John Hjorth Posted March 16, 2017 Share Posted March 16, 2017 Jurgis, This for real, and the first initiative in cooperation between NVO and CVS to do something real about the US Health Care pricing issues, to obtain and retain sustainable business practices through the Health Care value chain. Original source is here. Link to comment Share on other sites More sharing options...
Jurgis Posted March 16, 2017 Share Posted March 16, 2017 Jurgis, This for real, and the first initiative in cooperation between NVO and CVS to do something real about the US Health Care pricing issues, to obtain and retain sustainable business practices through the Health Care value chain. Original source is here. I know it's for real. The cards I received in junk mail in the past were also for real - some people have used them. The rest of the claims I can't comment on. Link to comment Share on other sites More sharing options...
KCLarkin Posted March 17, 2017 Share Posted March 17, 2017 I've seen similar (?) drug benefit cards in junk mailer coupon packs in the past. Not sure what was covered, who was paying for the discounts, etc. Never dug deeper. AFAIK, most of these cards are sponsored by the brand manufacturers. They encourage you to choose the Brand name drug over the generic. The CVS card seems different. For one thing, Insulin doesn't have generic competition. But more specifically, as the largest PBM and pharmacy, CVS could use the card more strategically -- negotiating steep discounts and encouraging more cash-pay patients to use CVS pharmacy. But it is possible that this is just a CVS-branded patient assistance card, and CVS is just collecting an admin fee from the manufacturer. In which case, you are right. These discount programs already exist. Link to comment Share on other sites More sharing options...
KCLarkin Posted March 30, 2017 Share Posted March 30, 2017 Given recent Republican infighting, I think CVS is substantially de-risked. It is hard to imagine any willingness or ability of current administration and congress to legislate or regulate PBMs in a catastrophic way. I'm surprised the market hasn't reacted positively to the collapse of the AHCA. The real risk reverts back to competitive risks. Is CVS competitively disadvantaged because of the integrated PBM/Pharmacy? On balance, I don't think so. Given the strong FCF, capital allocation, secular growth, and non-cyclical earnings, this company deserve at least a market multiple. Maybe I'm naive, but current sentiment on PBMs seems completely divorced from reality. Link to comment Share on other sites More sharing options...
DooDiligence Posted March 30, 2017 Share Posted March 30, 2017 Given recent Republican infighting, I think CVS is substantially de-risked. It is hard to imagine any willingness or ability of current administration and congress to legislate or regulate PBMs in a catastrophic way. I'm surprised the market hasn't reacted positively to the collapse of the AHCA. The real risk reverts back to competitive risks. Is CVS competitively disadvantaged because of the integrated PBM/Pharmacy? On balance, I don't think so. Given the strong FCF, capital allocation, secular growth, and non-cyclical earnings, this company deserve at least a market multiple. Maybe I'm naive, but current sentiment on PBMs seems completely divorced from reality. I agree & after looking at CVS, WBA, ESRX & others, I chose ESRX. I understand exactly kind of what they do & who they work for and I prefer their asset light business. I wish it'd go down another 20% Link to comment Share on other sites More sharing options...
Jurgis Posted March 30, 2017 Share Posted March 30, 2017 I've seen similar (?) drug benefit cards in junk mailer coupon packs in the past. Not sure what was covered, who was paying for the discounts, etc. Never dug deeper. AFAIK, most of these cards are sponsored by the brand manufacturers. They encourage you to choose the Brand name drug over the generic. The CVS card seems different. For one thing, Insulin doesn't have generic competition. But more specifically, as the largest PBM and pharmacy, CVS could use the card more strategically -- negotiating steep discounts and encouraging more cash-pay patients to use CVS pharmacy. But it is possible that this is just a CVS-branded patient assistance card, and CVS is just collecting an admin fee from the manufacturer. In which case, you are right. These discount programs already exist. aaa.com/prescriptions is what I was talking about. ( Site auto detects your location and may not open the same page for Canadians... ) Not arguing with what KCLarkin said. He might be totally right. Just providing additional info. 8) Link to comment Share on other sites More sharing options...
