Optimizing SKU lineup equals success with Curtis at Costco
ISSAQUAH, Wash. — Vic Curtis has come a long way since he began working for Costco Wholesale in 1991 as a pharmacy manager.
Recently, he was promoted to SVP pharmacy and has seen action in prescription and OTC merchandising, pharmacy operations, mail-order and Internet-based pharmacy, and pharmacy benefit management services, as part of Costco’s team led by Charlie Burnett, the “dean” of Costco’s pharmacy/health and beauty business.
With Costco’s limited SKU format, success hinges on being able to turn and optimize its SKU lineup, thus keeping the best performers, Curtis told Drug Store News. “Costco’s sales continue to be strong even in this tough economy,” he said. “We believe stepping up our efforts to increase the value and quality of the products we sell is resonating with our members,” he said. In his capacity and because of Costco’s unique “item management” approach to the business, Curtis and his team have the ability to make any single SKU an overnight sensation.
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Biosimilars regulations unlikely to unfold soon
As soon as members of Congress took their seats last month, the new Republican majority announced it would make good on its pledge to repeal the Patient Protection and Affordable Care Act. The effort largely is symbolic and unlikely to succeed, so at least one portion of the healthcare-reform law will likely remain in effect, namely the abbreviated approval pathway for follow-on biologics, also known as the Biologics Price Competition and Innovation Act.
In November, the Food and Drug Administration sponsored a public meeting to collect input from interested parties about what form regulations for follow-on biologics will take. The meeting was attended by the Pharmaceutical Research and Manufacturers of America, the Biotechnology Industry Organization and the Generic Pharmaceutical Association. In all likelihood, it will be a while before draft regulations come out; GPhA VP regulatory affairs Gordon Johnston and IMS Health VP industry relations Doug Long said guidance for draft regulations could appear this year.
“Historically, regulations have been slow to come,” Johnston told Drug Store News, noting that regulations for generic pharmaceutical drugs didn’t appear until four years after the 1984 passage of the Hatch-Waxman Act. “But certainly there’s a lot of interest in moving the process along, so I expect in 2011 we’ll see some sort of significant guidance or perhaps even draft regulations from the agency.”
Long thinks the process could take longer. “In discussions with others, there is a belief that it will be three years from the time of final guidance to see biosimilars on the market,” he told Drug Store News, saying that guidance could be issued in the latter half of 2011, but this was “very optimistic.”
Whatever the timeline, manufacturers aren’t sitting idly by. Teva Pharmaceutical Industries, the world’s largest generic drug maker and a major supplier of biosimilars in Europe, has sought to win approval for biosimilars in the United States using the existing unabbreviated pathway for biologics. So far, the Israeli company has had mixed results. It recently began marketing its generic version of Sanofi-Aventis’ anticoagulant Lovenox (enoxaparin), which the FDA approved as a pharmaceutical, though many experts said its chemical complexity places it more in the league of biologics. In September, Teva received a complete response letter from the FDA to its application for Neutroval (filgrastim), a biosimilar of Amgen’s Neupogen. Last month, Spectrum Pharmaceuticals and Viropro announced plans to develop a biosimilar of Genentech’s cancer drug Rituxan (rituximab), while Merck announced a deal with drug industry services firm Parexel International to develop biosimilars.
When a formal regulatory process takes shape, it is likely to look quite different from the one for generic drugs. For one, follow-on biologics will cost a lot more to develop. According to a 2006 study led by Duke University economist Henry Grabowski and published in the journal Health Affairs, simply building cell culture facilities can take three to five years and cost anywhere from $250 million to $450 million, which will keep the pool of manufacturers small.
On top of that, manufacturers must conduct clinical trials to prove their follow-on biologics are comparable to the originals, something that BIO and PhRMA strongly support, but that will incur additional costs for any prospective manufacturer.
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Generics discounts ignite Medicare Rx competition
Just when you thought the low end of the generic drug price spectrum couldn’t get any more commoditized, the $2 price point debuted with a big splash in September 2010.
Walmart stores tossed the rock that made the splash when it partnered with insurance giant Humana to launch a new, steeply discounted Medicare Part D drug coverage plan for 2011. Four months after both companies announced the venture, the ripple effects are still washing over retail pharmacy. But its long-term impact — namely, its ability to wrest a big chunk of the huge prescription drug market for seniors away from Walmart’s competitors and move it to Bentonville, Ark. — remains to be seen.
The strategy behind the launch of the Humana Walmart-Preferred Rx Plan is almost stunning in its simplicity and its boldness. For a cut-rate monthly plan premium of $14.80, Medicare beneficiaries in all 50 states can gain access to basic Part D drug coverage costing less than half the average national monthly premium set by prescription drug plans serving Part D, according to Walmart and Humana. But the real market-moving potential comes from the plan’s ability to lure Medicare beneficiaries to Walmart’s own stores.
To wit: The Preferred Rx Plan gives favored status to seniors who fill the Part D prescriptions at Walmart stores’ own pharmacies. Medicare beneficiaries who enrolled in the plan get low co-payments when they fill their prescriptions at a Walmart, Neighborhood Market or Sam’s Club pharmacy, with in-store co-payments that start as low as $2 for generic prescriptions at the company’s own pharmacies.
In effect, the plan cuts in half the out-of-pocket costs many Americans pay for widely dispensed, multisource medicines.
“This new co-branded prescription drug plan,” the two companies asserted, “can save a typical Medicare Part D beneficiary who enrolls in the Humana Walmart-Preferred Rx Plan an estimated average of more than $450 in 2011 on plan premiums, prescription medication co-payments and cost-shares, when compared with the average total costs for a Part D prescription drug plan in 2010.”
It wasn’t long before Walmart’s competitors jumped into the $2 generic co-pay contest. In late November, Kroger and Safeway became the first big pharmacy operators to respond, announcing a new, low-price plan for Medicare beneficiaries, in partnership with UnitedHealth Group. Like Walmart/Humana, the plan is a game-changer.
Called Pharmacy Saver, the new program is a collaboration among Kroger, Safeway and United’s Prescription Solutions affiliate. It will allow members to purchase some generic scripts for $2 for 30-day and some 90-day supplies. It applies to hundreds of prescription drugs, including 8-of-the-10 generics most commonly used by UnitedHealthcare Medicare plan members.
Within a few weeks of that announcement, Target, H-E-B, Hy-Vee, Publix Super Markets, Food Lion, Bloom, Harveys and Sweetbay Supermarket all joined the insurance company’s Pharmacy Saver program, in time for the plan’s launch at the beginning of this year.
For millions of seniors, that means that the new price expectation for hundreds of commonly used generics is two bucks for a 30-day supply. For the nation’s pharmacy retailers, it means that the competition for the low end of the generic prescription market is tougher than ever.
Jim, Retail pharmacies are learning that 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. Thus, the generic market is starting to look like a cash-pay consumer product instead of a brand-name pharmacuetical. FYI, I wrote about the economics of the new plan in Walmart-Humana: An Inevitable Surprise for Pharmacies and PBMs (http://www.drugchannels.net/2010/10/walmart-humana-inevitable-surprise-for.html). Adam