Pharmacy Industry News: Express Scripts deal to realign pharmacy business
Express Scripts deal to realign pharmacy business
* Walgreen may have to rethink Express Scripts fight
* Pharmacies’ negotiating power could diminish
* Investor sees potential for drugstore consolidation
* Walgreen shares fall 5.3 pct, CVS shares rise 2.6 pct
By Jessica Wohl and Phil Wahba
CHICAGO/NEW YORK, July 21 (Reuters) – Drugstore leader Walgreen Co (WAG.N) may need to make amends in its $5 billion contract spat with Express Scripts now that the pharmacy benefits manager looks to be getting much bigger, industry watchers say.
Express Scripts Inc (ESRX.O) said on Thursday it would pay $29.1 billion to buy rival Medco Health Solutions Inc (MHS.N) and become the biggest U.S. pharmacy benefits company, with easily one-third of the market. [ID:nN1E76K024]
The deal could take a year or more to pass through regulatory hurdles, but in the interim it could already have the power to realign the industry, from rival PBM companies to drugstores and pharmaceutical companies.
The Walgreen fight may be the most immediate example. Last month it said it was breaking its relationship with Express Scripts over prescription pricing, risking more than $5 billion in annual sales. But it would not be able to afford to shut out a combined company with Medco. [ID:nN1E75K038]
“It would give Express Scripts a bargaining position with Walgreen that would be somewhat crippling,” said Bill Smead, portfolio manager of the Smead Value Fund.
Pharmacy benefit managers, or PBMs, administer drug benefits for employers and health plans. Express Scripts would gain even more leverage for negotiating drug prices if the deal went through.
Shares of Walgreen, which had no comment on the impact of the deal, fell 5.3 percent to $39.58.
The deal could take some pressure off CVS Caremark Corp (CVS.N), which has struggled to quiet critics who say that the $27 billion merger of CVS with the Caremark PBM in 2007 has not lived up to its promise and has been a drag on profitability.
CVS may also pick up some PBM business in the coming year from clients concerned that Express Scripts and Medco will be too distracted by their merger efforts.
CVS shares rose 2.6 percent to $37.90, while Express Scripts shares rose 6.1 percent to $55.76.
Shares of Rite Aid Corp (RAD.N), a distant No. 3 in the drugstore industry, were up 4.6 percent to $1.36.
While Walgreen may need to take a more conciliatory approach with Express Scripts, it may also become more aggressive in acquiring drugstores to preserve its clout, said Smead. His fund has held Walgreen shares for 3-1/2 years. CVS may take the same tack, he said.
Other retailers with pharmacies, such as Kroger Co (KR.N), Target Corp (TGT.N) and Wal-Mart Stores Inc (WMT.N) either could not be immediately reached or declined to comment.
WILL WALGREEN RECONSIDER?
Express Scripts has said that Walgreen gives its clients smaller discounts than other drugstores do. Walgreen finds Express Scripts’ rates “really, really below standard,” but may have little room to play hardball.
“This really hurts Walgreens. It has definitely tipped the scales in that discussion,” said Jefferies & Co analyst Arthur Henderson, who covers the PBM industry.
Raymond James analyst John Ransom estimates that losing the business of a combined company would hit Walgreen’s annual earnings per share by $1.00. Analysts are expecting the chain to have an EPS of $2.63 this year.
Walgreen has already sold off its PBM to Catalyst Health Solutions Inc (CHSI.O), potentially leaving it further exposed to major PBMs. In 2010, Walgreen fought with rival CVS Caremark, whose PBM stands to be the second-largest after the merger.
Prescriptions make up two-thirds of Walgreen’s revenue and draw in shoppers who buy general merchandise such as suntan lotion and food when they come in for their medications.
Jefferies & Co drugstore analyst Scott Mushkin said that the Express Script-Medco deal, which comes at the time of year when PBMs most actively try to land contracts with large employers, could prompt some to chose CVS Caremark rather than the huge combined Express Script-Medco.
After stumbling in 2009 and losing a major contract, CVS Caremark is having a good selling season this year, landing a major contract with the Federal Employee Program. (Additional reporting by Lewis Krauskopf in New York; Editing by Michele Gershberg and Gerald E. McCormick)
UT Knoxville, UT Health Science Center Offer Dual Degree in Pharmacy, Business
How do you cut costs without cutting quality of care? It’s a question many health care professionals face in today’s health care environment. A new University of Tennessee program aims to develop students who are uniquely equipped to make decisions on key business issues facing the pharmacy today.
The program joins the forces of UT Knoxville’s College of Business Administration and the UT Health Science Center (UTHSC) to offer a dual degree leading to a Doctor of Pharmacy (PharmD) and a Master of Business Administration (MBA). It is designed to meet the critical need for pharmacist executives with fundamental business skills necessary to operate within the contemporary economic and health care environments.