Guest 50centdollars Posted March 31, 2017 Share Posted March 31, 2017 Given recent Republican infighting, I think CVS is substantially de-risked. It is hard to imagine any willingness or ability of current administration and congress to legislate or regulate PBMs in a catastrophic way. I'm surprised the market hasn't reacted positively to the collapse of the AHCA. The real risk reverts back to competitive risks. Is CVS competitively disadvantaged because of the integrated PBM/Pharmacy? On balance, I don't think so. Given the strong FCF, capital allocation, secular growth, and non-cyclical earnings, this company deserve at least a market multiple. Maybe I'm naive, but current sentiment on PBMs seems completely divorced from reality. I agree & after looking at CVS, WBA, ESRX & others, I chose ESRX. I understand exactly what they do & who they work for and I prefer their asset light business. I wish it'd go down another 20% What are your thoughts on the Anthem contract, which is 14% of revenues? The relationship has deteriorated and I doubt it gets renewed in 2019. This should lower the intrinsic value of ESRX but that is probably already reflected in the stock. Link to comment Share on other sites More sharing options...
DooDiligence Posted March 31, 2017 Share Posted March 31, 2017 Given recent Republican infighting, I think CVS is substantially de-risked. It is hard to imagine any willingness or ability of current administration and congress to legislate or regulate PBMs in a catastrophic way. I'm surprised the market hasn't reacted positively to the collapse of the AHCA. The real risk reverts back to competitive risks. Is CVS competitively disadvantaged because of the integrated PBM/Pharmacy? On balance, I don't think so. Given the strong FCF, capital allocation, secular growth, and non-cyclical earnings, this company deserve at least a market multiple. Maybe I'm naive, but current sentiment on PBMs seems completely divorced from reality. I agree & after looking at CVS, WBA, ESRX & others, I chose ESRX. I understand exactly what they do & who they work for and I prefer their asset light business. I wish it'd go down another 20% What are your thoughts on the Anthem contract, which is 14% of revenues? The relationship has deteriorated and I doubt it gets renewed in 2019. This should lower the intrinsic value of ESRX but that is probably already reflected in the stock. I think the loss is priced in. Privately owned Prime Therapeutics or CVS could wind up with the contract (and the subsequent bickering in court with Anthem.) Interesting take on the WBA/Prime deal which I view as a bigger long term problem for ESRX than losing Anthem. http://www.drugchannels.net/2016/09/why-walgreensprime-deal-could-transform.html Link to comment Share on other sites More sharing options...
KCLarkin Posted March 31, 2017 Share Posted March 31, 2017 My over-confidence was rewarded with more bad news: WOONSOCKET, R.I. (March 31, 2017) – CVS Health (NYSE: CVS) confirmed that its contract to provide specialty pharmacy services for the Blue Cross and Blue Shield Federal Employee Program (FEP) will terminate at the end of 2017. Given that the contract expires at year end, the loss of this contract does not affect the Company’s 2017 financial results. The loss of this specialty pharmacy contract, which is expected to generate revenues of approximately $2.8 billion in 2017, is not expected to have a material impact on the Company’s operating profit in 2018. As previously announced, under separate agreements which run through 2018, CVS Health will continue to provide integrated pharmacy benefit management (PBM) services, including mail service pharmacy and clinical care programs, to FEP’s more than 5.4 million federal employees, retirees and dependents. Fortunately, this is only the specialty pharmacy (so far). And probably is a natural consequence of the Prime/WBA deal. But this won't help fix the sentiment that CVS' competitive position is weak. Edit to add: Of course, the rather muted price reaction to this news suggests that it was either priced in or that sentiment is already so bad that even major contract losses won't move the needle. Link to comment Share on other sites More sharing options...
KCLarkin Posted April 24, 2017 Share Posted April 24, 2017 Finally some good news for CVS. The Anthem contract with ESRX is officially up for grabs: http://www.prnewswire.com/news-releases/express-scripts-announces-2017-first-quarter-results-provides-update-on-anthem-relationship-and-visibility-into-core-pbm-business-excluding-contribution-from-anthem-coventry-and-catamaran-300444525.html Link to comment Share on other sites More sharing options...
dwy000 Posted April 25, 2017 Share Posted April 25, 2017 DooDiligence - looks like you got your 20% decline in ESRX (or pretty close) even though no new news (assuming Anthem was priced in previously). Are you loading up now? Link to comment Share on other sites More sharing options...
