Dr. Adam Fein PhD

GLG News by Dr. Adam Fein PhD, Founder & President

GLG News is now G+ Insights

G+ is a community for professionals, academics and entrepreneurs to connect through online discussions and in-person meetings. You will continue to see G+ Insights (formerly GLG News) here as well as on the G+ website, where you can share and discuss the G+ Insights you read.

ESRX-MHS: Antitrust Issues

July 26, 2011

Analysis of:Megadeal Unites Drug Rivals | online.wsj.com

I give the Express Scripts / Medco Health Solutions deal a 60% chance of being approved by the Federal Trade Commission. I think it’s going to be a very tough fight for antitrust approval, but perhaps not for the reasons you think. The Agreement and Plan of Merger filed on Friday gives us a peek at the companies’ strategy for clearing the antitrust hurdles. But note that there is no termination fee if the companies don’t get antitrust clearance.

ESRX-MHS: Strategic and Market Analysis

July 25, 2011

The Express Scripts / Medco Health Solutions deal makes sense given the dynamics of the PBM industry. At the same time, a successful transaction would signal the end of the PBM industry's major growth opportunities and the transition to a more mature, highly consolidated market. The post-2015 world looks much less rosy for PBMs as the generic wave crests and the government crowds out private payers.

What's Behind Teva's Cephalon Deal

May 3, 2011

Analysis of:Teva to Buy Cephalon in $6.8b Transaction | www.bloomberg.com

This is a great, albeit expensive, strategic move by Teva. Management clearly recognizes the business model problem looming ahead for the generic drug business. The deal boosts Teva's brand business while maintaining a broadly diversified revenue base, positioning Teva as the "anti-Pfizer."The pharma industry of tomorrow will be about expensive drugs for small patient populations and cheap drugs for large populations. I wonder how many manufacturers will be ready.

2011 Part D Market Share: A Win for Humana and Walmart

April 29, 2011

Next Monday, Humana will report results for the first quarter of 2011. Based on my independent analysis of CMS data on Medicare Part D Prescription Drug Plans (PDPs), the company will have a lot to brag about next week for its Retail segment: Humana had a net gain of about 570,000 PDP enrollees, more than any other organization in 2011. The Humana Walmart-Preferred Rx Plan, a preferred pharmacy network PDP launched in October 2010, is now the fifth-largest PDP in the U.S.

Express Scripts' Disruptive Specialty Strategy

April 14, 2011

Express Scripts is ahead of its PBM peers with an innovative and risky strategy for absorbing the buy-and-bill specialty drug spending from health care providers. If successful, the company will become the clear leader in a big new addressable market for PBM services. It also puts them on a collision course with AmerisourceBergen and McKesson for control over specialty channels to physician offices and clinics. 

Thoughts on the Catalyst-Walgreen Deal

March 10, 2011

Analysis of:Walgreen to Sell Unit for $525 Million | online.wsj.com

This is a big move for Catalyst, which vaults ahead of its competitors to become the fifth largest PBM behind the Big 3 PBMs—CVS Caremark , Express Scripts , and Medco Health Solutions —and United Health’s Prescription Solutions. Even so, Catalyst will have less than 5% of the total U.S. prescription volume vs. about 70% for the top four. Below I discuss the implications for: Walgreens The PBM industry CVS Caremark

Medtronic Dumps Novation: Why GPOs Should Worry

March 1, 2011

Analysis of:Medtronic Makes Bold Pact-Ending Move Amid Medical-Device Woes | online.wsj.com

Medtronic is questioning the core of a GPO’s business model—pooling member purchase volumes in exchange for lower prices from manufacturers and wholesalers. Medtronic is the first company to make such a bold public move against GPOs, but other manufacturers are rethinking their channel and contracting strategies. Direct contracting is an existential mega-threat facing the GPO industry. A weaker GPO industry would likely be a net positive for wholesalers, particularly Cardinal Health .

CVS Caremark: Still Searching for Synergy

February 8, 2011

In the latest results from CVS Caremark , the company was not even able to meet the lowered expectations for its PBM business that the company had set for itself just three months ago. Unless there is major progress, I still predict a 2012 Caremark spin off for the reasons outlined in When will CVS and Caremark split up? Comments by new CEO Larry Merlo suggest that this scenario is now under active consideration.

Walgreens Joins the Attack on PBM Mail Profits

January 18, 2011

Analysis of:Walgreen aims to fill more 90-day prescriptions | www.chicagobusiness.com

Low-price retail fulfillment of 90-day prescriptions is a threat to PBM profits. Walgreens joins Walmart and CVS Caremark in pursuing strategies that eliminate the traditional out-of-pocket cost difference for consumers between mail and retail pharmacies. Will plan sponsors pay attention and create a strategic vulnerability in the profit model of Express Scripts and Medco Health Solutions ?

Cardinal Gets to China First with Zuellig Pharma Acquisition

November 29, 2010

Analysis of:Cardinal Health Acquires Leading Pharmaceutical Distributor in China | ir.cardinalhealth.com

The era of global wholesale is dawning. The acquisition represents the first major distribution investment outside of North America by one of the Big Three U.S. wholesalers. I've long pointed to China as a logical growth platform for U.S. wholesalers as in my January 2007 post 3 Ways for Drug Wholesalers to Grow.

