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CVS: Profitability wouldn’t be materially affected by DIR fee changes
WOONSOCKET, R.I. — CVS Health on Thursday released the following statement regarding Direct and Indirect Remuneration. The statement is presented in full below:
“The Direct and Indirect Remuneration (DIR) pay-for-performance network program is an important component of the Medicare Part D program created by CMS to help beneficiaries receive higher quality care at a lower cost. It ensures optimal pharmacy performance by driving better clinical performance. Performance network fees being charged to pharmacies are allowed under CMS regulation, and are fully disclosed as part of the annual bid process. CVS Health is not profiting from this program; a change in DIR pay-for-performance networks would not be material to our profitability.
DIR pay-for-performance network fees paid by pharmacies are directly passed to Medicare Part D plan sponsors and are used to lower beneficiary premiums. These fees apply to all participating network pharmacies, including CVS Pharmacy and CVS Specialty. Under Medicare Part D, DIR is fully disclosed to CMS and factored into CMS’s calculation of final Medicare payments to Part D plans. In fact, the DIR reports expressly recognize a plan sponsor’s ability to make retroactive pharmacy payment adjustments based on performance in the DIR reporting. Congress and CMS over the last 10+ years have incorporated pay-for-performance methodologies into Medicare fee-for-service payment systems. Additionally, Medicare Advantage plans have pay-for-performance components. Part D plans have mirrored these types of pay-for-performance methodologies, which drive clinical and network performance, because the plans pay the pharmacies directly.
CVS Heath’s profitability would not be materially affected by a change in DIR pay-for-performance networks. If the DIR construct was removed unilaterally, which we view as highly unlikely given Congress and CMS’s movement toward value-based care, all Part D plans would be impacted in the same way. Furthermore, we believe that would lead to higher premiums for beneficiaries across the industry. Congress is supportive of pay-for-performance programs and this is an important tool for the Medicare Part D program to provide higher quality care for beneficiaries at a lower cost.”
The ‘humanization’ of pets
Americans can’t do enough for their furry friends. To that end, growth continues to be the watchword in the pet care category.
Research released by the American Pet Products Association, or the APPA, indicated that American consumers would spend a total of $62.75 billion on pet supplies and care in 2016, up from $60.28 in 2015 and $58.04 in 2014.
Sales of pet food and supplies/OTC medicine were expected to reach $24.01 billion and $14.98 billion respectively in 2016, up from $23.01 billion and $14.28 billion respectively in 2015. The supplies subcategory encompasses such items as grooming tools, beds, collars, leashes, toys, litter, food and water bowls and clothing.
The booming potential is not lost on drug chain merchants who seek a bigger piece of the pet care pie. Rite Aid and Walgreens have ample assortments of pet food and high-margin accessories.
Americans, especially millennials, have a tendency to treat pets like members of the family. That’s giving rise to a number of trends, among them demand for products that owners can use to help their “furbabies” look their best. There’s been a spike, for example, in apparel for pets. There also is mounting demand for shampoos and grooming implements, APPA CEO and president Bob Vetere said.
A prime example comes from Wahl Clipper, perhaps best known for its “human” grooming tools, but also quality product for pets. One of Wahl’s best sellers for dogs is a norinse, foaming shampoo made from natural oils and water. After wiping it through the coat, pet owners can leave it to air dry or towel off the dog. Its properties also help to soften dogs’ coat, said Shay Moeller, product manager at North American Consumer Pet at Wahl Clipper.
Wahl also has developed a line of cat grooming products. In addition to no-water-needed (or waterless) shampoo and freshening wipes, these include four tools: a nail clipper that’s size-appropriate to fit cats’ claws and features a stainless steel cutting mechanism; a patent-pending, dual-level slicker brush with rubber tips to stimulate the coat; a pinbristle brush that draws oil from the skin and prevents the hair from breaking; and a two-in-one rake for longer-haired cats.
The “humanization” of pets also continues to push the envelope in the senior, weight management, and special needs, or SWM, subcategory in pet needs. According to “Senior, Weight Management and Special Needs Pet Products in the United States, 2nd Edition,” a report released by Packaged Facts, SWM products are on track to generate $5 billion in sales in 2020, an increase of 20% over sales recorded in 2015. Packaged Facts predicts that sales of supplement-type products alone will grow to exceed $697 million in 2019, with joint-health supplements ranking at the top of the list.
“As today’s pets live longer and struggle with health issues related to age and being overweight, there remains a solid need for products that address these and similar conditions,” said David Sprinkle, Packaged Facts’ research director.
Hartz has introduced a line of four chews to help meet these needs, including Hartz Calming Soft Chews For Dogs.