Healthcare Medical Pharmaceutical
Market Trends:
  • Retail pharmacies dispensing more complex therapies aligned with specialty pharmacy programs; consumer / paticost sharing of the pharmacy benefit continues to increase
  • Retail store-based medical clinics increasing and providing access to care but competing against physician practices
  • Significant drastic changes in marketing strategy likely with threat posed by Amazon as it prepares to ramp up its healthcare marketing initiatives and conceivably enter the pharmacy care  and PBM market sectors

Assisted Liv
Data Firms
Health Sys
Nursing Fac
Surgery Ctrs

... See how retail pharmacy-based healthcare clinics are changing healthcare delivery in the United States, read the article below for insights ...
Specialty pharmacy is typically involved with advanced therapies and complex patient types.  Therapies dispensed are often referred to as “biologics”or “large molecules”; they can also be conventional oral or injectable products for patients with highly specialized care needs.

Specialty drugs and their patients can be broadly categorized as having a combination of these attributes: 

  • Complex to manufacture and distribute; they require special handling and administration
  • Usually injectable but may be oral; injectables can be self-administered or administered by a clinician
  • Due to being advanced/specialized, they are  costly and taken by a smaller portion of the population
  • Specialty pharmacy patients require more care and are more challenging cases for clinicians to treat 

A large portion of specialty pharmacy patients are covered via Medicare.  While the number of specialty pharmacy patients is relatively small in terms of the overall population, the cost of the medications they require make up a very large portion of total drug spend in both commercial and government healthcare or pharmacy benefit plans.  Specialty pharmacy therapies can run from $10,000 to $100,000 in annual cost.  Depending upon the therapy and the benefit program it is featured in, the product may be covered through the medical or the pharmacy benefit.  Besides storing, shipping specialty products and counseling patients, specialty pharmacies usually spend considerable time and resources verifying coverage of patients and identifying the most appropriate benefit to adjudicate the claim through.

When patients self-inject specialty drugs or take them orally, the pharmacy benefit associated with their health plan often provides coverage through the use of a PBM.  When a clinician administers specialty drug therapies (through an IV or injection), the product is usually covered by the medical benefit.

Clinicians administering intravenous specialty pharmaceuticals under the medical benefit purchase the products and then are reimbursed by payers in an arrangement called “buy and bill".  Buy and bill has been a controversial business arrangement.  Although it has been utilized for years, there have been issues as to how much the product cost when the clinician procured the product and what the clinician actually charged the payer.  

Clinicians would substantially markup products in buy and bill arrangements, especially in oncology. Payers (commercial and government) have put limits on the percentage of markup they will allow physicians to charge them but fixed price arrangements are increasingly becoming the standard.  Hospital outpatient facilities also acquire specialty therapies through negotiating their own terms with manufacturers and bill the payers for the drugs.  

Specialty pharmacies and their services operate through different models. Some are organized as "closed door" pharmacy facilities which do not have storefronts or "walk-in" business, some are operating units of PBMs in conjunction with mail order facilities, others are administered through retail pharmacies equipped and staffed to provide specialty pharmacy services.  Other variations include hybrid specialty pharmacy business models which are combinations of specialty pharmacy and infusion services or specialty pharmacies supporting home infusion providers and / or long term care facilities.  Depending on the size of the organization and therapies offered, they can operate as a hub pharmacy for a manufacturer or have multiple locations servicing regional or metropolitan areas throughout the nation.

The leading therapeutic categories dispensed via specialty pharmacy venues are:

  • Oncology
  • Rheumatoid Arthritis
  • Multiple Sclerosis
  • IBD
  • ESRD
  • IVIG
  • Hemophilia
  • Hepatitis C
  • Growth Hormone
  • Cardiovascular
  • Transplant

Reimbursement in the specialty pharmacy sector can be complex.  Depending on the patient, medication, provider and the plan(s) involved; a claims adjudication pathway could closely resemble a retail pharmacy claim or it could involve separate charges for therapies, per diem payments for supplies, equipment, pharmacy services, non-nursing care services and ​then separate payments for nursing care.  Home infusion is typically paid for under the medical benefit but overall specialty pharmacy reimbursement can be through the pharmacy or the medical benefit depending on the patient, therapy, point-of-care and how the patient's insurance plan (or PBM) chooses to align the payments based on the benefit design.

