Step #1:  Obtain a price list for generic prescription drugs from your broker, TPA, ASO or PBM every month.

“Sticker shock” may be the best term to describe the malady that is hitting independent pharmacists.

They arrive at work – mostly behind the prescription counters at small drugstores – and, when they turn on their computers, are shocked by sudden and drastic price increases for generic medicines.

In November, one pharmaceutical vendor increased the price of a tube of prescription cream to treat athlete’s foot by more than 800 percent. In April, the price of one generic antibiotic went from about 15 cents a capsule to more than $2.70 a capsule, an increase of more than 1,700 percent.

“It is like a surprise, every day,” said Doug Hess, a pharmacist who owns Doug’s Family Pharmacy in Caernarvon Township. Brandon Wiley, who is head pharmacist and manager at Wiley’s Pharmacy in East Hempfield Township, Lancaster County, said he once paid $20 or $30 for 500-tablet bottles of the antibiotic, Doxycycline, that he would use to fill many prescriptions. “Now, it is over $1,000 for the same bottle,” he said.

A lot of people buying prescriptions don’t feel the financial hit – at least not immediately – because their prescription insurance plans require only a co-pay. But Robert Frankil, who lives in Montgomery County and owns an independent pharmacy in Bucks County, said the complex and confusing financial relationships that cloud the connection between drugmakers and drug consumers – involving vastly profitable companies called “pharmacy benefits managers” – affect the public at large.

Frankil went to Washington in November to testify before a U.S. Senate hearing on the spikes in generic drug prices. “Eventually, there is a trickle down to everyone,” he said in an interview. “When you look at the rate of drug increases in price compared to the rate of inflation, it is ridiculous.”

After the hearing, Sen. Bernie Sanders, a Vermont independent, issued a statement that said drug companies have seen an opportunity to make a lot of money and have seized the opportunity.

“There is greed at work in the pharmaceutical industry,” Sanders said. He and Rep. Elijah Cummings, D-Md., have introduced legislation that would require drug companies to reimburse Medicaid if they raise the prices of generic drugs more quickly than the rate of inflation.

A spokesman for the Washington-based Generic Pharmaceutical Association, a trade group, responded to questions by referring to statements issued in November by association President and CEO Ralph G. Neas.

“This legislation once again misses the forest for the trees,” Neas said, referring to the Sanders-Cummings initiative. “In actuality, generic drugs continue to be a resounding success in lowering health care costs and benefiting patients. Indeed, generics saved $239 billion in 2013 – a 14 percent increase in savings from 2012 – and more than $1.46 trillion over the recent decade.”

Neas cited a report from Express Scripts, the largest pharmacy benefits management company, that showed that since 2008, the price of brand drugs has almost doubled, but the price of generic drugs has been cut roughly in half. Regardless, John Norton, a spokesman for the Virginia-based National Community Pharmacists Association, said the price spikes cannot be a good thing.

“If you are having huge and relatively random price increases you are going to have problems,” Norton said. Independent pharmacists have their own point of contention with so-called “PBM” companies.

When a manufacturer suddenly increases the cost of a generic drug, the PBM sometimes does not boost its reimbursement payment to match the new price for several months, they said. That means the independent pharmacy must swallow the price difference for a time.

“We are selling the drug at a loss until the increase,” Wiley said. Express Scripts Holding Company’s stock, traded on NASDAQ, has doubled in price in the past three years. Lawmakers in Harrisburg also have heard testimony concerning drug prices. In 2013, at a state House committee hearing on proposed pharmacy benefit management legislation, Express Scripts spokesman Dave Dederichs said the company’s use of PBM “tools” has helped slow the increase in costs of prescription drugs.

“We are here today in opposition to the draft PBM legislation, which will act as a hindrance on the aforementioned tools to lower prescription drug costs for both plan sponsors and consumers,” Dederichs said in submitted testimony. Such statements fly in the face of what independent pharmacists frequently see.

Eric Esterbrook, owner of Esterbrook Pharmacy in West Reading, recalled the morning he came to work and was told by staffers that the price of Doxycycline had skyrocketed. “We were all just dumbfounded,” Esterbrook said. “It was just shocking.”

by | Ford Turner

Step #1:  Obtain a price list for generic prescription drugs from your broker, TPA, ASO or PBM every month.

PricewaterhouseCoopers’ (PwC) Health Research Institute surveyed 1,000 U.S. adults, experts and clients to find out. They took a pulse on the top health industry issues for the coming year and presented their findings in a webinar last Thursday.  Here are the top 10 issues of 2015.

1. Do-it-yourself healthcare. This year, the intersection of consumer desire and technological advancements will put “D.I.Y. healthcare” at the top of the agenda, PwC predicts. Increasingly, consumers are taking charge of more of their own care. Technology companies are ready to help this happen with the development of apps and mobile devices to track health metrics such as vital signs, medication adherence or even urinalysis. Nearly half of physician respondents said they would be comfortable using data from a mobile device to determine if a patient should be seen in person or prescribed medication, and 90 percent felt the apps and mobile devices would be important to their practice in the next five years, according to PwC’s HRI.