“As the health care field becomes more competitive, leaders in the field of pharmacy are challenged to make decisions that require an understanding of health care as well as business processes,” said Amy Cathey, executive director of the full-time MBA program. “For example, which of three drugs should a particular patient begin treatment with when the evidence shows all have similar effectiveness, but one is much less expensive based on the negotiated price with the source? Decisions have to be made every day that require balancing cost and customization, all with a focus toward the best possible patient care.”
The five-year program consists of 172 hours of coursework in which the PharmD degree from UTHSC is awarded first and the MBA from UT Knoxville is awarded second. The efficient cross-acceptance of elective classes saves students one semester of coursework. The PharmD educational program includes a strong focus on the appropriate and evidence-based use of medications, medication therapy management, drug actions and properties, critical thinking, and communication skills. The MBA program includes opportunities to work on applied projects that focus on innovation, business analytics, shopper marketing, and supply chain management.
Career opportunities include management and leadership positions in institutional and retail pharmacies, state and federal governments, the pharmaceutical industry, and pharmaceutical consulting firms.
“Change is one thing that most people can agree upon regarding health care,” said Peter Chyka, professor and executive associate dean at UTHSC. “This program can develop the knowledge, skills, and attitudes of a well-educated and informed pharmacist who can provide the business leadership and insight to develop and measure the many aspects of health care as they relate to the safe and effective use of medications.”
VoicePort Partnership With Unwired Nation Extends Services to Mobile Apps, Benefiting Pharmacy and Pharmaceutical Industry
VoicePort, LLC, a leading developer of advanced speech recognition and customer service applications for the Pharmacy and pharmaceutical industry, today announced it has entered into a strategic alliance with Austin-based Unwired Nation, the Mobile-Apps-As-A-Service company. The two companies together will work to take VoicePort’s customer service solutions, widely regarded in the pharmacy and pharmaceutical industry, to smartphones and tablets quickly, easily, affordably. This news is being issued this week during two independent pharmacy events in Las Vegas — Cardinal Health and AmerisourceBergen — and in advance of the upcoming National Association of Chain Drug Stores (NACDS) show at the end of August in Boston where the VoicePort mobile solutions will be demonstrated.
VoicePort uses advanced speech recognition self-service technology to automate interactions, especially in industries such as the pharmacy and Brand pharmaceuticals. VoicePort solutions, such as its PharmaPhonetics, focus on out-bound proactive notification and messaging. VoicePort is partnering with Unwired Nation to leverage its Kinita platform to enable the rapid deployment of their customers’ existing web investments, in combination with extensions to its PharmaPhonetics platform, to create high value, native mobile applications. VoicePort is working with Unwired Nation first to expand its pharmacy-focused offering, but the two companies intend to work together for joint clients and strategic mobile needs across the enterprise, anywhere there is a need to develop new mobile applications in a very rapid timeframe.
“We know our clients need to communicate with their customers — patients — simply, clearly, and via whatever smartphone or tablet that customer is using,” said Christopher Mann, President and CEO of VoicePort. “Unwired Nation helps us deliver this to our pharmacy and pharmaceutical clients today, and we see opportunities to leverage this mobile technology in the near future, augmented and accelerated by our own integration expertise, in our other businesses’ verticals that include Media, Publishing and Enterprise Solutions.”
VoicePort’s PharmaPhonetics Patient solutions deliver cost-effective, automated, personalized, and intelligent interactive communications that speak directly to patients on behalf of the pharmacy. Services include patient prescription pick-up, refill reminders and health awareness messaging, all delivered in a HIPPA-approved model, and integrated with that pharmacy’s management database system. PharmaPhonetics enables personalized permission-based phone, text, e-mail — and via Unwired Nation’s Kinita platform — now mobile phone communications that dynamically respond to the individual patient’s needs.
“Medication Adherence continues to drain the U.S. HealthCare system with cost estimates of up to $300 billion dollars a year due to patient non-compliance,” said Alphonse J. Sasso, VoicePort’s Vice President of Business Development. “Enabling a variety of communication options — phone, text, e-mail and now mobile phone — to pharmacies to deliver messages based on each customer’s preference will help increase compliance, and more importantly, will improve overall health of patients.”
Unwired Nation’s Kinita cross-platform mobile application system uses a simple web-services interface, enabling clients to rapidly deploy and manage mobile web applications that come alive with native features and platform-specific interfaces. VoicePort leverages Kinita Messenger(TM) and other Kinita patent-pending technologies to enable cross-platform push messaging for clients’ apps, providing access to real time dedicated-inbox functionality with native device capabilities for mission-critical enterprise application or high-touch consumer applications. Kinita allows VoicePort clients to manage their mobile web assets as usual, while Kinita manages new platforms, feature updates, app stores, operating system updates and multiple device and OS fragmentation — all as a service.
“We are thrilled to be partnering with VoicePort and bringing our mobile smarts to the pharmacy and pharmaceutical industry, as well as others,” said Eric Smith, Unwired Nation CEO and co-founder. “Any time a company — or a company’s clients — want to take a piece of their business mobile, we hope they turn to Unwired Nation. We’ve figured out the secret sauce in mobile: taking whatever a company has already built in web applications and moving them to native mobile apps in a rapid and scalable manner within hours.”