Impax intros generic Estrace Cream
Impax Labs has launched its generic Estrace Cream (estradiol vaginal cream, 0.01%). The product is indicated to treat moderate-to-severe vaginal changes due to menopause.
Impax’s manufacturing and development partner for the generic Estrace Cream, Perrigo, received Food and Drug Administration approval in January. The product had U.S. sales of roughly $469 million for the 12 months ended January 2018, according to data from IQVIA.
CVS Health touts low drug price growth for PBM clients
CVS Health is highlighting the savings that it brought its pharmacy benefits manager clients in 2017. The company on Thursday said that last year, drug price growth clocked in at 0.2% for its CVS Caremark clients, even as manufacturer price inflation neared 10%. When combined with low drug utilization growth of 1.7%, this meant a 1.9% reduction in drug trend for its commercial clients — the lowest in five year, the company said.
“The healthcare landscape continues to evolve, but the cost of drugs remains a top concern for our clients and their members, who turn to us to ensure they are getting the most out of their pharmacy benefit plan,” CVS Health excecutive vice president and COO Jon Roberts. “At CVS Health, we always encourage the use of clinically appropriate therapeutic alternatives including generics, which can lower cost for payors and members, leverage competition within drug classes where applicable, and develop innovative strategies to keep prescriptions affordable. By lowering member costs, we are also helping to remove a key barrier to adherence. Members who are more adherent have better health outcomes and ultimately lower overall health care costs.”
One key factor CVS Health cited in keeping drug spend down was the growth in generic use, which boosted the generic dispensing rate for its PBM clients to more than 86%. The company said it used PBM strategies including $0 copays for preventive generics, as well as formulary strategies that prioritize using generics first and reduce costs in such high-use categories as anti-hypertensives and cholesterol-reducing drugs. CVS Health said that plan designs that promoted lower cost therapies and targeted adherence interventions helped improve adherence by as much as 1.8 percentage points in such categories as diabetes, high blood pressure and high cholesterol.
On the specialty front, CVS Health said that while price inflation for the high-cost category rose 8.3% in 2017, it managed to keep specialty drug cost growth to 3.7% for its clients by using formulary strategies, cost-cap-based rebates and indication- and outcomes-based contracting.
The company noted that it managed formulary approach actually drove a decline in drug price of 0.1% for clients aligned with its managed formularies. It said that these clients aslo had lower per-member-per-month costs despite seeing greater utilization. These efforts are alongside the real-time benefits information initiative CVS Health undertook in 2017 to allow prescribers to see a patient’s out-of-pocket costs and tailor their prescribing to more affordable options.
Going green: How cannabis will steal share of wallet
The past few years have been quite eventful from macro, retail, and lifestyle perspectives. Healthcare uncertainty; new approaches to health and wellness; growing emphasis on natural products; and new shopper demands, expectations, and values have all been active drivers of change.
Amid it all, a new industry is materializing. In spite of an administration that looked eager to crack down on cannabis legalization, more states, red and blue alike, continue to move forward and evolve their thinking around medical and adult-use cannabis. Twenty-nine states have legalized cannabis in some form, and 12 have marijuana-related initiatives on their ballots in 2018. Canada still has its sights set on national legalization by this summer, and Shoppers Drug Mart (the nation’s largest retail pharmacy, which applied for a cannabis dispensing license in October 2016) has recently entered into three medical cannabis supplier agreements with Canada-based companies Aphira, MedReleaf, and Aurora Cannabis. In the U.S., the size of the legal cannabis industry is expected to drastically increase, reaching anywhere from $24 billion to $44 billion by 2020, depending on advances in legalization.
From a medical perspective alone, research shows that the category already is impacting and reshaping consumers’ shopping patterns. There’s no better time than now to accept the diversity of consumers and product applications and start to seriously consider how cannabis will affect your retail category.
