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New Data on Pharmacy Industry Market Share

With little fanfare, NACDS just released its new estimates of 2009 pharmacy revenues and prescriptions. See Industry Facts-at-a-Glance.

Check out the charts below for my summary of prescription revenues and number of prescriptions for the five major drug dispensing formats. The data nicely illustrate key trends that are transforming the pharmacy industry:
The shift to high-cost specialty pharmaceuticals

The dampening effect of generic drugs on retail revenues

The slowdown in mail prescription growth

The slow-motion decline of independent pharmacies
Don’t just take my word for it. Please post your thoughts and predictions about these newly-released data in the comments below.

NCPA’s New CEO and the Pharmacy Industry’s Future

On Sunday, the National Community Pharmacists Association (NCPA) announced the appointment of Kathleen Jaeger as Executive Vice President and CEO. Ms. Jaeger was most recently President and CEO of the Generic Pharmaceutical Association (GPhA).

I’m impressed by this selection. NCPA has chosen an experienced association director and Washington insider. I expect her to upgrade NCPA into a more professional organization, assuming that the old guard doesn’t block her from making the necessary changes.

Ms. Jaeger’s appointment illustrates how the balance of power is shifting in U.S. drug channels.

GPhA became a powerful lobbying organization during Ms. Jaeger’s tenure—a period which also corresponded to an increase in the retail generic dispensing rate (GDR) from about 40% in 2002 to more than 70% today. Retail GDR will exceed 80% within two years, so generics represent the future of the pharmaceutical industry.

But generic drugs turn pharmaceutical channel economics upside down. The costs of distributing and dispensing a traditional (non-specialty) generic drug far exceed the actual cost of the medicine, which is the opposite of brand-name drugs. As a result, the economic interests of companies within the U.S drug channel—pharmacies, wholesalers, and PBMs—are diverging from brand-name drug manufacturers.

Intriguingly, GPhA often aligned with the Pharmaceutical Care Management Association (PCMA), which represents the pharmacy benefit management (PBM) industry. Members of both associations gain with increases in the generic dispensing rate. Members of NCPA also gain from a higher GDR because the average generic prescription is more profitable for a pharmacy than the average brand-name prescription. (Yes, this really is true despite the howls of protest that you often read in comments on Drug Channels.)

In contrast to the PCMA-GPhA relationship, NCPA and PCMA are usually at odds on most issues due to the underlying economic relationship between PBMs and pharmacies. Ms. Jaeger’s background implies that she understands the true economics of the PBM business today, such as the fact that the majority of a PBM’s profits come from dispensing generic drugs from their own mail-order pharmacies while retail network spreads are a comparatively small source of profits. Can we presume that NCPA’s messaging will start to more accurately reflect the real economics of today’s drug channels? Perhaps no more odd reactions to Walmart announcements?

This appointment also fuels NCPA’s expanding political ambitions. As I note in The Politics of Pharmacy, the NCPA’s Political Action Committee (PAC) has become one of the largest association PAC in the country. Whether it’s good or bad…well, that’s a different question.

I counsel my pharmaceutical manufacturer clients to break down functional silos and improve cross-departmental collaboration as channels consolidate and converge. Effective channel management starts with an economic understanding of how the revenue from an individual prescription gets divided between the manufacturer, the wholesaler, the pharmacy, and the PBM. The growing political savvy of trade associations makes this effort more important than ever.

NACDS honors pharmacy industry leaders

The National Association of Chain Drug Stores (NACDS) recognized Charles Vance Burnett, JD, BS Pharm, and Stanley F. Barshay, with its highest honors at the 2010 annual meeting in Palm Beach, Fla.

Burnett, senior vice president, pharmacy, Costco, received the Sheldon W. Fantle Lifetime Achievement Award. Barshay, former chairman of Schering-Plough Consumer Health Care Products, was honored with the Robert B. Begley Award.

Established in 1989, the Lifetime Achievement Award was renamed in 1996 in honor of the late Sheldon “Bud” Fantle of People’s Drug Stores. The Begley Award, established in 1980, is named in memory of former NACDS Chairman of the Board Robert B. Begley and honors great personal warmth, generous spirit, and long-time service to the industry.

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