy. Joe describes challenges faced by specialty pharmacy leaders and Therigy’s solution for achieving a high performing, integrated specialty pharmacy service model.

You can also download Therigy’s case study: Memorial Hermann Realizes Significant Care Enhancements and Cost Savings by Bringing Specialty Pharmacy Services In-House. This case study explores how the largest health system in southeast Texas developed internal specialty pharmacy services.

Read on for Joe’s insights.