DooDiligence Posted April 29, 2017 Share Posted April 29, 2017 The whole system, with the PBM's handling enormous amounts dollars, seems to me to be totally screwed by discounts, rebates and the likes, - to an extent, so that a price is no longer just a price. The pharma companies are trying to deflect pricing scrutiny to the PBMs. There seems to be a growing consensus that PBMs are leaching excessive profits out of the system. But a quick sanity check shows this isn't true. The entire CVS company, including the retail pharmacy, front-of-store sales, health clinics, PBM, and insurance operations only generated Net Income of $5.2 B in 2015. That's about 1% of US drug spending. PBMs are not the cause of the price increases. PBMs are using their buying power to demand lower prices. Rather than sacrificing profits, the drug companies are jacking up list prices. It is remarkable how effectively the drug companies have scapegoated the PBMs. They could become BFF's if PBM's share value based data to help pharma's bolster their brands (except for the fact that would be at odds with generic promotional focus.) Link to comment Share on other sites More sharing options...
DooDiligence Posted April 29, 2017 Share Posted April 29, 2017 Here is an example of the absurd scapegoating that Big Pharma is doing: https://www.bloomberg.com/news/articles/2017-02-08/seeing-danger-of-trump-s-new-thing-health-group-preps-defense The top executive at British drug giant GlaxoSmithKline Plc took a veiled swipe at the PBM industry on Wednesday, citing an industry-sponsored report that out of every $100 of a drug’s list price, only two-thirds ends up back with the drugmaker. Much of the rest goes to “non-innovators in a system which thinks it’s paying high prices for innovation,” -- Bob is shopping in a Mexican street market. He spots a beautiful pottery piggy bank. He decides to buy it for his son. "How much?" he asks. "1000 pesos," replies the seller. Bob walks away. A little while later, he is drinking a Cerveza with his friend Pablo B Morales. He tells Pablo about the beautiful piggy bank. Pablo replies, "You need to haggle harder. Do you want me to go speak to the seller?". Pablo goes back to the seller and haggles down the price to 500 pesos. Bob gives Pablo 50 pesos in gratitude. Bob returns the next year. The seller is now selling piggy banks for 1500 pesos. And tourists are complaining about the high price of piggy banks. The clever seller says, "you must understand. Only 1/2 of the list price ends up in my pocket. Much of the rest goes to non-innovators in the system." -- List Price: 1000 Net Price: 500 P.B.M: 50 Who are the "non-innovators" who took the remaining 450 pesos? Isn't Paz a Mexican? (not a slur, some of my best friends could be Mexican's...) Link to comment Share on other sites More sharing options...
DooDiligence Posted April 29, 2017 Share Posted April 29, 2017 DooDiligence - looks like you got your 20% decline in ESRX (or pretty close) even though no new news (assuming Anthem was priced in previously). Are you loading up now? Yup. This thread has more useful commentary on ESRX than the ESRX thread (maybe because I post too much over there...) Link to comment Share on other sites More sharing options...
KCLarkin Posted September 20, 2017 Share Posted September 20, 2017 Liberty already posted this to the Amazon thread but thought I would cross-post here since it is most relevant to the retail pharmacies: https://www.axios.com/amazon-talking-to-pharmacy-benefit-managers-2487579501.html I don't really see anything new here. Just more evidence that Amazon is exploring the possibility of entering retail pharmacy. CVS and WBA are selling off slightly on this report. Link to comment Share on other sites More sharing options...
JRM Posted September 21, 2017 Share Posted September 21, 2017 That's exactly what we need; fentanyl with 1-click. I asked my wife (who is a pharmacist) what percentage of prescriptions are filled through a mail order pharmacy, and to my surprise she said 30-50%. Maybe somebody else has a better estimate. This was much higher than I suspected. She said the PBMs and insurance companies are pushing mail order when practical. However, I think there is a natural ceiling for mail order. There are many times when a person leaves the doctor or hospital and has a prescription they want to fill immediately. Maybe Amazon will get same day delivery (or 1 hour delivery), but not likely on a wide scale. Like the grocery business, I think Amazon will need a brick and mortar presence to take much market share from the major players. Link to comment Share on other sites More sharing options...
