Drug Channels News Roundup, July 2020: Diabetes Costs, Regeneron’s Copay Support, MA Rethinks Coupons, My Favorite Chart Updated, and ABC’s Steve Collis

The steamy, socially distanced days of summer are here. Cool off by getting up close and personal with our refreshing selection of articles and insights. In this issue:

• Pricing problems for diabetes treatments

• Controversy over Regeneron’s copay support

• Massachusetts concedes that coupons help some patients (but accumulators hurt)

• A 2020 update to my all-time favorite chart

Plus, thoughtful perspectives on diversity from AmerisourceBergen CEO Steve Collis

P.S. Join the more than 9,700 followers of my curated links published on @DrugChannels on Twitter. My recent tweets have highlighted: VC’s pharmacy love, physicians’ biosimilar concerns, drug trend in workers’ comp, copay accumulator news, the outlook for insurance costs, remdesivir pricing, Philly pharmacies, how paid parking boosts telemedicine, and more.

ON SALE! We are offering our 2019–20 Economic Report on Pharmaceutical Wholesalers and Specialty Distributors at discounts up to 35% off. Sale prices valid thru September 8, 2020. The updated 2020-21 edition will be available in October 2020.

Trump’s Executive Orders on Drug Pricing: The Drug Channels Guide to Industry Implications

Surprise! President Trump signed four executive orders (EO) last Friday afternoon. They cover:

• Pass-through of 340B discounts for insulin and EpiPens

• Rebate reform (!)

• Importation

• Most Favored Nation (MFN) pricing for drugs

The fourth order on MFN has not been publicly released, so I will reserve comment for now.

I see significant challenges in implementing these far-reaching orders. Below, you’ll find the text of the first three along with my commentary and links to Drug Channels articles that will help you make sense of them.

Read on and see if you agree with me.

Clarity in the Face of COVID-19: Building an Effective Patient Savings Strategy

Today’s guest post comes from Frank Dana, Chief Commercial Officer at ConnectiveRx.

Frank discusses how the loss of commercial insurance coverage will affect the newly unemployed. He describes how ConnectiveRx's affordability tools can help pharmaceutical manufacturers and patients.

To learn more, download ConnectiveRx’s free reference: Five Keys to Building a Successful Copay Strategy in the COVID-19 Era.

Read on for Frank’s insights.

How Hospitals and PBMs Profit—and Patients Lose—From 340B Contract Pharmacies

The stunning growth of specialty pharmacies in the 340B Drug Pricing Program has accelerated a troubling trend: Patients covered by commercial insurance and Medicare Part D are footing the bill for 340B savings.

That's the uncomfortable reality of the 340B program’s hidden prescription economics.

Whenever a prescription is eligible for 340B pricing, an insured patient could pay thousands of dollars out of pocket—even as the 340B hospital and its contract pharmacy generate substantial profits. Meanwhile, private health plans and Medicare pay full price for drugs that are sold to 340B covered entities at deep discounts, further subsidizing hospitals and PBM-owned specialty pharmacies.

Below, to show you how this occurs, I follow the dollar for a brand-name specialty drug used by a consumer with commercial insurance. Our indisputable math exposes the little-understood economics behind specialty pharmacies in the 340B program.

I hope that the program’s participants take an honest look at who is actually paying for their 340B savings. As always, I welcome your feedback via email or in the comments below.

PBM-Owned Specialty Pharmacies Expand Their Role In—and Profits From—the 340B Program

Last week, I documented that nearly half of U.S. pharmacies now participate in the 340B Drug Pricing Program. Below, we update our exclusive analysis of the biggest specialty pharmacies within 340B.

The four largest specialty pharmacies are owned by CVS Health, Cigna’s Express Scripts business, UnitedHealth Group’s OptumRx business, and Walgreens Boots Alliance/Prime Therapeutics.

As you will see below, these specialty pharmacies have dramatically increased their participation in the 340B program. Hospitals are the primary 340B covered entities that engage with these specialty pharmacies.

We estimate that specialty pharmacy dispensing accounted for nearly one-third of PBMs’ total gross profits in 2019. Consequently, the 340B program is a significant and growing component of profitability for these large, for-profit, publicly traded companies.

Later this week, I’ll examine how patients with commercial and Medicare Part D insurance are subsidizing the super-sized 340B profits of these companies.

Walgreens and CVS Top the 28,000 Pharmacies Profiting from the 340B Program. Will the Unregulated Party End?

It’s time for our annual look at the 340B Drug Pricing Program’s booming pharmacy component.

Our exclusive analysis of government data finds that 28,000 pharmacy locations—almost half of the U.S. industry—now act as contract pharmacies for the hospitals and other healthcare providers that participate in the 340B program. Over the past 12 months, the number of pharmacies in the program has grown by more than 3,300 locations.

As you will see below, multi-billion-dollar, for-profit, publicly traded pharmacy chains—Walgreens, CVS, Walmart, Rite Aid, Kroger, and Albertsons—continue their unchecked 340B expansion.