The CVS Health / Aetna deal was not the only mega deal CVS Health embarked upon in 2017.  In October, 2017, Anthem and CVS Health announced a PBM collaboration called "IngenioRx". It will be a full service PBM operating company jointly managed by Anthem and CVS.  The arrangement will enable Anthem to maintain its own formulary. CVS will see benefits with more business in its specialty, mail order and retail pharmacy units.  CVS not only operates its own "CVS brand" retail drugstores but also the retail pharmacy departments in Target stores as well. CVS will also likely develop healthcare programs to support Anthem members through its store-based MinuteClinics. 

Anthem chose to partner with CVS Health as it was not able to come to an agreement with its present PBM, Express Scripts.  Anthem will transition its business from Express Scripts by the end of 2019.  IngenioRx seems to be closely modeled after an arrangement currently in place between Prime Therapeutics and Walgreens.  In 2016, Walgreens Boots Alliance (WBA) and Prime Therapeutics established a strategic partnership known as AllianceRx Walgreens Prime. It is a combination of specialty pharmacy and mail order pharmacy coupled with pharmacy benefit management services. The organization operates as its own business unit with a dedicated management team; IngenioRx has many parallels to this arrangement.

CVS Health and Target Corporation announced in December, '15 that CVS Health completed the acquisition of Target’s pharmacy and clinic businesses for approximately $1.9 billion. CVS Health gains Target’s 1,672 pharmacies across 47 states and will operate them through a store-within-a-store format, branded as CVS/pharmacy. In addition, a CVS/pharmacy will be included in all new Target stores that offer pharmacy services. 79 Target clinic locations will be rebranded as MinuteClinic and CVS Health will open up to 20 new clinics in Target stores within three years.  

The CVS / Target arrangement is different and challenging. CVS gains additional locations and placement within the mass merchandiser market sector of the retail pharmacy segment. The prescription volume of a Target retail store is often considerably less than that of a chain drugstore. CVS will need to formulate a strategy to increase prescription volume in the Target units. One option to support this measure may be to open more Minute Clinics within the Targets which can generate additional prescriptions for the pharmacies. 

CVS Health acquired Omnicare in May, 2015 for $12.7 billion dollars. Omnicare has 13,000 employees at 160 locations across 47 states. This significantly lengthens CVS Health's reach into assisted living and long term care market segments. It also helps grow its specialty pharmacy business.

CVS Health acquired Coram, the specialty pharmacy/home infusion unit of Apria Healthcare, for $2.1 billion dollars in late November, 2013. Coram services over 20,000 patients per month and generates over $1.1 billion dollars in annual sales. The addition will expand the presence of CVS Health in the specialty pharmacy and home infusion markets --plus enable it to compete directly with the specialty pharmacy and home infusion business units of Walgreens. CVS Health has a well-fortified position in the U.S. healthcare market. Prior to the addition of Coram, the company had already established a specialty infusion business unit and collectively, they augment the other health and pharmacy services CVS Health provides.

Since the 1990s, CVS has cultivated its retail pharmacy business through organic growth and acquisition. Over the years they have acquired Longs, and Arbor pharmacy retailers plus parts of Eckerds, Sav-On and Osco chain drugstores. They bought Caremark, a leading PBM and mail order pharmacy provider, in 2006 which is one of the largest operations of its kind in the nation.  

During 2006, CVS also bought MinuteClinic, the healthcare unit which provides patient medical care within CVS stores provided by nurse practitioners. The in-store clinic business model is a steady driver of change in the delivery of healthcare across the nation. Their care offerings continue to expand and managed care plans have endorsed their value by including them in their approved provider networks.  

Moving forward, there are numerous directions for CVS Health to grow. In 2013 they acquired about 80% of retail drugstore chain Onofre (44 stores) in Brazil as an entrance into international markets and entered into an agreement to pool their generic drug purchasing with Cardinal Health to assert more leverage on generic drug manufacturers and improve operational efficiencies. 

