Pharmaceutical Commerce - May/June 2017 - 10

Top News
H. D. Smith is starting a
fight over who should service
independent pharmacies
'Why fund your competitors?' asks the company, in a pitch to
independents served by the Big 3 wholesalers
It is widely recognized that the drug
wholesaling business in the United States
is highly consolidated, especially in the
context of the dozens of firms that have
been acquired by the Big 3-McKesson,
AmerisourceBergen and Cardinal Health-
over the past couple of decades. Whether
for a large national chain, a mail-order
pharmacy or thousands of independent
pharmacies, the Big 3 have an offering,
and long lists of clients. Now, the company
generally regarded as the No. 4 drug
wholesaler (by volume)-H. D. Smith-
is attempting to peel off a larger portion
of the pool of independent pharmacies
from the Big 3, by making the pitch that
drug stocks supplied by the Big 3 to
independents inevitably help independents'
competition-the national chains-
more than it helps the independents.
The company is launching an advertising
campaign (see illustration) in online and
print industry publications, as well as its
own sales force efforts.
Some context: each of the Big 3 has a
"sourcing alliance" with one or more
national chains and/or the leading PBMs.
AmerisourceBergen started the trend in
2013 w ith Walgreens Boots Alliance
Development, a joint venture between it
and Walgreens Boots Alliance (itself an
alignment between Walgreens, a major
European pharmacy chain; Boots; and
Alliance, a UK wholesaler); WBA also
has a significant shareholder stake in
AmerisourceBergen. Cardinal Health
followed with CVS Health, forming Red
Oak Sourcing, a generics-purchasing
venture; McKesson has a similar alignment
w ith WalMar t and (although it may
soon be part of Walgreens) the Rite Aid
pharmacy chain. At the same time, each
wholesaler has a substantial business
serving independent pharmacies, either

as a straight-up wholesaler, or through
franchises or franchise-like arrangements
(Good Neighbor Pharmacy for ABC;
Health Mart for McKesson, and Medicine
Shoppe and Medicap for Cardinal Health).
To a greater or lesser degree, the volume
of drug distribution going through a Big 3
wholesaler positions it as a more powerful
purchaser from manufacturers, and thus
better able to demand preferential pricing.
H. D. Smith, by contrast, is 100%
independent-pharmacy focused, says
Robert Meriweather, VP of sales for the
firm. In addition, it is privately held-no
shareholders expecting dividends. "So, for
every $1 of gross profit the Big 3 company
derives from its sales, a portion of that goes
to the chain alliance partner; a portion
goes to stockholders; and then-maybe-a
portion goes to independents in the form
of better pricing." Independents need to
realize, he says, that "if an independent
pharmacy gains a dollar of better pricing
on a drug from its Big 3 supplier, roughly
speaking, that supplier's chain partner is
getting two dollars." Over the long term,
the alliance arrangements between the big
chains and the big wholesalers will starve
the independent pharmacies, he says.
Preferential treatment for big
chains carries through in other
supplier arrangements of the Big 3, says
Meriweather. They, like H. D. Smith, have
pharmaceutical services administrative
organizations (PSAOs) which consolidate
independent pharmacies' reimbursement
arrangement with pharmacy benefit
managers (PBMs). H. D. Smith's, called
Arete Pharmacy Network, recently won
over an independent pharmacy, Axline,
from a Big 3 PSAO; the difference in
pricing, after operating for several months,
was seen to be 200 basis points (2%)-a not
insignificant difference in an environment

Part of H. D. Smith's campaign to independent pharmacists

where PBMs sometimes force pharmacies
"underwater" by paying less to reimburse
for a drug than what the pharmacy paid to
acquire that drug.
Each of the Big 3 invest substantially
in serving their independent pharmacy
clients, providing business consulting, a
national brand (if the independent chooses
to affiliate with it) and related services.
Meriweather says that H. D. Smith's bundle
of services easily matches up against any
other wholesalers', including helping to
fund new pharmacy startups or transfers

between one independent and another.
According to data from the National
Communit y Pharmacists Assn. (the
trade group of independents), there are
roughly equal numbers of independent
or chain drugstore outlets in the US-
around 22,000 each in 2015-but that is
down roughly 1,000 from five years ago for
independents, and up roughly by the same
number for chains. In addition, there are
another 8,200 grocery-store pharmacies
and about 8,500 mass-market (big-box
store) pharmacies.

Marken launches 24-hour patient call center
UPS-owned subsidiary expands its direct-to-patient clinical services
Claiming to have the first such service
in the clinical logistics industry, Marken
(Research Triangle Park, NC) has started a
call center service to coordinate drop-offs
and pickups for clinical trial subjects. With
the PIC in place, clinical trial sponsors could
choose, for example, to write direct-topatient instructions into the trial protocol,
thus providing a higher level of overall trial
quality management. When such direct-topatient services occur in patients' homes,
home-nursing organizations are often
involved; Marken says that it will coordinate

with those as well. The 24/7/365 call center,
called a Patient Interaction Center (PIC), is
based in Philadelphia, PA, and call center
case managers are trained in the specialized
logistics needs of clinical trial protocols,
which need to be followed very exactly to
maintain data quality of the trial.
"We have embraced the industry's focus
on patient-centric clinical trials and now
consider ourselves a leader in direct to
patient services," said Wes Wheeler, Marken
CEO, in a statement. "Marken pioneered
direct-to-patient services five years ago

10 Visit our website at www.PharmaceuticalCommerce.com May | June 2017

and since then we have gained the trust of
our clients."
Direct-to-patient is an increasingly
important component of commercial
drug distribution, as specialty products
such as biologics in prefilled syringes go
direct to patients, especially in chronic care.
That is generally the realm of hub service
providers and some specialty pharmacies,
who would incorporate logistics concerns
into an overall patient-support program
(Pharmaceutical Commerce, March/April,
p. 24). There is some overlap between the

two: hubs and specialty pharmacies get
involved in clinical trial coordination, and
the clinical logistics providers (including
Marken) are providing some commercialdelivery services.
The service is limited to the US only at
this time, although a company spokesperson
notes that internationalization could be
a natural next step, since Marken makes
deliveries in 150 countries. In turn, Marken's
parent, UPS Healthcare Logistics, has been
expanding its slate of clinical trial services in
recent years.


http://hdsmith.com http://pharmaceuticalcommerce.com/

Table of Contents for the Digital Edition of Pharmaceutical Commerce - May/June 2017

Table of Contents
Pharmaceutical Commerce - May/June 2017 - Cover1
Pharmaceutical Commerce - May/June 2017 - Cover2
Pharmaceutical Commerce - May/June 2017 - Table of Contents
Pharmaceutical Commerce - May/June 2017 - 4
Pharmaceutical Commerce - May/June 2017 - 5
Pharmaceutical Commerce - May/June 2017 - 6
Pharmaceutical Commerce - May/June 2017 - 7
Pharmaceutical Commerce - May/June 2017 - 8
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Pharmaceutical Commerce - May/June 2017 - Cover4
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