2011-12 Economic Report on Retail and Specialty Pharmacies

by Adam J. Fein, Ph.D.
(134 page downloadable PDF file; Released January 2012)


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The pharmacy industry continues to expand and change. In 2011, Americans filled more than 4 billion prescriptions at 60,000 retail and specialty pharmacies. Total industry revenues will be nearly $275 billion. For anyone who wants to understand and benefit from the forces reshaping the highly competitive U.S. pharmacy industry, the 2011–12 Economic Report on Retail and Specialty Pharmacies is an invaluable planning tool.

This all-new report was researched and written by Adam. J. Fein, Ph.D., one of the world’s leading experts on the industry and author of the influential Drug Channels blog. Dr. Fein has synthesized a wealth of financial data, research studies, and his own unique business consulting experience into a definitive, nonpartisan up-to-the-minute resource. The report includes 62 data-packed exhibits and an extensive bibliography with hyperlinks to original source materials.

This year’s report—42 pages longer than the 2010-11 edition—includes expanded coverage of specialty pharmaceuticals, new market data, and more-detailed analyses of reimbursement trends. 

The 2011–12 Economic Report on Retail and Specialty Pharmacies is essential for pharmaceutical manufacturers, wholesalers, pharmacy owners, benefit managers, managed care executives, healthcare policy analysts, investors—anyone who wants to understand and benefit from this ever-evolving industry. The report will:

  • Increase your understanding of key industry trends, such as the fast-growing specialty drug market and cost-plus reimbursement models
  • Illuminate business strategies in the industry by explaining the complex ways retail and mail pharmacies earn profits from pharmaceutical products
  • Improve your ability to negotiate and collaborate successfully with retail, mail, and specialty pharmacies
  • Validate and challenge your assumptions about the risks and opportunities facing the industry 

No other report on the market offers the depth, insight and analysis of the 2011-12 Economic Report on Retail and Specialty Pharmacies. Download your copy today!

Please note that purchase of the 2011-12 Economic Report on Retail and Specialty Pharmacies indicates agreement with the terms and conditions of the End User License Agreement (EULA). License terms, purchaser's name/email, and a unique transaction ID will be added to the secure PDF file upon checkout. You must purchase the Corporate License if you want to share the report with other people in your company. Upon request, we will refund duplicate purchases of a Corporate License from the same organization. 

 


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Pembroke Consulting, Inc., grants to Purchaser, and Purchaser hereby accepts, a limited, terminable, revocable, nontransferable, nonexclusive, nonsublicenseable license to access and use the 2011-12 Economic Report on Retail and Specialty Pharmacies only in accordance with the End User License Agreement. License terms, purchaser's name/email, and a unique transaction ID will be added to the secure PDF file upon checkout. We offer two License Options:

  • Single User License: This license allows for use of this report by one individual person. This person may use the report on any computer, and may print out the report, but may not share the report (or any information contained therein) with any other person or persons. Unless a Corporate License is purchased, a Single User License must be purchased for every person who wishes to use the report within the same organization or enterprise. Buyers who infringe upon these license terms are liable for a Corporate License fee.

  • Corporate License: This license allows for use of the report by an unlimited number of employees within the same organization or enterprise worldwide. Each of the employees within this organization or enterprise may use the report on any computer, and may print out the report, but may not share the report (or any information contained therein) with any other person or persons outside the enterprise or organization.  

The 2011-12 Economic Report on Retail and Specialty Pharmacies is protected by copyright law. Unauthorized reproduction or distribution of this report, or any portion of it, may result in severe civil and criminal penalties, and will be prosecuted to the maximum extent of the law. 