Despite this astonishing growth, the contract pharmacy component does not have—and has never had—a regulatory infrastructure. That’s because the subregulatory notice that created contract pharmacies wasn’t subject to any rulemaking procedures. Eli Lilly recently challenged this notice, which forced the government to concede that its own pharmacy guidance is “not legally enforceable.”

As you review our analysis, ponder why manufacturers still comply with HRSA’s non-binding guidance—and why investors remain unconcerned with the risks of public companies’ participation in the out-of-control 340B program.

CMS Best Price Proposal and Copay Assistance: How New Rule Could Change the Access Landscape

Today’s guest post comes from Rick Fry, Senior Vice President of Commercial Solutions and Jason Zemcik, Senior Director of Product Management at TrialCard.

Rick and Jason outline their view of the crucial issues in the new proposed rule from Centers for Medicare and Medicaid Services (CMS) regarding copay accumulator adjustment programs. They preview the public comments that TrialCard expects to submit to CMS.

Please visit TrialCard’s copay accumulator program resources to learn more about mitigating copay accumulator programs. Contact sales@trialcard.com to discuss solutions for your organisation.

Read on for Rick’s and Jason’s insights.

The Top 15 Specialty Pharmacies of 2019: PBMs Stay On Top (rerun)

This week (Monday through Thursday), I’m rerunning some popular posts. Click here to see the original post and comments from April 2020.

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In Drug Channels Institute's list of the top 15 pharmacies of 2019, we show that many of the largest U.S. pharmacies are now central-fill mail and specialty pharmacies operated by PBMs and insurers.

To complement that broader ranking, we present below our exclusive list of the top 15 pharmacies based on specialty drug dispensing revenues. Consistent with our previous analyses, PBMs and insurers have retained their dominance over specialty drug channels, while smaller pharmacies are facing increased competition and profit pressures.

I see upside for specialty pharmacies in the aftermath of the pandemic. This growth will come at the expense of provider-administered drug channels. I expect the top companies’ share will increase in 2020, due to mergers and business transitions among the largest PBMs. However, the increasing role of government payers may create opportunities for smaller pharmacies.

This Friday, I’ll discuss how COVID-19 will affect the specialty pharmacy market during the first of my two live video webinars.

Four Unexpected Ways that the COVID-19 Medicaid Boom Will Affect PBM and Pharmacy Profits (rerun)

This week (Monday through Thursday), I’m rerunning some popular posts. Click here to see the original post and comments from April 2020.

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The U.S. economy is in a medically-induced coma. Unemployment is soaring. Companies are teetering on the brink of bankruptcy. It is unclear when our lives will return to their pre-pandemic state.

One thing seems apparent: As people lose jobs and health insurance, Medicaid enrollment will jump, perhaps by as much as 20% to 30%. This will have profound implications for the drug channel.

Today, I focus on how this increase will affect retail pharmacies and pharmacy benefit managers (PBMs). Below, I review Medicaid enrollment trends, how states manage prescriptions, and the factors driving the coming boom in Medicaid enrollment.

As I explain, many (but not all) retail pharmacies will benefit from Medicaid growth. PBMs, however, will not fare as well. Read on and see if you agree.

Pharmacy DIR Fees Hit a Record $9 Billion in 2019—That’s 18% of Total Medicare Part D Rebates (rerun)

This week (Monday through Thursday), I’m rerunning some popular posts. Click here to see the original post and comments from February 2020.

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Pharmacy-related price concessions in Medicare Part D—known as pharmacy DIR fees--have grown faster than most people realize.

We estimate that these payments reached $9.1 billion in 2019. This figure indicates that about 18% of total Medicare Part D rebates are now paid by pharmacies, not manufacturers. Details below.

To address concerns about how these fees are computed, the Centers for Medicare & Medicaid Services (CMS) has proposed some minimal transparency requirements for monitoring the metrics behind DIR fees. I suspect that the proposal will have no near-term impact on slowing the growth trends.

Our long time readers know that I’ve been skeptical about pharmacy owners’ claims regarding the impact of DIR fees. But it does now appear that these payments have become a significant economic burden. When the facts change, I change my mind. What do you do?

The Top 15 U.S. Pharmacies of 2019: Specialty Drugs Drive the Industry’s Evolution (rerun)

This week (Monday through Thursday), I’m rerunning some popular posts. Click here to see the original post and comments from March 2020.

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Next week, Drug Channels Institute will release our 2020 Economic Report on U.S. Pharmacies and Pharmacy Benefit Managers. It’s the 11th edition of our popular and comprehensive examination of the entire drug pricing, reimbursement, and dispensing system.

The exhibit below—one of 203 in our new report—provides a first look at the 15 largest pharmacies, ranked by total U.S. prescription dispensing revenues for calendar year 2019. I also highlight business developments that shifted market share among the biggest players.

As you will see, pharmacy industry prescription dispensing revenues reached a record $446 billion in 2019. Revenues were highly concentrated due to the rapid growth of large specialty pharmacies and the multiple transactions that we discuss throughout our report.

For a sneak peek at the complete report, click here to download a free pre-publication draft overview (including the table of contents and a list of exhibits). We’re offering special discounted pricing if you order before March 22, 2019.