Health and wellness – and cannabis
Approaches to health and well-being are shifting, and have been for some time. For today’s shoppers, healthcare, in general, is a major source of worry: ShopperScape data has shown that more than half of shoppers are worried about some aspect of healthcare, whether it’s cost, health in general, insurance, or access to services.
Complexity, cost, and barriers to access have, in part, prompted shoppers to take health into their own hands, and have fueled a shift from sick care (reactionary, occasion-based) to self-care (proactive, ongoing). More shoppers are prioritizing elements of self-care, understanding that a proactive approach is needed to avoid the high cost of healthcare.
Part of this approach involves more conscious purchasing. Now more than ever, shoppers are paying attention to what they buy, reading ingredient labels, and seeking out items that are minimally processed.
Subsequently, a share of wallet is shifting as shoppers allocate more of their dollars toward better-for-you products. As they do, their demands and expectations around brands and retailers are shifting. More and more, shoppers are affirming they prefer to shop retailers that are transparent about product quality, and that they are willing to spend more money on a brand they trust.
Enter cannabis, which can play within fresh, local, organic, natural, and healthy, across medical and recreational applications, embodying the “growing green” movement literally and figuratively. The plant is a “natural” product, something consumers can grow on their own or buy from local producers, and is, in some cases, rooted in a lifestyle reflected by brands that promote transparency and authenticity. Thus, as support grows and legalization becomes more widespread, cannabis is primed to be a basket staple that will cause yet more shifts in shopper share of wallet.
At the same time, as more discretionary income is shifting toward natural products, more products that tout the benefits of cannabis across applications, such as medical treatment, wellness enhancement, or recreational indulgence, are coming into the mainstream. For example, products containing cannabidiol (or CBD, a major, non-psychoactive compound found in cannabis and hemp plants, and legal in most states) are becoming increasingly popular within the HBC category as a way to promote relaxation and soothe everything from minor aches and pains to migraines, arthritis, or anxiety.
New category, new trip missions
Shoppers’ increased demand for naturals, the influx of CBD products, and the move toward self-care has obvious implications when it comes to cannabis for HBC, beauty, and OTC categories. But when thinking about what categories might be sacrificed for cannabis products, none are quite as obvious as over-the-counter medications and prescription drugs.
We know that drug stores, which rely on the pharmacy to drive trips and the front store to build baskets, have been struggling with store traffic. While pharmacy needs still give shoppers a reason to enter the store for the most part, pharmacy trips aren’t necessarily a reliable source of front-store conversion.
In terms of medical cannabis alone, which is legal in 29 states but not available at retail pharmacy, those pharmacy trips, and the potential for front store participation could be eliminated altogether as shoppers turn to cannabis as an alternative to traditional prescription or over-the-counter medications. Data from an Illinois-based study conducted byAclara Research shows that more than 6 in 10 (62%) medical cannabis users in the state found relief from chronic pain (the condition that represents the largest group of chronic patients in the U.S.) and other ailments to be so effective that they were able to reduce the number of prescription drugs they take. Further, 30% of patients were able to cut all prescription drugs from their care regime.
With this reduction in prescription medications, almost 7 in 10 users (66%) reported shopping their retail pharmacy less often since using medical cannabis. And patients are extremely willing to pay out of pocket for this alternative (for now) treatment: 49% of patients in the study earned less than $40,000 per year, yet reported spending more than $3,000 on medical cannabis — cited as almost half the average food spending for the typical U.S. household. This is a strong indicator that consumers are willing to make trade-offs and restructure total wallet allocations.
While cannabis may have the most direct impact on prescription drugs, OTC, and beauty items, other categories will be affected by this shift in discretionary spend. Categories that seemingly could not be further away from cannabis, even with its diverse applications, are anticipating the impact.
Trade publication Footwear News reported in January (as cannabis became fully legal in California) that the shift in discretionary income with cannabis on the scene could cause sneaker sales in the state to take a hit. And the founder of craft beer company Lagunitas Brewing Co. has been quoted as saying cannabis will be “way bigger” than the craft beer industry (which, according to the Brewers Association, had a $67.8 billion economic impact in 2016).
