Author Topic: CVS - CVS Health Corporation  (Read 9087 times)

KCLarkin

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Re: CVS - CVS Health Corporation
« Reply #40 on: February 07, 2017, 10:59:38 AM »
The whole system, with the PBM's handling enormous amounts dollars, seems to me to be totally screwed by discounts, rebates and the likes, - to an extent, so that a price is no longer just a price.

The pharma companies are trying to deflect pricing scrutiny to the PBMs. There seems to be a growing consensus that PBMs are leaching excessive profits out of the system. But a quick sanity check shows this isn't true.

The entire CVS company, including the retail pharmacy, front-of-store sales, health clinics, PBM, and insurance operations only generated Net Income of $5.2 B in 2015. That's about 1% of US drug spending.

PBMs are not the cause of the price increases. PBMs are using their buying power to demand lower prices. Rather than sacrificing profits, the drug companies are jacking up list prices. It is remarkable how effectively the drug companies have scapegoated the PBMs.

John Hjorth

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Re: CVS - CVS Health Corporation
« Reply #41 on: February 07, 2017, 11:31:06 AM »
Thanks for your input here, KCLarkin,

I try to stay open minded about the whole US healtcare system as it is right now, because I do not have enough knowledge about it to make a judgement.

I will take a look at the four major PBMs in the weeks to come.

My post about the rebates, discounts etc. was meant to be read so to say straight out.
”In the race of excellence … there is no finish line.”
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gjangal

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Re: CVS - CVS Health Corporation
« Reply #42 on: February 08, 2017, 01:01:23 PM »
The industry seems to be moving to a place where the PBM function is facing revenue pressure by either being folded into the payers ( Blue shield and prime therapeutics) or with the pharmacy ( CVS Caremark) . The drug wholesalers ( MCK, CAH, ABC) also have to rethink their model. Their revenues are under pressure with pharmacy players consolidating, drug warehousing also is becoming a part of the pharmacy function increasingly ( WBA and ABC)

WBA has made nice moves in this market compared to CVS. They moved to buy Rite aid, struck a deal with prime therapeutics for pharmacy benefits and bought stake in ABC to control warehousing. CVS also has a deal setup with CAH for generics.

Anthem's renewal with Express scripts ( around 14 mm members) may be in question as renewal come up. They might choose to go with prime therapeutics which is co-owned by all the bcbs plans. WBA stands to gain if they do this.

KCLarkin

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Re: CVS - CVS Health Corporation
« Reply #43 on: February 08, 2017, 06:35:18 PM »
Here is an example of the absurd scapegoating that Big Pharma is doing:
https://www.bloomberg.com/news/articles/2017-02-08/seeing-danger-of-trump-s-new-thing-health-group-preps-defense

Quote
The top executive at British drug giant GlaxoSmithKline Plc took a veiled swipe at the PBM industry on Wednesday, citing an industry-sponsored report that out of every $100 of a drug’s list price, only two-thirds ends up back with the drugmaker.

Much of the rest goes to “non-innovators in a system which thinks it’s paying high prices for innovation,”

--
Bob is shopping in a Mexican street market. He spots a beautiful pottery piggy bank. He decides to buy it for his son. "How much?" he asks. "1000 pesos," replies the seller. Bob walks away.

A little while later, he is drinking a Cerveza with his friend Pablo B Morales. He tells Pablo about the beautiful piggy bank. Pablo replies, "You need to haggle harder. Do you want me to go speak to the seller?".

Pablo goes back to the seller and haggles down the price to 500 pesos. Bob gives Pablo 50 pesos in gratitude.

Bob returns the next year. The seller is now selling piggy banks for 1500 pesos.  And tourists are complaining about the high price of piggy banks. The clever seller says, "you must understand. Only 1/2 of the list price ends up in my pocket. Much of the rest goes to non-innovators in the system."