DooDiligence Posted September 21, 2017 Share Posted September 21, 2017 That's exactly what we need; fentanyl with 1-click. I asked my wife (who is a pharmacist) what percentage of prescriptions are filled through a mail order pharmacy, and to my surprise she said 30-50%. Maybe somebody else has a better estimate. This was much higher than I suspected. She said the PBMs and insurance companies are pushing mail order when practical. However, I think there is a natural ceiling for mail order. There are many times when a person leaves the doctor or hospital and has a prescription they want to fill immediately. Maybe Amazon will get same day delivery (or 1 hour delivery), but not likely on a wide scale. Like the grocery business, I think Amazon will need a brick and mortar presence to take much market share from the major players. What end of the biz do you think would be most attractive to/for them? CVS / WBA ...? ABC / CAH / MCK ...? ESRX (doubt it but Buddha let it be so...) Link to comment Share on other sites More sharing options...
dwy000 Posted September 21, 2017 Share Posted September 21, 2017 That's exactly what we need; fentanyl with 1-click. I asked my wife (who is a pharmacist) what percentage of prescriptions are filled through a mail order pharmacy, and to my surprise she said 30-50%. Maybe somebody else has a better estimate. This was much higher than I suspected. She said the PBMs and insurance companies are pushing mail order when practical. However, I think there is a natural ceiling for mail order. There are many times when a person leaves the doctor or hospital and has a prescription they want to fill immediately. Maybe Amazon will get same day delivery (or 1 hour delivery), but not likely on a wide scale. Like the grocery business, I think Amazon will need a brick and mortar presence to take much market share from the major players. http://www.drugchannels.net/2017/06/latest-data-on-pharmacy-markets.html The data on mail order pharmacy suggests it is falling off a cliff in terms of #/% of prescriptions filled - now down to 10% of total (although going up from $ perspective because it is heavily weighted to specialty pharma). That wouldn't seem to match up with Amazon's strength (cheap prices, great distribution). Also, with the % of zero co-pay rising, generic prices falling and reduced out of pocket costs, it would be hard to target this industry from Amazon's "your margin is my opportunity" perspective. Drugs is a strange business where the end users neither decide what product to use nor are they the payer (both generalizations). Hard to see where Amazon can add value to the equation. Link to comment Share on other sites More sharing options...
JRM Posted September 22, 2017 Share Posted September 22, 2017 The only "high margin" operator in this equation is the PBM. It's good to see that mail order is losing market share. I like to be able to talk to the person who verified my prescription. I still don't completely understand the value-add of the PBM. Seems like a real estate agent to me. Link to comment Share on other sites More sharing options...
DooDiligence Posted September 22, 2017 Share Posted September 22, 2017 The only "high margin" operator in this equation is the PBM. It's good to see that mail order is losing market share. I like to be able to talk to the person who verified my prescription. I still don't completely understand the value-add of the PBM. Seems like a real estate agent to me. Supposedly, reducing payers / clients drug spend & improving patient outcomes. Link to comment Share on other sites More sharing options...
gjangal Posted September 22, 2017 Share Posted September 22, 2017 IMO to enter the prescription game , AMZN needs become a pharmacy benefit manager or acquire one . It must partner with a insurance companies or large companies that self insure by pitching real reduction in pharmacy costs or better than what PBMs do today. If it manages to do that it can also service prescriptions. Physical storefront with WFM may also help The main activities of a PBM once you have the members are relatively easy like designing a formulary. Negotiating drug prices and managing patients by making sure they follow through with medication etc Link to comment Share on other sites More sharing options...
KCLarkin Posted September 22, 2017 Share Posted September 22, 2017 The only "high margin" operator in this equation is the PBM. PBM's have extremely slim gross margins (say 5-10%). Which, I guess, is similar to a real estate agent. Link to comment Share on other sites More sharing options...
JRM Posted September 22, 2017 Share Posted September 22, 2017 Express Scripts had an ROE of 20% in 2016. Down from over 40% in 2011. Link to comment Share on other sites More sharing options...
DooDiligence Posted October 18, 2017 Share Posted October 18, 2017 https://www.forbes.com/sites/brucejapsen/2017/10/18/anthem-partners-with-cvs-health-to-launch-new-pbm/#1140f19a5740 Link to comment Share on other sites More sharing options...
KCLarkin Posted October 26, 2017 Share Posted October 26, 2017 Cross-posting this from Amazon thread: http://www.stltoday.com/business/local/amazon-gains-wholesale-pharmacy-licenses-in-multiple-states/article_4e77a39f-e644-5c22-b5e6-e613a9ed2512.html CVS, WBA down today on news that Amazon has wholesale pharmacy licenses. These aren't actual consumer pharmacy licenses but do indicate that Amazon is plotting a move into pharmacy (which we already knew). Long-term, I'm skeptical that Amazon does enough damage to CVS to justify current price. But in the short-term, the stock is going to get hit on any Amazon news. Not sure what to do. Don't trust my instinct to double-down. Or my instinct to flee. Probably best to just let the hand play out. Link to comment Share on other sites More sharing options...
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