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Gilead [Shared]

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Ali Alatas

on 25 January 2017

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Transcript of Gilead [Shared]

Government Pricing Program Training
Follow
the Pill

Overvie
w

of Drug
Suppl
y Chain

Direc
t

Sale

Charg
eback
Sa
le

Manu
facturer

Phar
macy

Whol
esaler

Utiliz
ation
Rebat
e Sale

Pharmac
y Benefit
Manage
r (PBM)

Group P
urchasing
Organiza
tion (GPO)

Manag
ed Care
Organizat
ion (MCO)

Fee-for
-Service
Manag
ed Care
Role wi
thin Drug S
uppl
y Chain
Streng
ths and
Chall
enges
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Overview of the Model
Insured Patient
Drug (Contract Price)
Contract
Payment
Data
Drug (WAC)
Possession Takers
Wholesaler
Manufacturer
MCO/Insurance
Non-Possession Takers
Pharmacy/Provider
GPO
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Overview
The following are the three major types of transaction relationships within the drug supply chain:
Direct Sale
Chargeback/Indirect Sale
Utilization Rebate Sale
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Direct Sale
Wholesaler
Manufacturer
Drug (WAC)
Payment
or pharmacies and hospitals and doctors
PBM
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Chargeback/Indirect Sale
= $100
Pharmacy/Provider
Wholesaler
Manufacturer
Contract to purchase at
$60
$98
(2% PPD)
$60
$40
Chargeback Claim
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Manufacturer
Manufacturers are the source of the prescription drugs in the pharmaceutical supply chain. The pharmaceutical manufacturing industry is composed of two distinct business models: manufacturers of brand-name drugs and manufacturers of generic drugs. There are few pharmaceutical companies that participate in both the branded and generic parts of the industry.
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Wholesalers
Now moving to provide services and technology solutions, which include:
Specialty drug distribution
Drug repackaging
Electronic order service
Drug buy-back program
Purchase product directly from the manufacturer and distribute to customers, which include pharmacies, hospitals, long-term care facilities and other medical facilities
Originally provided traditional distribution function:
warehousing products
managing inventory
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Wholesalers
Negotiate discounts on generic drugs based on ability to drive market share or increase volume sold by wholesaler
Purchase branded drugs from manufacturer at a discount off of Wholesaler Acquisition Cost (WAC). These discounts relate to:
Prompt-pay discounts
Volume discounts
Sell branded drugs to end consumer (i.e. pharmacy) at WAC plus some negotiated percentage
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Wholesaler
Manufacturer
Wholesaler:
These top 3 wholesale distributors collectively account for 88% percent of the wholesale market (valued at $212 billion in annual sales)
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Pharmacy
Pharmacies are the final step in the pharmaceutical supply chain before drugs reach the patient. Pharmacies purchase drugs from wholesalers, and occasionally directly from manufacturers, as we’ve previously shown in Direct and Chargeback/Indirect Sales, and then take physical possession of the drug products.
After purchasing pharmaceuticals, pharmacies assume responsibility for their safe storage and dispensing to consumers. Pharmacy operations include maintaining an adequate stock of drug products, providing information to consumers about the safe and effective use of prescription drugs, and facilitating billing and payment for consumers participating in group health benefit plans.
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Pharmacies
Specialty Pharmacies
Specialize in high cost, complex drug therapies
Long-Term Care Pharmacies
Serve nursing homes and other
Sector dominated by Omnicare, PharMerica, NeighborCare and Kindred Healthcare
Additional operational responsibilities include:
Contracting with Pharmacy Benefit Managers (PBMs) to join their network
Generating utilization data that PBMs, health plans, employers, governments and other payers rely on to measure consumer activity
Pharmacy types
Walk-In Retail Pharmacies
55,000+ in US
Examples include CVS, Walgreens
Mail Order Pharmacies
Fastest growing retail sector (+25% in 2013)
Majority are owned and operated by PBMs or large chain drug stores
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Pharmacies
Number of Prescriptions by Pharmacy Type, 4.2 billion in 2013
Prescriptions (Mn)
Independent
17.5%
Food Stores
12.7%
Mail Service
5.2%
Long-Term Care
8.2%
Chain Stores
56.4%
Data Source: IMS Health, National Sales Perspectives, National Prescription Audit, Jan 2014
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Utilization Rebate Sale
Insured Patient
Drug (Contract Price)
Contract
Payment
Data
Drug (WAC)
Wholesaler
Manufacturer
MCO/Insurance
Pharmacy/Provider
GPO
PBM
= $100
$10
$102
$98
(2% PPD)
$40
$88
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Pharmacy Benefits Manager
Performance risk
Customer service (adequacy of pharmacy network, timeliness of reporting)
Clinical quality measures (averting use of inappropriate medications)
Cost management (number of generic substitutions in a given time period)
Contract with health plans to manage prescription drug costs on behalf of pharmacies and consumers
Payment to PBMs usually has three components
Payment for administrative services
Claims adjudication processing
Disease management services
Retain a portion of the rebates secured from manufacturers through negotiations (the rest gets distributed to the pharmacies it represents)
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Pharmacy Benefits Manager
PBM Market Share 2014
(by percentage share of 226.87 million PBM lives)
Prescriptions (Mn)
Independent
17.5%
Prime Therapeutics
7.9%
Other
8.3%
CVS Caremark
22.1%
Express Script
3.8%
Data Source: Health Strategies Pharmacy Benefit Managers Research Agenda, 2015
OptusRX
10%
Catamaran
12.3%
Humana Pharmacy Solutions
3%
MedImpact
2.6%
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Group Purchasing Organization
GPO negotiates an admin fee from manufacturers for bringing in business
Fee is usually 3% (anything over that is considered an incentive by the government)
Negotiates with manufacturers on behalf of groups of hospitals, small pharmacies, etc.
Provides lower price through increased negotiating power
Shareholders pay a fee to the GPO for this service
Calculation
Admin fee = 3% x member utilization x cost per unit
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Managed Care Organization
Returning to the Utilization Rebates Example, a managed care organization (MCO) acted as the insurance and contracted with a PBM to help manage the prescription options and costs available to its insured patient.

There are many different MCOs, but they all share the same major objective, which is to supervise the financing of medical care delivered to members.
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Managed Care Organization
Traditional Fee-For-Service Health Care Model
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