The Cigna-Express Scripts Deal’s Intriguing Connections With—And Implications For—AmerisourceBergen and Walgreens

Almost there! Last week, the U.S. Department of Justice (DOJ) Antitrust Division closed its investigation of Cigna’s proposed acquisition of Express Scripts. Click here to read the DOJ’s closing statement. As with everything in the U.S. drug channel, there’s more to this transaction than meets the eye. Below, I explain how the transaction will benefit AmerisourceBergen (ABC), which supplies the mail and specialty pharmacies of Express Scripts. But as you’ll see, Express Scripts has been relying less on ABC as a source of supply for its mail and specialty pharmacies. Meanwhile, the new organization transaction will have few degrees of … Continue reading The Cigna-Express Scripts Deal’s Intriguing Connections With—And Implications For—AmerisourceBergen and Walgreens

Updated Part B Data: Hospitals Are Displacing Physician Offices Even Faster Than We Thought

The Medicare Payment Advisory Commission (MedPAC), the independent agency that advises Congress on the Medicare program, recently released its latest annual report: June 2018 Data Book: Health Care Spending and the Medicare Program. It’s a charming, 216-page data romp through all aspects of Medicare. Chapter 10 focuses on prescription drugs. This year’s report provides new and revised details about the locations where Part B buy-and-bill spending occurs. As you will see below, physician offices account for a smaller share of spending than what we previously reported. Hospital outpatient departments account for a higher share. What’s more, the new MedPAC data … Continue reading Updated Part B Data: Hospitals Are Displacing Physician Offices Even Faster Than We Thought

The State of Specialty Pharmacy 2018: Reflections from #Asembia18 (rerun)

This week, I’m rerunning some popular posts before the Labor Day weekend. Click here to see the original post and comments from May 2018. Last week, Paula and I had the pleasure of attending Asembia’s 2018 Specialty Pharmacy Summit. The Specialty Pharmacy Summit remains the most important forum in the specialty marketplace. This year, a record 6,500 people learned, networked, and connected in Las Vegas. It was another year of record attendance. (Here’s the official press release.) Drug Channels again salutes Larry and Robert Irene for sustaining and growing an annual event that unites the entire industry. Today marks the … Continue reading The State of Specialty Pharmacy 2018: Reflections from #Asembia18 (rerun)

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

This week, I’m rerunning some popular posts before the Labor Day weekend. Click here to see the original post and comments from June 2018. 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 … Continue reading Profits in the 2018 Fortune 500: Manufacturers vs. Wholesalers, PBMs, and Pharmacies (rerun)

Still Possible: Hospitals Overcharge Health Plans for Specialty Drugs

Over the years on Drug Channels, I have explained the two primary reasons a drug’s list price doesn’t reflect what a third-party payer actually spends for that drug: (1) channel intermediaries and providers add markups that account for the costs, profits, and value of the services, and (2) manufacturers provide rebates and discounts to third-party payers. Two recently-released reports confirm the often-overlooked magnitude of provider markups. As you will see below, commercial payers use reimbursement approaches that permit hospitals to inflate specialty drug costs by thousands of dollars per claim when compared with physician offices. This is not about differences … Continue reading Still Possible: Hospitals Overcharge Health Plans for Specialty Drugs

A System Without Rebates: The Drug Channels Negotiated Discounts Model

Are you ready for a world without rebates? In June, Alex Azar, Secretary of the U.S. Department of Health & Human Services (HHS), summarized his long-range vision for a new drug channel system: “[W]e may need to move toward a system without rebates, where PBMs and drug companies just negotiate fixed-price contracts. Such a system’s incentives, detached from artificial list prices, would likely serve patients far better.” (emphasis added) No one has yet explained what a system without rebates would look like. To facilitate the discussion, I have sketched out a possible new drug channel system that would: Respond to the … Continue reading A System Without Rebates: The Drug Channels Negotiated Discounts Model

Drug Channels News Roundup, July 2018: Amazon’s med-surg business, Naughty 340B hospitals, GoodRx pricing data, and CVS’s musical controversy

The lazy days of summer are here. Take some time off from the gross-to-net bubble and enjoy my curated collection of timely articles. This month: A must-read Q&A on Amazon’s healthcare products distribution business A new GAO study discovers that more than one in five 340B hospitals provides minimal charity and uncompensated care Fresh data from GoodRx about the crazy variability in pharmacies’ prescription prices Plus, The Wall Street Journal publishes some hard-hitting journalism about the controversial hold music played at CVS pharmacies. P.S. Join the more than 6,000 people who follow my daily musings and neat links at @DrugChannels … Continue reading Drug Channels News Roundup, July 2018: Amazon’s med-surg business, Naughty 340B hospitals, GoodRx pricing data, and CVS’s musical controversy

Building a New Drug Wholesaler Compensation Model: What Happens as Brand Inflation Slows?

Today, drug wholesalers make money from distribution in a straightforward manner: Buy low, sell high, collect early, and pay late. They also profit as brand-name list prices increase. Like other drug channel intermediaries, wholesalers have warped incentives to prefer ever-higher list prices. But what happens to their business model if list prices don’t rise—or even if they decrease? This question is no longer theoretical. Many drug makers—Pfizer, Roche, Novartis, Novo Nordisk, Sanofi, and others—have announced an intention not to raise list prices for 2018 or have rescinded planned increases. Merck has gone further and become the first major manufacturer to … Continue reading Building a New Drug Wholesaler Compensation Model: What Happens as Brand Inflation Slows?

Specialty Pharmacies and PBMs Penetrate the 340B Program—And How Manufacturers Should Respond

In two recent Drug Channels articles, I have documented the phenomenal growth in pharmacies participating in the 340B Drug Pricing Program and the superior profits that pharmacies earn from the program. Today, I turn to the less well-known role of specialty pharmacies and pharmacy benefit managers, which are now significant participants as 340B contract pharmacies. Below, we present our first exclusive analysis of how independent and PBM-owned specialty pharmacies have deepened their relationships with hospitals and other 340B covered entities. We estimate that nearly 10% of all specialty prescriptions are dispensed by 340B contract pharmacies, which makes this channel one … Continue reading Specialty Pharmacies and PBMs Penetrate the 340B Program—And How Manufacturers Should Respond

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 … Continue reading Amazon Buys PillPack: Six Pharmacy and Drug Channel Implications