CVS Health will continue to assertively address healthcare reform opportunities. They have already partnered with several healthcare systems in various regions of the United States. This will widen revenue streams and enable them to apply their business units synergistically and play a wider role as a pivotal healthcare provider in the United States.  For 2017, their goals will clearly focus on countering Walgreens and their partnership with Prime Therapeutics plus Walgreens victory in being awarded the TRICARE contract for retail pharmacy. 

Walgreen Co. is another leader in pharmacy services undergoing change. In 2012 they acquired a sizable portion of Alliance Boots, an international chain drugstore and wholesaler, then shortly thereafter finished the deal by completely merging the companies to form "Walgreens Boots Alliance". This formed a global pharmacy services brand which bridged the Boots brand into the U.S. and the Walgreens brand into multiple nation markets outside of the United States. In September '16 they entered into a strategic alliance with Prime Therapeutics, the nation's fourth largest PBM which is owned / operated by 14 BCBS plans.

During 2013, Walgreen Co. announced it was acquiring Kerr Drug of North Carolina. One of the last sizable, privately held retail pharmacy chains, Kerr operates 78 retail stores and a specialty pharmacy. Kerr's long term care pharmacy was not part of the sale. Walgreens also entered into an agreement to acquire an initial 7% stake of wholesaler AmerisourceBergen with the ability to own up to approximately 25% of the company. Key objectives in this arrangement are to pool generic drug purchases for greater leverage over generic drug manufacturers as well as to increase efficiencies in distribution and operations. 

Walgreens has re-branded its in-store patient clinics from "Take Care" to "Healthcare Clinic" and in 2014 sold the majority of the unit to Water Street Health Care Partners, a private equity firm. Walgreens continues to be the entity's primary business partner and still owns a small stake in the venture. The company continues to grow its home infusion business and operates a mail order pharmacy unit as well. The company had developed a PBM unit in the mid 90s but decided to scale back on its growth and eventually sell it to another PBM, CatalystRX. Shortly thereafter, CatalystRx was acquired by a larger PBM, Catamaran. In 2015, Catamaran was subsequently purchased by United Healthcare.

In August, '16 Walgreens Boots Alliance WBA announced it was partnering with pharmacy benefit manager Prime Therapeutics to reduce drug procurement costs. Prime Therapeutics, the nation's fourth-largest PBM, is owned by 14 leading Blue Cross and Blue Shield health plans. The companies will combine central specialty pharmacy and mail order service units and introduce a new retail pharmacy network; the new organization, known as "AllianceRx Walgreens Prime" launched in early April, '17.

Specialty pharmacies provide drugs to people with costly, chronic conditions such as rheumatoid arthritis. Walgreens has four central specialty pharmacies that primarily provide mail order services; they will augment the specialty pharmacy capabilities of Prime Therapeutics. The combined entity will be owned by Walgreens and Prime Therapeutics, but will have a separate board and executive team.  

In September, 2017, after a series of changes due to financing and regulatory issues, Walgreens was approved to acquire 1,932 stores from Rite Aid for about $4.4 billion.  Rite Aid will be left with about 2,600 stores.  Another company, Fred's Pharmacy, which was in the mix to also acquire Rite Aid stores via the Walgreens - Rite Aid deal, exited the dealings.  Moving forward, it will be interesting to see how Walgreens integrates the Rite Aid units by either re-branding or closing them depending upon where they are located to existing Walgreens stores.  Rite Aid will still have a sizable number of stores but far less than Walgreens or CVS.  They may be able to move forward with the 2,600 stores or perhaps seek another deal with Fred's; Walmart is another possible player in retail pharmacy which may seek to acquire them.

Institutional/compounding pharmacies are distinctly different service providers. They support healthcare systems, home infusion companies, hospitals, long term care facilities and physician/clinic-based care providers. Their business is based on more specialized products which they produce on a contract basis for various providers; those with high volume, specialized capabilities are registered as "503Bs".

