The Chelko Consulting Group Blog

The big news last week was that Express Scripts (ESI) bought Wellpoint’s prescription drug operations for $4.68 billion.  ESI also sent out a notice to its market contacts last week to explain that it was reducing the amount of its "discounts" in response to a March 30, 2009 settlement approved by the U.S. District Court. A critical part of the announcement reads: "According to the relevant terms of the amended settlement, FDB [First DatBank] will be required to adjust its reporting of Blue Book AWP for those prescription drugs covered under the settlement by reducing the mark-up factor used to calculate the drugs' AWP to 1.20 times the Wholesale Acquisition Cost ("WAC") or direct price, instead of using a markup to WAC or direct price that exceeds 1.20.

The announcement later explains, "Our PBM Agreement contemplates that, in the event of this type of change to the relevant AWP calculation, there will be a modification of the AWP discounts in the PBM Agreement so the parties are returned to their comparable economic position prior to the change by FDB in its calculation of AWP." The essence is that the government changed the definition of the benchmark Average Wholesale Price (AWP) and, hence, reduced the value of it.  So, ESI is reducing the value of its "discounts" to maintain the same net sales price to the buyer. First of all, my hat is off to ESI for publicly admitting this change.  Secondly, I'm not sensing a real PBM value-add here.  Have they really provided the marketplace with a discount?  Or are its contracts set-up to allow manufacturers to just inflate their pricing to offset the negotiated “discounts” (and the plan sponsors are now also paying big middlemen PBMs like ESI to help distribute the drugs to plan members)?  Last year, we observed 14% to 15% price increases on average for brand drugs (before discounts).  Furthermore, there is an article in the Wall Street Journal today that highlights some dramatic first quarter 2009 price increases by the drug manufacturers:  Viagra +20.7%, Sprycel +32.7%, Strattera +15.6%, and others. 
Give me back the shoe-box effect of major medical plans.  I think the PBMs and their promises of "discounted" drug cards have taken us for a ride.

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Yes, much has been reported on the Crestor group experiencing 54% fewer heart attacks than the placebo subjects, as well as 48% fewer strokes, and 20% fewer deaths.  But what do all these percentages really mean? There were 83 cardiac events of all types in the Crestor group, an 0.9% actual risk, compared with 157, or 1.8%, in the placebo group.  The study actually showed that physicians would have to treat 180 people for two years to prevent one death.

Is this big news?  Will this study “reshape cholesterol-treatment guidelines used for more than a decade to fight cardiovascular disease, the world’s leading killer”? (from the second paragraph of the same WSJ article)  I hope not.  This study calls to mind the cautions of Dr. Norton Hadler of the University of North Carolina.  Dr. Hadler has proposed that Medicare and other plan sponsors consider adopting a simple “number needed to treat” rule (NNT) in determining the eligibility of new medicines and procedures.  For a hard outcome (death, heart attack, stroke, etc.), the NNT should be no larger than twenty (20), meaning for every twenty patients treated, at least one would avoid the event.  For a soft outcome (feel better, function better, etc.), the NNT should be no larger than five (5).  These seem like reasonable thresholds – and ones that AstraZeneca’s Crestor study results would easily fail. 

You can see Dr. Hadler’s own reaction to the Crestor study at ABCnews.com:
http://abcnews.go.com/Health/HeartDiseaseNews/story?id=6207285&page=1
By the way, Dr. Hadler’s thresholds would be measured by independent studies, not those funded by the manufacturers.  As pointed out in a New York Times editorial today, the lead investigator in the study also stands to benefit from a patent involving the use of C-reactive protein (or CRP) to evaluate the risk of cardiovascular disease.

So, let’s take a pass on more medication and focus our attention on better diets and more physical activity.

Posted by Rick Chelko at 11:34 PM | Permalink | Comments (0) | TrackBacks (0)

The Wall Street Journal (“of Medicine” as a colleague once coined it) has recently published a number of articles regarding mixed and declining profit reports by the big pharmaceutical manufacturers.  Pfizer and Schering-Plough further reported weakness in the market for cholesterol drugs.

What is up with this?  Is it possible that the recent turmoil in our financial market has trickled down to Main Street in such a way that maintenance drug spend is being affected? Does it mean that prescription drug copays are now at a level that is impacting plan member decisions regarding the value of their medications?  Are plan members switching to generic drugs?  Have they responded to health promotion programs and changed their diet and exercise routines - no longer needing cholesterol lowering drugs?  Regarding declining Lipitor sales, Pfizer reported, “The drug’s sales have been under pressure from the availability of cheaper, generic options for cholesterol treatment.” (WSJ October 22, 2008)

This sounds like a good trend to me. Usually when economic times get tough, plan members load up on discretionary treatment before they lose coverage.  Now that cost sharing levels in most PPO and CDH plans are significant, plan members may be foregoing care altogether.  Is this good?  Are we avoiding unnecessary plan costs?  Or, are we simply deferring appropriate preventive treatments? Only time will tell.

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There was an interesting story on page B3 of the Wall Street Journal [of Medicine] today.  It explained GlaxoSmithKline’s strategy to extend its brand drug patent protection through the use of “RL” and “CR” extended release versions.  Drug modifications like this have enabled GSK to keep sales rising despite difficulty bringing brand-new drugs to market. 

One pharmaceutical analyst was quoted as saying, “The whole industry is finding it difficult to get through the FDA with line extensions because the FDA is understaffed and focusing on things they think are more innovative and important.”  We can only hope this is true. 

An FDA spokesperson said, “The law does not allow the FDA to discriminate against any new drug application based on what else is already on the market.”  Well, here is to hoping the FDA manages its resources well without running afoul of the law, and drug manufacturers respond with real innovations instead of line extensions.

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