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TABLE OF CONTENTS

Chapter 1: Industry Overview

  • Products Dispensed by Pharmacies

  • Industry Structure

  • Overall Market Share by Company

  • Market Share for Specialty Pharmaceuticals

  • Clinics and Other Healthcare Services

Chapter 2: Changes in Pharmacy Industry Structure

  • Overall Growth

  • Growth by Dispensing Format

  • Recent Growth Trends

    • Independent Drugstores

    • Mail-Order Pharmacies

Chapter 3: Prescription Prices and Top Drugs

  • Traditional Drugs

  • Specialty Drugs

  • Consumer Copayments and Coinsurance

Chapter 4: Relationships with Pharmacy Benefit Managers

  • PBM Industry Overview

  • Role and Function of PBMs for Plan Sponsors

  • Retail Pharmacy Participation in PBM Networks

    • Pharmacy Networks

    • PBM-Pharmacy Relationships

    • The Efficiencies of Pharmacy Networks

    • PBM Compensation for Pharmacy Networks

  • Pharmacy Services Administration Organizations

Chapter 5: Pharmacy Reimbursement by Third-Party Payers

  • The Basics of Pharmacy Reimbursement

    • Reimbursement Methodologies

    • Service Fees

  • Reimbursement for Brand-Name and Specialty Prescriptions

  • Reimbursement for Generic Prescriptions

  • Cost-Plus Methodologies

    • Average Acquisition Cost

    • Direct-to-Payer Acquisition Cost

    • Average Manufacturer Price

    • Average Sales Price

  • Reimbursement of Mail-Order Pharmacies

Chapter 6: Relationships with Pharmaceutical Wholesalers

  • Wholesale Suppliers to Pharmacies

  • Purchasing Strategy of Smaller Pharmacies

  • Pharmacy Buying Groups

  • Self-Warehousing Chains and Mail-Order Pharmacies

Chapter 7: Pharmacy Profitability

  • Overall Drugstore Gross Margins

  • Gross Margins on Prescriptions

  • Gross Profits from Brand-Name Prescriptions

  • Gross Profits of Brand vs. Generic Prescriptions

  • Lifecycle Profits for Generic Drugs

  • PBM Profits from Network and Mail Pharmacies

Chapter 8: Economic Trends and Outlook

  • Pharmaceutical Market Growth

    • Summary

    • The Outlook for U.S. Pharmacy Spending

    • Projected Growth in Drug Trend

    • Payment for Prescription Drugs Under Healthcare Reform

  • Capturing the Specialty Opportunity

    • Summary

    • The Shift to Specialty Drugs

    • The Boom in Specialty Dispensing

    • The Medical Spend Opportunity

  • Preferred and Limited Pharmacy Networks

    • Summary

    • Pharmacy Network Models

    • Preferred Networks

    • Limited Networks

    • Limited Networks for Specialty Drugs

    • Outlook

  • Risk and Reward from the Generic Wave

    • Summary

    • The Generic Wave

    • Retail Pharmacy Generic Price War

    • Payer-Led Margin Compression

  • The Impact of New Prescription Reimbursement Benchmarks

    • Summary

    • The Benefits of Average Cost Benchmarks for Pharmacies

    • Lessons from Cost-Plus Reimbursement for Specialty Drugs

    • The Downsides of Cost-Plus Reimbursement for Pharmacies

Endnotes

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LIST OF EXHIBITS

Exhibit 1: Health Plan Criteria for Identifying a Specialty Drug, 2011

Exhibit 2: Overview of U.S. Pharmacy Market, 2010

Exhibit 3: Average Annual Number of Prescriptions per Pharmacy, 2010

Exhibit 4: Largest U.S. Pharmacies Ranked by Total Prescription Revenues, 2011

Exhibit 5: Prescription Revenue Share by Chain, Top 20 U.S. Markets, 2011

Exhibit 6: Pharmacy Revenues from Specialty Pharmaceuticals, by Company, 2010

Exhibit 7: Leading Specialty Reimbursement Hub Providers

Exhibit 8: Channels to the Patient for Specialty Drugs

Exhibit 9: Actual vs. Desired Work Activities for Pharmacists Working Full-Time

Exhibit 10: U.S. Prescriptions, Annual Total and Growth, 2000-2010

Exhibit 11: U.S. Pharmacy Revenues, Annual Total and Growth, 2000-2010

Exhibit 12: Drugstore Revenues vs. U.S. Retail Sales, 2000-2011:Q3

Exhibit 13: Share of Revenue Growth by Dispensing Pharmacy Format, 2000 vs. 2010

Exhibit 14: Number of Pharmacies by Dispensing Format (Thousands), 2000 vs. 2010

Exhibit 15: Average Prescription Revenue per Pharmacy Outlet, 2000 vs. 2010

Exhibit 16: Median Wait Time to Fill a Prescription, by Dispensing Format, 2010

Exhibit 17: Number of Prescriptions by Dispensing Format, 2009 vs. 2010

Exhibit 18: Prescription Revenues by Dispensing Format, 2009 vs. 2010

Exhibit 19: Number of Independent Pharmacies, 1990-2010

Exhibit 20: Pharmacy Franchise and Marketing Programs of Large Drug Wholesalers

Exhibit 21: Adjusted Mail Prescriptions, Annual Total and Growth, 2000-2010

Exhibit 22: Average Pharmacy Revenue per Prescription, Brand vs. Generic, 1990-2010

