Retail Pharmacy Trends. Ed Escalante, VP/GM Edgar Cardona, VPS May 13, 2013 San Francisco, CA

Transcription

1 Retail Pharmacy Trends Ed Escalante, VP/GM Edgar Cardona, VPS May 13, 2013 San Francisco, CA

2 About this presentation Knowing Your Market Helps You Plan Ahead Understanding the latest retail pharmacy trends can help you evaluate your opportunities. The following slides outline industry developments: Pharmaceutical market growth across distribution channels Branded and generic drug shifts PBM consolidation Accountable Care Organizations (ACOs) and limited networks Consumers choice of retail pharmacy Specialty pharmacy McKesson provides this third-party information as a service to those interested in pharmacy ownership. While all information is believed to be reliable at the time of writing, the information provided here is for reference use only and does not constitute the rendering of legal, financial, commercial, or other professional advice by McKesson. Readers should consult appropriate professionals for advice and assistance prior to making important decisions regarding the sale or purchase of a business. McKesson are not responsible for, nor bear any liability for, the accuracy, efficacy or reliability of the content provided herein McKesson Corp. All rights reserved. 2

3 US Pharmaceutical Market Growth US Pharmaceutical Spending, Overall growth of the $350.0 pharmaceutical market is slow but relatively stable. Downward pressures: Weak brand pipeline Generic substitution Cost containment/ reimbursement Upward trends: Price increases Spending $ in Billions $300.0 $250.0 $200.0 $150.0 $100.0 $92.6 $85.7 $89.3 $81.4 $82.1 $199.1 $203.5 $215.0 $219.3 $227.3 Aging population and $50.0 greater demand for prescriptions Healthcare Reform $ Retail Channels Institutional Channels Source: 2011 IMS Top-Line Market Data, IIMSHealth.com, Updated February 23, 2012 ( McKesson Corp. All rights reserved. 3

4 Prescriptions Dispensed by Channel Chains dominate, dispensing more than half of all retail prescriptions (Rx). Independent pharmacies, however, continue to be a substantial channel with the number of outlets remaining steady for about a decade (approximately 21,000 locations) Market Share (% Rx) 18% Retail Channels Total Rx (million) Share (%) 12% 18% 53% Chain / Mass 2,212 53% Independent % Grocery % Mail Order % Total US Retail , % Source: Pembroke Consulting, Drug Channels. April 10, McKesson Corp. All rights reserved. 4

5 Retail Pharmacy Gross Margin 2010 Drug Store Gross Margin The US Census Bureau reports that for more than a decade the drugstore average gross margin has remained steady at 25.4% of sales (plus/ minus 1%). CVS Caremark Walgreens 28.1% 29.7% While the NCPA shows similar stability in Independent pharmacies gross margin (average 22.6% from 2006 to 2010) and increases in recent years their margin is less than the industry average. Rite Aid 26.5% Industry Avg* 25.4% Independents 24.0% 20.0% 22.0% 24.0% 26.0% 28.0% 30.0% Source: Pembroke Consulting, Drug Channels. May 5, 2011, US Census Bureau NAICS Code 44611; Company Reports; NCPA 2012 McKesson Corp. All rights reserved. 5

6 Mail Order % Change in Mail Prescriptions from Previous Year The past several years show a decline in the growth of mail-order prescriptions, with negative growth in Reduced cost benefit to consumers and level playing field requirements of Medicare Part D (about 20% of the market) are likely downward pressures. 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% 9.0% 10.3% 8.1% 8.6% 13.2% 10.8% 4.2% 4.0% 1.9% 1.1% PBMs, however, are expected -2.0% -0.4% -1.5% to continue to steer patients toward this channel. -4.0% Source: Pembroke Consulting, Drug Channels. April 12, McKesson Corp. All rights reserved. 6

7 Generics Generics Market Share 2006 vs The percent of generics dispensed is reaching an all-time high, with 15% growth in market share driven by consumer acceptance and PBM strategies. 100% 90% 80% 37% 22% Within 6 months of a brand drug s loss of patent, patients received the generic form of the drug 80% in 2010, compared to just 55% in In 2010, retail pharmacies actually dispensed generics about 72%, whereas the Big 3 Mail Order facilities rates averaged about 61%. Generics will reach a saturation point at some point, but the ceiling is unclear as blockbuster brand drugs reach the patent cliff over the next several years. 70% 60% 50% 40% 30% 20% 10% 0% 63% 78% Generics Brand Source: NCPA s The Dose, May 5, 2011, NCPA McKesson Corp. All rights reserved. 7

8 Brand Drug Expiry Value of Expiring Brand Drug at Risk to Generics An unprecedented $35.0 volume of brandname drugs will lose exclusivity and face generic competition over the next five years. In 2012, over $35 billion in branded pharmaceutical Constant US $Billions $30.0 $25.0 $20.0 $15.0 $10.0 $5.0 $11.1 $28.6 $6.1 $13.8 $12.5 $6.4 $2.2 revenue is at risk to generic. All in all, by 2015, about $102 billion could be at-risk. Blockbusters $ $ Levaquin Zyprexa Lipitor Plavix Seroquel Actos Singulair Lexapro Diovan Cymbalta Oxycontin Asacol Niaspan Nexium Copaxone Celebrex Namenda Lovaza Abilify Crestor Zetia Humira Vytorin Strattera * Estimated expiry dates are subject to change due to patent litigation, additional patents, exclusivities Source: Medco, Accessed on 8/1/2012. Pembroke Consulting, Drug Channels. Sep 8, 2011, McKesson Corp. All rights reserved. 8

