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Moody’s: Rx credit rating threatened by patent expirations, debt

BY DSN STAFF

NEW YORK —A combination of patent expirations and rising levels of debt could put the drug industry’s strong overall credit rating at risk, according to one of the largest credit-rating firms in the country.

Moody’s Investors Service said in a report last month that pharmaceutical industry debt increased by 117% to $270 billion at the end of 2009, compared with $124 billion at the end of 2006. The higher levels of debt could make it difficult for drug companies to buy other companies without hurting their credit scores, according to the report titled “Pharmaceutical Industry Levers Up.”

“The rise in industry debt leaves reduced cushion in credit metrics, making pharmaceutical ratings vulnerable to ongoing downward pressure,” Moody’s SVP Michael Levesque said. Still, drug companies have a better overall credit rating than most industries, Moody’s said, with 20 companies still having “A” ratings.

In addition, some of the bigger companies have used acquisitions for the specific purpose of cushioning themselves against the effects of patent expirations. Pfizer acquired Wyeth, and Merck acquired Schering-Plough, particularly to get their hands on those companies’ large pipelines of high-cost specialty drugs, including biotech drugs for treating autoimmune disorders and cancer.

With imminent expirations of the patents for top-selling drugs like Pfizer’s cholesterol-lowering medication Lipitor (atorvastatin)—which had 2009 sales of $7.5 billion, according to IMS Health—Van Leeuwenhoeck Research managing partner Marcel Wijma thought the age of the blockbuster is coming to an end. But high-cost specialty biotech drugs could make up for some of those lost sales. Some biotech drugs already have made IMS’ list of the top 15 drugs by sales, such as Enbrel (etanercept) by Amgen and Pfizer, and Amgen’s Epogen (epoetin alfa) and Neulasta (pegfilgrastim), all of which had sales of $3 billion or more in 2009. “Some biotech drugs have blockbuster-like sales figures because they cost more, not because they have markets of millions of patients, the way block-buster pharmaceuticals do,” Wijma told Drug Store News.

Pharmaceutical companies with largest increases in debt

Reported total debt*

Reported cash & investments*

* In U.S. millions; fiscal year** Represents the periods ended March 31, 2007, and Sept. 30, 2009, respectively† Reflects Moody’s credit ratingsSource: Moody’s Investors Service, April 2010
  Change in debt*
Company 2006 2009 (+/-) 2006-2009 2006 2009
Pfizer (A1)† $7,980 $48,662 $40,682 $31,605 $39,091
Roche (A2)† 6,753 41,031 34,278 20,610 18,253
GlaxoSmithKline (A1)† 10,745 26,253 15,508 6,813 11,735
Merck (Aa3)† 6,836 17,454 10,618 16,501 10,037
AstraZeneca (A1)† 1,223 11,063 9,840 7,842 11,586
Johnson & Johnson (Aaa)† 6,593 14,541 7,948 4,100 19,425
Novartis AG (Aa2)† 7,299 13,988 6,689 10,268 18,824
Eisai (A2)†** 2 4,702 4,700 2,469 2,370
Abbott Laboratories (A1)† 12,411 16,456 4,045 2,603 11,065
Sanofi-Aventis (A1)† 9,157 12,664 3,507 2,945 8,171

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Retail clinics: Improved care at a lower cost

BY Michael Johnsen

WHAT IT MEANS AND WHY IT’S IMPORTANT Retail clinics. Save. Money. Without regard to who’s footing the bill exactly — healthcare payer or Jane Patient — retail clinics not only represent a significant cost savings across the board, but by siphoning nonemergency-yet-still-urgent cases out of the emergency rooms and doctors’ offices, retail clinics also can contribute to improved care across the healthcare continuum.

(THE NEWS: Study: Retail clinics save nonemergency patients money. For the full story, click here)

All told there were 119.2 million total ER visits in 2006, up 8.2% as compared with 2004, according to ACEP. Extrapolate that figure with WellPoint’s finding that 19.4% of those visits may be for nonemergencies across the entire nation, and the fuzzy math equates to an approximate 23.1 million non-emergency patients presenting across some 3,833 ERs. For whoever is paying for the cost of care, that’s an expenditure totaling $10.2 billion if every case were to present at an ER; as compared to $1.2 billion if every case were to present at a retail clinic. That’s the cost savings piece.

But cost savings aren’t the only benefit retail clinics afford the overall healthcare system —  there’s a general improvement in care. According to the American College of Emergency Physicians, average waiting times for patients triaged with non-emergency ailments at emergency departments range between one and two hours, but only when the ER isn’t crowded. That’s like saying that bee stings don’t hurt, you know, except when they do.

Let’s face it, in a nation of 309 million and counting, there are simply not enough points of care, be it for an emergency or nonemergency situation. Taking nonemergency visits out of emergency rooms would likely improve the efficiency of care for more critical patients, as well as the experience of care for noncritical patients. That’s the improved care piece.

Improved care at a lower cost, that’s what retail clinics bring to the table.

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Tide brings Loads of Hope to Dollar General

BY Allison Cerra

NASHVILLE Tide brought its mobile laundromat to a local Dollar General to benefit victims of the recent floods.

Tide’s Loads of Hope program visited a Nashville Dollar General May 12 to provide customers in the area with clean laundry. One truck and a fleet of vans house more than 32 energy-efficient washers and dryers that are capable of cleaning over 300 loads of laundry every day. Tide washs, dries and folds the clothes for these families for free.

The Loads of Hope program also benefited victims of Hurricanes Katrina and Ike, in addition to other natural disasters.

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