--
List Price: 1000
Net Price: 500
P.B.M: 50

Who are the "non-innovators" who took the remaining 450 pesos?

giofranchi

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Re: CVS - CVS Health Corporation
« Reply #44 on: February 09, 2017, 04:47:14 AM »
Strong Q4 2016 results:
http://seekingalpha.com/news/3241986-cvs-q4-revenues-12-percent-earnings-14-percent-shares-2-percent-premarket

Selling for little more than 13x forward earnings, while still growing sales and earnings at a very healthy rate, CVS looks very interesting.

Can someone sum up the bear thesis?

Cheers,

Gio
Portfolio: ACGL, BRK.B, DIS, FFH, FWONA, IBB, JNJ, JPM, LBRDA, LSXMA, MKL, NKE, QQQ, SBUX, SFTBF, TRV, XBI

DooDiligence

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Re: CVS - CVS Health Corporation
« Reply #45 on: February 09, 2017, 05:32:55 AM »
Here is an example of the absurd scapegoating that Big Pharma is doing:
https://www.bloomberg.com/news/articles/2017-02-08/seeing-danger-of-trump-s-new-thing-health-group-preps-defense

"As part of PBMs’ lobbying plan, they list $100 billion in government savings that could be proposed to Trump and Congress as a way to get drug costs down -- and deeply cut drug and biotech profits. That includes shortening the time during which drugmakers have exclusive sales rights on new treatments and raising taxes on the industry."


Anyone know what time frame the proposed $100B savings would extend over?

What this lobby calls "exclusive sales rights" are patents & they're there to allow pharma manufacturers who've spent $2B+ over a decade or more (not counting the $ on discontinued/failed projects) to actually recoup & turn a profit.

On that note; I submit that they should add an extra year to the "period of exclusivity" in exchange for lower gross margin introductions of branded products & price increases capped to inflation (admittedly difficult to legislate & monitor) & a requirement that the branded producer introduce a generic version 2 years before patent expiration to further allow them to earn a ROIC while lowering drug spend.

The industry should probably get proactive now, on the introduction of generics to its own products.

The last point I raise (in my carefully cherry picked paragraph from the article 😲) is in regards to the lobby's suggestion that taxes would be a solution (taxes, really?)

Express Scripts shows an 8.x% GM & 4.x% OM which doesn't seem egregious.

Pharmas post significantly higher GM's & OM's.

Who's taking the biggest risks with owners capital?

I'm OK with Novo Nordisk dropping prices to remain competitive but how much is enough?

How about some transparency in the rebates (a breakdown on every sales receipt showing list & net prices along with how much of the difference is charged to the patient IN BOLD.)

Heyyyyyy wait a minute - this administration campaigned against regulations.....
abev | aapl | bbh | cri | ew | esrx | nsrgy | nvo | rgr | trow | vde

DooDiligence

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Re: CVS - CVS Health Corporation
« Reply #46 on: February 09, 2017, 06:32:01 AM »
abev | aapl | bbh | cri | ew | esrx | nsrgy | nvo | rgr | trow | vde

KCLarkin

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Re: CVS - CVS Health Corporation
« Reply #47 on: February 17, 2017, 07:23:07 AM »
More lobbying in the DIR battle:
https://naosp.wildapricot.org/resources/Pictures/NASP%20Response%20to%20PCMA%20Comments%20Regarding%20DIR%20Fees.pdf

But this seems to undermine their argument:

Quote
There is no cap on the dollar figure of the percentage fee applied in some DIR Fee programs, resulting in upwards to $1,000 per prescription being pulled back from the specialty pharmacy.

In other words, specialty pharmacies were earning up to $1000 per prescription just from the spread. No wonder the payors are trying to claw this back. And no wonder the pharmacies are fighting so hard to rein in the PBMs.

Basically, specialty pharmacies are charging medicare part D plans up to $1000 per prescription for expensive drugs. What a scam.

--
In other news, the nominee for CMS nominee seems to side with the PBMs:
https://www.youtube.com/watch?v=tqItvm4EaeU

In other words, she is unlikely to press for medicare to negotiate drug prices directly.