2. Making the leap from mobile app to medical device. The mhealth app space is getting more and more crowded. The FDA will likely review more mhealth apps this year than ever before. Regulatory approval could give some apps a competitive edge in a crowded sector. The rush of new apps also means consumers will need a way to sort through all the available tools.

3. Balancing privacy and convenience. Approximately five million patients had their personal records compromised from data breaches last summer alone, Mr. Isgur says. These EHRs, which offer personal, medical, financial and insurance information, can go for up to $1,300 on the black market. Yet as healthcare organizations strive to make data private, they must also consider their consumer, who could benefit from convenient data access. The healthcare industry can learn a lot from the financial and retail sectors on how to balance convenience and privacy with data. Collaborations with experts across industries may help healthcare organizations develop better security strategies.

4. High-cost patients spark cost-saving innovations. There is a very, very small percentage of people that cost our health system a lot of money. The sickest 1 percent of patients generates 20 percent of U.S. healthcare spending and dual eligibles are especially costly. We also know there’s a laser focus in most healthcare organizations to try to reduce costs. To do that, many organizations are trying to look at those populations and develop innovative care models. This year we will likely see health systems employ a variety of strategies, including delivering care in new settings, through telehealth and retail clinics, high-tech solutions like wearables and apps, and low-tech solutions like making sure diabetic patients have refrigerators to store their insulin.

5. Justifying the price of specialty medications. Increasing stress on the healthcare system is leading many insurers and healthcare systems to control drug costs by limiting access to high-priced, specialty medications. Though cost has been an issue for many years, expect insurers to raise the bar in 2015 for both patients and providers to access to these medications. From the patient perspective, we’ve seen an increase in financial responsibility that continues year over year, and frankly is not changing.

It’s getting more significant as insurers move to coinsurance and larger copayments, looking for the patient to have more of a contribution to the cost of their drugs, more of a conscious decision about the need for the drug. Patients will increasingly be a factor in decision making for drugs. Correspondingly, from the physician perspective, [insurers are] really looking for physicians to present a much more detailed, clinical profile of the patient to justify medical necessity, and in some cases, that’s extending all the way to the request for genomic data.

6. Open everything to everyone. There is a shift beyond making data transparent solely for the sake of remaining compliant. Instead, manufacturers, regulatory agencies and prescribers are transforming the way data is shared with a greater sense of collaboration. For instance, pharmaceutical and medical device manufacturers are contributing clinical trial data sets to Project Data Sphere, The Yale University Open Data Access Project and other programs. A great deal of clinical data is never published based on the outcomes of different trials, initiatives or registries. This movement to publish sort of the good and the bad and make things more transparent, I think, is clearly a top issue for this year.

7. Getting to know the newly insured. More than 10 million adults have gained health coverage through the Patient Protection and Affordable Care Act, according to PwC’s presentation. The insurance industry and provider community are trying to learn about this group in a short period of time. Additionally, primary care physicians, surgeons and other specialists have seen measurable increases in the proportion of Medicaid patients in expansion states, according to PwC. Hospitals and health systems in the states that have expanded Medicaid are seeing significantly different types of revenue figures, which are evidence of an increase in admissions and a reduction in uncompensated care debt. As far as implications, it makes sense for providers to contract broadly with insurers and help uninsured and underinsured enroll in coverage, she says.

8. Physician extenders see an expanded role in patient care. Extenders — such as nurses, physician assistants, pharmacists and others — will have an expanded role in patient care. Over the next five years, the supply of primary care nurse practitioners and physician assistants is expected to increase by 30 percent and 58 percent respectively. States will have to again visit and revisit their scope of practice laws. One implication of this trend is that extenders initially may not slow growth in the cost of care as much as people think due to the demand for extenders, resulting in an increase in the cost of wages. However, that is expected to level out.

9. Redefining health and well-being for millennials. As baby boomers retire, employers, insurers and health systems are looking for new ways to engage, attract and retain millennials. Employers will have to really pivot to better meet the expectations of this group of millennials. It will require them to reorient strategies from the concept of wellness to one of well-being. By 2030, millennials will make up 75 percent of the U.S. workforce, according to the PwC.

10. Partner to win. In this new hyper-competitive environment, people are thinking differently about how they collaborate and with whom they collaborate. According to the PwC, successful companies that want to thrive “will work together on innovative products and services.” An analysis of the Fortune 50 healthcare companies found that about 40 percent pursued new healthcare partnerships last year.  It’s no longer enough to partner at a peripheral level…You really have to think critically about who you partner with.

Written by Kelly Gooch and Emily Rappleye

Three companies dominate this key piece of the pharmaceutical supply chain. The largest, San Francisco-based McKesson (MCK ), reported almost $138 billion in fiscal 2014 revenue. The companies earn slim margins from their massive revenue, however. And those thin profits have come under harsh pressure in recent years due to shifting trends in health care.