9 PBMs % Retail Prescription Claims by PBM (2012 Estimate)* In 2012, PBMs continue to CVS/Caremark 19.0% consolidate: Express Scripts 15.0% Express Scripts acquisition of Medco makes it the largest PBM (115 mil lives) SXC acquired both Catalyst and Health Trans + Medco Medco OptumRx/Prescription Solutions Catalyst Health Solutions + SXC SXC 6.0% 4.0% 9.0% 14.0% Prime Therapeutics 5.0% These mergers have created discussion around what impact consolidation with have on the health care system efficiency, access, and costs. Humana Aetna Cigna Other PBMs Cash Pay (non third party) 4.0% 2.0% 1.0% 10.0% 11.0% 0.0% 5.0% 10.0% 15.0% 20.0% * US Retail Prescription claim volume ; Excludes claims dispensed by mail-order pharmacies Source: Pembroke Consulting, Drug Channels. Apr 2, Atlantic Information Services Inc., Survey Results: Pharmacy Benefit Trends & Data, Chapter 6 (aishealth.com/sites/all/files/pharm_gdru_ch6.pdf;) 2012 McKesson Corp. All rights reserved. 9

10 Limited Networks Although today there is relatively little penetration of limited pharmacy networks, they are predicted to grow rapidly over the next 5 years, especially in Medicare Part D plans. Today The Pharmacy Benefit Management Institute s 2011 survey (representing 6 million members) found: 21% had a limited pharmacy network, while 13% didn t know Limited Networks are more common among employers with 20,000+ lives (37%), versus those with under 2,000 lives (19%) Future It s predicted that over the next five years, limited networks will continue to grow as PBMs seek addition ways to curb drug spending. Preferred or limited networks will become the norm in Medicare Part D, with focus on cost and care increasing. Source: Prescription Drug Benefit Cost and Design Report (Online), Pharmacy Benefit Management Institute , Page 10 ( McKesson Corp. All rights reserved. 10

11 Accountable Care Organizations The Retail pharmacist s role in ACOs is still unclear. Pharmacy Advocacy groups are promoting the positive outcomes when pharmacists contributed in team-based models providing patient care and prevention (e.g., medication safety, MTM, adherence, immunizations). Pharmacy connectivity plus the ability meet the monitoring and evaluation requirements is another critical factor shaping the role pharmacists play in ACOs. ACO Basics The Affordable Care Act (ACA) authorized CMS to contract with Accountable Care Organizations (ACOs) to provide health care to fee-for-service to Medicare beneficiaries. While a range of provider organizations can manage an ACO, all must: Coordinate patient care across settings (e.g., physician offices, hospitals, long-term care facilities) Demonstrate slower growth in health care costs while meeting patient access and quality standards Let patients leave the network CMS estimates between 50 to 270 ACOs will form over the next three years, affecting two million Medicare beneficiaries. HHS estimates that ACOs could save up to $960 million in the first three years. Source: Healthcare.gov Academy of Managed Care Pharmacy, Pharmacists as Vital Members of ACOs, McKesson Corp. All rights reserved. 11

12 Consumer Prescription Needs About one-third of all customers report using a second or third retail pharmacy because of proximity and cost issues. This creates an opportunity for their primary pharmacy to retain these scripts with delivery services, price matching and other customer services. # Pharmacies Used to Meet Consumer s Prescription Fill Needs Reasons Why Consumers Use Multiple Pharmacies 5% Proximity 21% # pharmacies used: % 27% Cost Lack of Availability Urgent Need 6% 11% 13% 0% 10% 20% 30% Source: Drug Store News. How consumers choose a primary pharmacy. April McKesson Corp. All rights reserved. 12

13 Specialty Pharmacy 2011 Estimated Specialty Drugs Market Share Specialty pharmacy is evolving: In 2011, specialty drugs represented about 17% of the pharmacy industry s total revenues The top 3 specialty pharmacy providers generate about two-thirds of the revenue, whereas the next two largest had a total share of about 4% PBMs remain the largest participants in the specialty market Manufacturers strategically choose pharmacies with the distinctive capabilities required to efficiently and effectively serve specialty patients, providers, and payers. 2% 2% 33% 10% 11% 23% 20% (Total Revenue $46.9 billion) CVS Caremark Accredo (Medco) CuraScript (ESI) Walgreens/BioScript Diplomat Omnicare All other retail & specialty pharmacy Source: Pembroke Consulting, Drug Channels, May 8, 2012, Pembroke Consulting, Drug Channels. June 12, 2012, McKesson Corp. All rights reserved. 13