McKesson Snags US Oncology

November 1, 2010

Analysis of:McKesson to Purchase US Oncology in a Transaction Valued at $2.16 Billion | phx.corporate-ir.net

This deal is a big win for McKesson, which now solidifies its position as the #2 specialty products distributor. McKesson also picks up the services and Group Purchasing Organization (GPOs) businesses of US Oncology. On the other hand, Cardinal Health now has an even bigger challenge in rebuilding its specialty business and diversify away from its two mega-customers, CVS Caremark and Walgreen . See Double Trouble for Cardinal Health. Time to go shopping?

Double Trouble for Cardinal Health

October 14, 2010

Cardinal's recently released annual 10-K filing for the fiscal year ending June 30, 2010show a company that's increasingly at the mercy of its two dominant customers. CVS Caremark’s retail pharmacy business and Walgreens are now half of Cardinal’s drug distribution business. Even more troubling, it looks like Cardinal lost substantial market share when we exclude its two mega-customers and account for inflation.

CVS Caremark: More Happy Talk, But Hard Work Remains

October 12, 2010

Analysis of:CVS Caremark Says Drug-Benefit Business Strong. | online.wsj.com

CVS Caremark held its 2010 Analyst Day last Friday. Management told a good story, but the underlying message remains the same: Keep waiting because the pot of gold is (still) just around the corner. Many of the programs described at the meeting sound quite intriguing in theory but are not likely to translate into an insurmountable competitive advantage. Thus, I still expect CVS to spin off Caremark, but probably not until 2012.

Walmart-Humana: An Inevitable Surprise for Pharmacies and PBMs

October 4, 2010

Analysis of:Humana, Wal-Mart Launch Cheaper Medicare Drug Plan | online.wsj.com

Walmart is once again challenging the conventional wisdom about profitability and market share with a lower cost, consumer-driven plan design. Once you understand this “incentivized preferred network design” (my words), then you’ll grasp its disruptive potential for retail and mail-order pharmacies.The announcement is also an “Inevitable Surprise”—the predictable outgrowth of Walmart’s observable actions and statements about the pharmacy and PBM industries.

Health Care Reform: Impact on Drug Channels

March 25, 2010

Analysis of:The Doctors of the House | online.wsj.com

Pharmacy Benefit Managers (PBMs) will gain from the expanded coverage in the bill. The “transparency” requirements, while an unnecessary reporting burden, should not be material. Retail pharmacies will benefit from increased prescription volume and various legislative “fixes,” but face margin risk as the uninsured get the advantage of third-party bargaining power. Drug wholesalers will primarily benefit along with their pharmaceutical manufacturer suppliers.

Walgreen’s PBM Bypass Strategy

March 11, 2010

Analysis of:Walgreen, Delta In Talks Over Prescription Drug Plan | online.wsj.com

A WAG-DAL arrangement signals a possible longer-term disintermediation threat to the Pharmacy Benefit Manager (PBM) business model in the large employer market. Walgreens has built the deepest, broadest multi-channel platform for pharmaceutical distribution and has an especially strong position for specialty drugs. An employer doesn’t need an intermediary (PBM) to assemble and manage a network that only has a single pharmacy provider.

Maintenance Choice Update: CVS Gain, Caremark Same

February 11, 2010

Analysis of:CVS Posts 10% Rise in Net | online.wsj.com

CVS Caremark's Maintenance Choice program is growing rapidly as a benefit design option, demonstrating that payers are willing to accept more restricted pharmacy networks in exchange for savings and control. The outcome for the pharmacy industry will be more rapid consolidation. At the same time, I still wonder if Maintenance Choice provides enough competitive differentiation to help Caremark win new Pharmacy Benefit Manager (PBM) business.

No Visible Revenue Synergies in CVS Caremark's Latest Numbers

February 23, 2009

Analysis of:CVS Net Rises; Finance Chief Plans to Retire | online.wsj.com

CVS Caremark’s PBM businesses are not becoming a larger share of prescriptions filled at CVS retail pharmacies. Put another way, the flagship Maintenance Choice program may be appealing to payers and consumers, but there is not yet a quantitatively visible shift in CVS' retail activity. If CVS pharmacies are taking retail pharmacy market share, then it’s not yet as a result of corporate co-ownership with a PBM.

Pharmacy Profits and Wal-Mart

January 16, 2009

Analysis of:Health-Care Outlays Climb at Slowest Rate in Years | online.wsj.com

U.S. spending on outpatient prescription drugs grew by only 4.9 percent in 2007, which was below overall health care spending growth  of 6.1 percent. Public funds (primarily Medicare and Medicaid) paid for 36 percent of total retail prescription drug spending in 2007. So, how much money do pharmacies make from Medicare and Medicaid? The answers may surprise you. Here’s what I found: (1)  Medicaid remains the most profitable third-party payer for independent pharmacies. (2) Despite what you may have heard, gross margins on third-party insurance business are growing at independent pharmacies. (3) The generic price war that was triggered by Wal-Mart is squeezing pharmacy margins on cash-pay consumers. While $4 generics may be good news for uninsured/underinsured patients, they are bad news for pharmacy owners.

An Unfortunate Victory for EU Repackagers

December 9, 2008

Analysis of:EU Exec Drops Drug Repackaging Ban Plan | www.reuters.com

Reuters reported on Friday that the EU plans to drop a proposed ban on repackaging of pharmaceuticals. In my opinion, dropping the ban is a very bad decision. Repackaging eliminates the benefit of just about every practical anti-counterfeit tracking technology, including the emerging serialization requirements in some EU countries. Apparently, tablets can even beremoved from blister packs under EU law. It’s hard to see how this will benefit consumers.

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