Exhibit 23: Top 10 Brand Drugs by Retail Pharmacy Dollars, 2010

Exhibit 24: Top 10 Generic Drugs by Retail Pharmacy Dollars, 2010

Exhibit 25: Top Specialty Therapy Classes and Specialty Drugs, 2010

Exhibit 26: Drug Trend, Traditional vs. Specialty Drugs, 2010

Exhibit 27: Out-of-Pocket Spending, Retail Sales of Prescription Drugs, 1970-2020

Exhibit 28: Average Copayments by Prescription Drug Tier, 2000-2011

Exhibit 29: Rate of Prescription Abandonment by Copayment

Exhibit 30: U.S. Retail Prescription Claims, by PBM, 2012E

Exhibit 31: Medicare Part D PDP Enrollment, by Parent Organization, 2011

Exhibit 32: Largest Pharmacy Services Administration Organizations, 2011

Exhibit 33: Average Reimbursement for Specialty Drugs, by Channel, 2011

Exhibit 34: Benchmark Drug Price vs. Pharmacy Invoice Price, 2010

Exhibit 35: Brand Reimbursement Rates, Retail vs. Mail-Order Pharmacies, 2011

Exhibit 36: Percentage of AWP Billed to Employer, Retail vs. Mail-Order, 1999-2011

Exhibit 37: Generic Reimbursement Rates, Retail vs. Mail-Order Pharmacies, 2011

Exhibit 38: Drug Wholesaler Sales by Type of Customer, 2010

Exhibit 39: Drug Distribution and Related Revenues at Big Three Wholesalers, 2011

Exhibit 40: Market Share with Smaller Pharmacies, by Wholesaler, 2011

Exhibit 41: Pharmacy Buying Groups and Wholesaler Relationship

Exhibit 42: Overall Gross Margins for Pharmacies and Drugstores, 1993-2009

Exhibit 43: Overall Gross Margins for Drugstores, 2010

Exhibit 44: Average Prescription Gross Margins at Independent Drugstores, 2006-2010

Exhibit 45: Average Prescription Gross Margins at Independent Drugstores, By Payer, 2009

Exhibit 46: Estimated Gross Profit from a Brand-Name Prescription, 2000-2010

Exhibit 47: Share of Pharmacy Revenues, by Channel Participant and Drug Type, 2010

Exhibit 48: Pharmacy Profits During the 180-Day Generic Exclusivity Period

Exhibit 49: PBM EBITDA per Equivalent Script, by Channel and Drug Type, 2011

Exhibit 50: Growth in National Health and Prescription Drug Expenditures, 2010-2020

Exhibit 51: U.S. Spending on Retail Prescription Drugs and Healthcare Reform, 2009-2020

Exhibit 52: Drug Trend Forecasts, 2011-2013

Exhibit 53: Source of Payment for Retail Sales of Prescription Drugs, 1970-2020

Exhibit 54: Fastest-Growing Private Specialty Pharmacies, 2011

Exhibit 55: Public Payer Share of Selected Specialty Drugs in Retail Pharmacies, 2010

Exhibit 56: Medical Benefit vs. Pharmacy Benefit Spending on Specialty Drugs

Exhibit 57: Channels to the Patient for Specialty Drugs with White Bagging

Exhibit 58: Infused Therapy Sourcing at Oncology Practices, 2011

Exhibit 59: Projected Brand Revenues Lost Due to Generic Launches, 2011-2021

Exhibit 60: Distribution of Per-Unit Weighted Average AMPs, September 2011

Exhibit 61: Medicare Part B Spending on Office-Administered Drugs, 1997-2009

Exhibit 62: Wholesaler and Provider Profits from a Specialty Generic Injectable Drug 

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