An assortment of State and Federal regulators have expressed concern about and seek clarification on the status of compounding pharmacies as being manufacturers of product versus pharmacy providers.  This originates from the New England Compounding Center's (NECC) safety violations which produced defective product that caused deaths and hospitalizations for patients who contracted meningitis from their use. NECC was affiliated with a larger compounding pharmacy entity, Ameridose. Both commercial enterprises have ceased to operate.  There is ongoing dialogue between government, provider and healthcare product manufacturers as to how compounding pharmacies will be categorized and subsequently regulated moving forward.  It is a complicated issue, the NECC meningitis outbreak occurred in 2012 and there was already regulatory / classification discussions underway prior to it, going into 2018 there are indications affirmative steps beyond intense dialogue and fact-finding.  

In October, '15 AmerisourceBergen acquired PharMEDium for $2.58 billion; this fortified their position in large scale, institutional pharmacy services. Margins within the compounding pharmacy unit are substantially higher than the drug wholesaling business. PharMEDium is expected to ramp up quickly during 2017 to fulfill opportunities via AmerisourceBergen channels and grow the legacy PharMEDium book of business.
Mail order pharmacies offer home delivery of prescription medications which are maintenance therapies (blood pressure, cholesterol, diabetes, oral contraceptives, etc.). In addition, they often provide specialty pharmacy services for advanced injectable and biological therapies. A number of managed care organizations, PBMs and the larger retail pharmacy chains operate their own mail order pharmacies. Key managed care attributes include:

  • Advanced clinical/financial reporting for payers/plans/providers
  • Convenience for members
  • Economical prescription drug access for consumers/patients
  • Close formulary management
  • Rapid, large scale brand to generic conversion upon brand expiration
  • Specialty pharmacy service attributes for advanced therapies 

... A list of Mass Merchandiser Pharmacies ...
... A list of Mail Order Pharmacies ...
... As Amazon expands its business into the healthcare sector, pharmacy retailers may find themselves under siege ...
... This is a list of Retail Pharmacies; scroll down for Mass Merchandiser Pharmacies, Compounding Pharmacies, Mail Order Pharmacies, Specialty Pharmacies plus healthcare marketing presentations, pharmacy market trends ...
... A list of Compounding Pharmacies...
... Find out more about Compounding Pharmacies, visit the learning resource below ...
*Pharmacies within Target stores are owned / operated by CVS Health...
... A list of Specialty Pharmacies ...
.......A recent development in early August, 2017; PharMerica was acquired by private equity firm KKR with Walgreens Boots Alliance (WBA) as a minority partner.  The $1.4 billion dollar deal enables PharMerica to grow under the guidance and resources provided by KKR and Walgreens.  It also prevents WBA competitors BioScrip, CVS Health or Optum from acquiring PharMerica.......
.......A recent development in early August, 2017; PharMerica was acquired by private equity firm KKR with Walgreens Boots Alliance (WBA) as a minority partner.  The $1.4 billion dollar deal enables PharMerica to grow under the guidance and resources provided by KKR and Walgreens.  It also prevents WBA competitors BioScrip, CVS Health or Optum from acquiring PharMerica.......
... There are multiple factors triggering change in pharmacy; mergers / acquisitions are frequent occurrences and a growing biosimilar pharmaceutical sector are two catalysts of changes ... 
Visit HMPD's LinkedIn company site and showcase pages or see Facebook updates...

Follow me on Twitter and Pinterest; connect and network with me at LinkedIn by clicking my name below:

Healthcare Marketing
Digital Marketing 
Managed Care Marketing
<img src="56362856.jpg" alt="registered pharmacist working in a specialty pharmacy">
...In December, 2017, CVS Health announced it was acquiring Aetna for $69 billion dollars. Presumably, CVS Health is seeking to acquire Aetna to widen its business model and fortify its position against Amazon who is laying groundwork to enter the pharmacy sector. The CVS Health / Aetna tandem will have wide impact across multiple healthcare sectors such as employee benefit consultants, PBMs, MCOs, physician practice groups, health systems and retail, mail order and specialty pharmacy.  Checkout this link for more details...

....... A healthcare industry resource for pharmaceutical, medical device and clinical care marketing strategy, digital marketing, market trends and managed care: a global community of users from 50+ nations .......