AmerisourceBergen (ABC), McKesson and Cardinal Health (CAH ) have been able to withstand this squeeze largely because they’ve combined their purchasing power with major pharmacy chains Walgreen Boots Alliance (WBA ), Rite-Aid (RAD ) and CVS Health (CVS).

Source:  www.fda.gov

The three dominant drug distributors control more than 85% of the market. Their stocks have trended higher the past five years, with AmerisourceBergen up 29%, McKesson up 27% and Cardinal Health ahead 20% the past 12 months.

Challenges And Benefits

The drug wholesaler-drugstore partnerships unite the two middlemen in the pharmaceutical supply chain. Their common bond is in wanting to defend the spread between the wholesale price the manufacturer charges and the retail price that the insurer lets pharmacies bill patients.

That spread can be paper-thin for branded drugs, and often substantially wider for generics. The catalyst for the distributor/pharmacy chain deals: “The payers in the U.S. have been looking at every single option to lower prices,” said Vishnu Lekraj, health care service analyst at Morningstar.

This price pressure, applied by the pharmacy benefit manager side, leverages the PBMs’ market power to control prices on behalf of insurers, Lekraj said.

The AmerisourceBergen-Walgreen, Cardinal Health-CVS and McKesson-Rite Aid ventures have each elevated their generics purchasing to $10 billion to $12 billion a year, estimates FBR Capital Markets data.

By joining together, drug wholesalers and drugstores can better withstand the profit squeeze and pass most of the pricing pressure onto generic drug manufacturers, Lekraj says. That advantage until recently has remained largely theoretical, although the partnerships have begun to bear fruit.

Rite-Aid’s latest quarterly results demonstrate the value provided by its deal struck last February to have McKesson purchase its generic drugs and deliver them directly to stores, notes Fein. The pharmacy chain’s total inventories were $255 million below year-ago levels in the third quarter, a boon to working capital and profit margins.

“If Rite Aid keeps posting such positive results, expect other large pharmacy buyers to give in … and begin sourcing generics through the large wholesalers,” he wrote on his Drug Channels blog.

One wrinkle to McKesson’s partnership with Rite Aid: the distributor’s plans to use its own NorthStar generic manufacturing arm for some generic production, providing more pressure on generic-drug makers to make concessions on price. McKesson suppliesWal-Mart (WMT) with branded drugs, but the retailing giant currently buys its own generics.

The Wholesale Story

Branded drugmakers have long used the wholesalers, rather than sell directly to big drugstore chains. Those branded drugs provide the Big Three with lots of revenue, but at margins of only around 1%.

Generics, though much lower priced, offer much higher margin opportunities. The recent wave of branded drugs coming off patent was bad news for manufacturers but a net positive for distributors and pharmacies, even though it dampens revenue growth. That trend is set to continue for the next few years.

Some of the big potential generic launches being eyed within the next couple of years include Nexium (acid reflux), Copaxone (multiple sclerosis), Abilify (anti-depressant), Enbrel ( rheumatoid arthritis) and Advair (asthma).

Aggressive Partnering

AmerisourceBergen has been the pace-setter in the industry. It kicked off the drugstore-chain partnering trend, striking a deal with Walgreen in March 2013. Last week it pushed into animal health territory, saying it would buyMWI Veterinary Supply (MWIV) for $2.5 billion.

The game changer was its deal with Walgreen. That relationship, including brand and generic drug distribution, fueled a 29.1% jump in AmerisourceBergen’s revenue from the prior year to $31.6 billion in the September quarter and a 30.1% rise in operating earnings to $423.8 million, or 1.34% of revenue.

The deal with Walgreen also provided scale in Europe for the drug wholesaler via Walgreen’s combination with Alliance Boots, the biggest U.K.-based pharmacy. Walgreen has since tapped its option to acquire an equity stake in AmerisourceBergen.

As of last August, Walgreen had bought 11.5 million shares of AmerisourceBergen on the open market, giving it a stake of less than 5%, though it has an option to acquire 23%. McKesson followed suit, strengthening its generic-buying clout when it acquired a controlling stake in German drug distributor Celesio in January 2014 for $5.4 billion.

While analysts have awaited a similar move into Europe by Cardinal Health, the company has instead directed its international push into China. That piece of the business has grown from $1 billion a year to $2.6 billion since 2011. Sales in China are growing more than 30% a year, and account for over 10% of Cardinal Health’s total revenue.

Specialty Segment: On The Rise

Amerisource has been the leader in distributing specialty drugs, which is the fastest-growing segment of the industry. The company’s oral oncology, opthalmology and plasma revenue grew 11% to nearly $20 billion last year. Cardinal Health’s specialty segment has grown from $1 billion to $5 billion the past four years.

Because these high-priced drugs often require special handling and delivery mechanisms, and can be geared to smaller patient pools, they aren’t normally distributed through the standard drugstore channels. Specialty pharmacies sometimes source directly from the manufacturer, bypassing the distributors.

Read more: http://www.nasdaq.com/article/drug-distributors-build-strength-in-an-era-of-change-cm433710#ixzz3P5ku5S1c