Shoppers will make trade-offs around other discretionary items, potentially impacting food, apparel, household items, electronics, digital media, and more. The introduction of a more than $40 billion dollar industry that spans channels and applications will undoubtedly cause a major shift in discretionary dollars.
Suppliers and retailers need to embrace the new reality and start investing in research to better understand the mind-set of the cannabis shopper and consumer. Because cannabis is only legal at state levels, shoppers are able to become acquainted with and participate in the category before national retailers and suppliers have the chance to play. They are developing behaviors, preferences, and loyalties that will be in place by the time cannabis is legal nationwide, so it’s best to start acting now: State versus national legalization is only making national companies fall behind in the cannabis economy.
As for where shoppers actually purchase cannabis products, that remains to be seen in terms of a nationally legal landscape in the United States. Now, in legal states, purchases take place in dispensaries (though delivery services are on the rise) designated for medical or recreational sales, with these dispensaries more and more resembling high-end, polished retail environments like Sephora or Apple stores. Right now, dispensary trips may be displacing some trips to traditional channels like drug, supermarkets, mass, and convenience store retailers (where cannabis trips can replace Rx, HBC, beauty, and food and beverage trips), but a nationwide end to prohibition could result in cannabis eventually having a presence in these conventional channels. Even now, CBD products in the form of tinctures, capsules, and topicals are becoming more widely available at smaller natural grocers and online through direct-to-consumer sales.
For now, though, it’s worth looking to the north as Canada gears up to legalize cannabis across the country by late summer 2018. There, in terms of medical cannabis, products likely will be available behind the counter at retail pharmacies. Both Shoppers Drug Mart and the Canadian Pharmacists Associationhave argued that pharmacists are best-suited to dispense medical cannabis, and the CPhA in November 2017 launched a medical cannabis continuing education program to help prepare pharmacists across the country.
SDM is awaiting approval of their cannabis producer license from Health Canada (as it stands now, medical cannabis in Canada is available by personal growing, through a registered caregiver’s grow, or by mail via a licensed producer/dispensary), and medical cannabis could perhaps be sold online. It’s been mused that Amazon, with its distribution centers in Canada, might test the waters when full legalization goes into effect.
Questioning whether or not cannabis will impact conventional retail is no longer relevant or useful. Instead, industry players must question how they will react.
Macro: Understand that the threat to share of wallet is real. For example, a 2017 survey of 10,000 California cannabis consumers revealed these consumers spend more per year on cannabis than the average American spends annually on personal care, tobacco, and alcohol combined.
Retail: In high-performing dispensary environments, knowledgeable employees are critically important for brand equity, and touchpoints along the consumer path-to-purchase are thoughtfully considered. Increasingly, dispensaries are designed for a stress-free, pleasant, and digitally integrated shopping experience — more in line with the future of the physical store.
Shopper: The percentage of Americans in favor of cannabis legalization is at 61%, its highest level ever and double what it was in 2000, according to a Pew poll from October 2017. The industry (which is, at its roots, consumer-led) tends to align with shoppers’ demands for natural, local, better-for-you, and transparency, a strong differentiator in an age of conscious consumerism. Understanding consumer use cases, such as easing stress/anxiety, enhancing sleep, relieving pain/other medical conditions, or purely enjoyment, also is important in aligning portfolios against this industry.
Technology: Take note of the grassroots approach used by cannabis brands today, which involves a strong social media presence that helps to build authenticity and personal connection. In addition, delivery options are growing in legal states, giving consumers convenient anytime, anywhere access. For example, Aurora Cannabis’ mobile app provides same-day delivery, strain descriptions and pricing, and real-time client communication. Lastly, new tech approaches are changing the way consumers participate in the category.
Kate Senzamici is a principal analyst at Kantar Consulting.