Surprise Deal: Cardinal Health Sells Its Specialty Pharmacy (Again)

The evolving specialty market has just claimed another victim. Cardinal Health is selling its specialty pharmacy to BioMatrix Specialty Pharmacy LLC, a private-equity-backed company. There was no public announcement, so today’s article counts as another Drug Channels exclusive. Below, I provide background about BioMatrix and the specialty pharmacies that wholesalers operate. Cardinal’s capitulation highlights the challenges for smaller specialty pharmacies. Cardinal operates a small, sub-scale specialty pharmacy that has had difficulty attracting patients. What’s more, Cardinal’s overall size as a $137 billion business couldn’t help its pharmacy gain sufficient access to manufacturers’ and payers’ limited networks. Each of the Big … Continue reading Surprise Deal: Cardinal Health Sells Its Specialty Pharmacy (Again)

NEW: The 2018–19 Economic Report on Pharmaceutical Wholesalers and Specialty Distributors

I am pleased to announce our new 2018–19 Economic Report on Pharmaceutical Wholesalers and Specialty Distributors, available for purchase and immediate download. Click here to download a free report overview (including the Table of Contents and a List of Exhibits) Click here to read the press release (which highlights some key findings about revenues, profits, and trends) We’re offering special discounted pricing if you order before October 26, 2018. The 2018–19 Economic Report on Pharmaceutical Wholesalers and Specialty Distributors—our ninth edition—remains the most comprehensive tool for analyzing the economic and business realities of U.S. pharmaceutical distribution. This year’s edition has … Continue reading NEW: The 2018–19 Economic Report on Pharmaceutical Wholesalers and Specialty Distributors

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

Preorder Now: Our 2018–19 Economic Report on Pharmaceutical Wholesalers and Specialty Distributors

On October 9, 2018, Drug Channels Institute will release The 2018–19 Economic Report on Pharmaceutical Wholesalers and Specialty Distributors. It’s the ninth edition of our annual evaluation of the economic and business realities driving U.S. drug distribution. This definitive, nonpartisan resource remains the most comprehensive tool for analyzing the industry. The 2018-19 edition has been thoroughly updated and revised with the latest information. This year, we are providing you with the opportunity to preorder the 2018-19 edition at special discounted prices. This means that you can be among the first to access our new report. Those who preorder will receive … Continue reading Preorder Now: Our 2018–19 Economic Report on Pharmaceutical Wholesalers and Specialty Distributors

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)

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

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?

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. 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 … Continue reading Meet The Power Buyers Driving Generic Drug Deflation (rerun)

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

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 … Continue reading McKesson’s Choppy Cs: Consolidating Customers and Challenging Contracts