- Amazon Care ventures into prescription delivery
- More problems with Part D formularies
- Do list prices drive rebates, or vice versa?
P.S. Join the more than 8,900 followers of my daily musings and links to neat stuff at @DrugChannels on Twitter. My recent tweets have highlighted such topics as the chaos at retail pharmacies, vertical integration, importation, Amazon’s retail misadventures, hypocrisy at the AARP, the future of pharmacy reimbursement, a very naughty wholesaler, and more.
Amazon Care, the company’s virtual medical clinic, is now live for Seattle employees, CNBC
Here’s another small but intriguing move by the pharmacy industry’s purported disrupter. Amazon Care, the company’s virtual health clinic for its employees, has launched in Seattle.
Notably, this new service delivers “Amazon Care prescribed medications” to employees at their home or office. Cigna’s Express Scripts business provides PBM services to Amazon, but Express Scripts’ mail pharmacy is not filling prescriptions for Amazon Care. Perhaps the prescriptions will come from the new Amazon Pharmacy #005 in Kent, WA?
Many notable Amazon developments have occurred over the past year. That’s why I devote Section 12.5.1. of our forthcoming 2020 Economic Report on U.S. Pharmacies and Pharmacy Benefit Managers to an update on Amazon’s activities in the drug channel.
Notably, this new service delivers “Amazon Care prescribed medications” to employees at their home or office. Cigna’s Express Scripts business provides PBM services to Amazon, but Express Scripts’ mail pharmacy is not filling prescriptions for Amazon Care. Perhaps the prescriptions will come from the new Amazon Pharmacy #005 in Kent, WA?
Many notable Amazon developments have occurred over the past year. That’s why I devote Section 12.5.1. of our forthcoming 2020 Economic Report on U.S. Pharmacies and Pharmacy Benefit Managers to an update on Amazon’s activities in the drug channel.
For the First Time, a Majority of Generic Drugs Are on Non-Generic Tiers in Part D, Avalere Health
Here’s another example of warped incentives inside the Medicare Part D program. Avalere Health found that for 2020, a majority (53%) of generic drugs are not on the generic formulary tiers. See Avalere’s summary chart below. One in five generic drugs is categorized as “Tier 3 Preferred Brand” and an additional 28% are categorized as “Tier 4 non-Preferred.” Weird.
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One of the report’s authors tweeted this explanation:
“We think a few things 1) Coverage gap discount doesn't apply to generics / creates incentives for brands, 2) rebate sharing formula is only for spending above catastrophic, incents rebates, 3) Tier cost sharing caps incent placing generics on non-preferred drug tier”Avalere’s findings echo my conclusions in Why Part D Plans Prefer High List Price Drugs That Raise Costs for Seniors. My article highlighted how high-list-price/high-rebate system remains a fundamental source of warped incentives that disadvantages lower priced products.
The Association Between Drug Rebates and List Prices, USC Schaeffer Center
This paper documents a familiar relationship: Increases in drug rebates are positively correlated with brand-name list prices. The paper analyzes data on more than 1,200 brand-name drugs at the national drug code level. It relies on SSR Health’s net price data, which I describe in Surprise! Brand-Name Drug Prices Fell in 2019.
The summary data in Table 1 are instructive. From 2015 to 2018, average list price grew by 42%, while average rebates grew by 92%. Consequently, net prices grew by only 20%. Using these data, total gross-to-net spreads grew by $83 billion. This fact forms the basis of the the gross-to-net bubble.
Determining causality from this positive relationship is trickier than the authors acknowledge. Do manufacturers raise list prices to generate rebate funds for formulary position with PBMs? Do PBMs negotiate bigger rebates to offset manufacturers’ list price increases? Or is there a symbiotic dance between these two forces that keeps expanding gross-to-net bubble?
FYI, the Pharmaceutical Care Management Association (PCMA) offered this spirited rebuttal of the USC report.
The summary data in Table 1 are instructive. From 2015 to 2018, average list price grew by 42%, while average rebates grew by 92%. Consequently, net prices grew by only 20%. Using these data, total gross-to-net spreads grew by $83 billion. This fact forms the basis of the the gross-to-net bubble.
Determining causality from this positive relationship is trickier than the authors acknowledge. Do manufacturers raise list prices to generate rebate funds for formulary position with PBMs? Do PBMs negotiate bigger rebates to offset manufacturers’ list price increases? Or is there a symbiotic dance between these two forces that keeps expanding gross-to-net bubble?
FYI, the Pharmaceutical Care Management Association (PCMA) offered this spirited rebuttal of the USC report.
‘A Supercenter for health’: Walmart places a big bet on cheaper, less intimidating primary care, STAT
Here’s a useful profile of the new Walmart Health location in Calhoun, GA, and the company's plans for primary care.
The article includes the unintentionally hilarious photo below featuring … Chester Cheetah? For the carb-clueless, Mr. Cheetah is ”the official mascot for Frito-Lay's Cheetos brand snacks as well as Chester's Snacks which consists of flavored fries, popcorn and puffcorn.”
Perhaps Walmart plans to use Cheetos to increase demand for its primary care services? #strategy
P.S. I was only joking when I wrote Walmart Adds Low-Cost Surgical Procedures.
The article includes the unintentionally hilarious photo below featuring … Chester Cheetah? For the carb-clueless, Mr. Cheetah is ”the official mascot for Frito-Lay's Cheetos brand snacks as well as Chester's Snacks which consists of flavored fries, popcorn and puffcorn.”
Perhaps Walmart plans to use Cheetos to increase demand for its primary care services? #strategy
P.S. I was only joking when I wrote Walmart Adds Low-Cost Surgical Procedures.
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