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Advanced Emissions Solutions, Inc. Message Board

bagholder54 18 posts  |  Last Activity: Dec 22, 2014 11:41 PM Member since: May 21, 2001
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  • Reply to

    The failure of GILD management.

    by bearofbleecker Dec 22, 2014 8:18 PM
    bagholder54 bagholder54 Dec 22, 2014 11:41 PM Flag

    Couple of comments nail. 1) to your last Q, its business, a follow the money thing. Exclusive contracts (for sole preferred formulary access) drives market share for the brand, so it generally includes deeper and more radically tiered performance rebates for the fiduciary, ESRX in this case. But exclusives are not great when you have drug categories with variable AEs or low response rates. Physicians need broad access to meet patient needs which are difficult to predict due to variability. Anti-infectives, like antibiotics or HCV, are in this category.
    Regarding yours (and others) comments about patient lawsuits, denial of access, etc, the legal basis is quite clear that fiduciaries are indemnified of this risk in several ways. By their clients the payers, and more importantly, by state medical charter which states that physicians hold sole responsibility for drug prescribing decisions. Incidentally , this is the reason a physician can prescribe a drug for any purpose h/she deems appropriate.
    GILDs competitive view is informed by its somewhat coddled experience in the HIV category where contracting is less intense, the markets are smaller and the user audience is well organized. Abbv customer relations people, on the other hand, are tough and jaded. Humira was the third or fourth anti-tnf brand to launch but dominates today. And they are staring down a patent cliff on the brand representing 90% of sales. They are hungry. Clearly GILD needs to up its game in national accounts.
    all my opinion, bag

  • Reply to

    The failure of GILD management.

    by bearofbleecker Dec 22, 2014 8:18 PM
    bagholder54 bagholder54 Dec 22, 2014 10:53 PM Flag

    Now retired, I was in pharma national accounts from 1991 to 2007. 1991 was two years before ESRX went public, and two years before Merck bought Medco. It was the year the term PBM was first applied. It was the beginning. I know of what I speak. But perhaps my emotions have resulted in too harsh a language towards GILD mgt.
    However, while you would not agree, most people in the know would agree, that mgt tripped up big time here. Absent a strong comeback in payer contracts soon, heads should roll, imo
    bag

  • Reply to

    The failure of GILD management.

    by bearofbleecker Dec 22, 2014 8:18 PM
    bagholder54 bagholder54 Dec 22, 2014 9:49 PM Flag

    When you find your investment decisions to be based on faith in management doing the yet to be revealed "right thing" , it may be time to find a new hobby.

    Compensation is clearly not correlated with competence at GILD national accounts / customer relations, or perhaps the problem is ignorance higher up. Their silence today clearly demonstrates a freeze in the headlights. Not a comforting thought for this investor.
    all mu opinion
    bag

  • Reply to

    The failure of GILD management.

    by bearofbleecker Dec 22, 2014 8:18 PM
    bagholder54 bagholder54 Dec 22, 2014 9:35 PM Flag

    I have followed Steve Miller's career at ESRX since mid 90s. I have sat across table from him. He is arrogant but part of what made them the largest pbm in industry. He just does his job. It is my view that a 15% or 17% rebate on all Sov/Harv volume, which at 100% market share is a lot of volume, would have at least given those two brands equal access to ABBV's brand on the national formulary. Why equal? Because in anti-infectives you want physicians to have maximum choice. It may have taken 20% to get an exclusive. And yes, that would have meant giving that best price to all Medicaid, but that is a good problem to have when you hold 100% share.
    There are plenty other formularies for sov/harv to access for parity or exclusive to abbv. My trust in senior management has taken a hit today. This type of fiduciary contracting is neither new or complicated. It is industry precedent. That management did not follow is just not excusable.
    all opinion, bag

  • Reply to

    The failure of GILD management.

    by bearofbleecker Dec 22, 2014 8:18 PM
    bagholder54 bagholder54 Dec 22, 2014 9:01 PM Flag

    Pretty easy to see my Yahoo is doing poorly. Their message boards are harder to use now than they were ten years ago. But that is not the topic. GILD is my beef.
    I was wrong to believe GILD management would act rationally. Instead of contracting with payer fiduciaries like ESRX in front of the launch of a pending competitive brand, like all smart pharmas before them, they decided on hubris and ignorance. In the last fifteen years I can recall the following pharmas contracting to inhibit access by soon to launch second in class brands from Pfizer (Lipitor shut out Crestor), GSK (Imitrex shut out Maxalt) and many others too difficult to recall accurately in my present mood. But it is THE established method for first to market brands to protect their franchise when competition arrives. And GILD ignored that precedent. A great brand cannot overcome weak, myopic management. We trusted this well compensated management with doing the right thing, and they fumbled. This is the shame of this debacle.
    all my opinion

  • Reply to

    Its More Complicated than Pricing

    by bagholder54 Nov 13, 2014 3:03 PM
    bagholder54 bagholder54 Dec 22, 2014 7:57 PM Flag

    fair enough late. I tend to be optimistic, a trait not always helpful in investing. I followed Steve Miller's career at ESRX from the mid 90s. He's tough and that is why payors use them. I do not place any blame for this fiasco on him or his company or ABBV. GILD owns this embarrassment. Now you suggest mgt may do better with other fiduciaries. This would be helpful. It is far more of a win - win for a first to market mfr to contract with fiduciaries than it is for a fiduciary to partner with a weaker second to market mfr. If they wouldnt work with Miller for reasons of personality that simply shows the short sightedness of GILD mgt. This is business, not a popularity contest. If your people have a problem with a pot'l partner's people, change YOUR people. #$%$ it, investors couldnt give a hoot about interpersonal relations. And certainly GILD cannot use it as a public excuse to its shareholders. They screwed up. Mgt should admit they tried and failed, and tell us how they will succeed in future. First-to-market contracting in the face of pending competition is middle management stuff. GILD must have some smart national accounts people in there somewhere.
    all my opinion
    bag

  • Reply to

    Its More Complicated than Pricing

    by bagholder54 Nov 13, 2014 3:03 PM
    bagholder54 bagholder54 Dec 22, 2014 6:46 PM Flag

    Well, I was wrong to believe GILD management would act rationally. Instead of contracting with payer fiduciaries like ESRX in front of the launch of a pending competitive brand, like all smart pharmas before them, they decided on hubris and stupidity. In the last fifteen years I can recall the following pharmas contracting to inhibit access by soon to launch second in class brands from Pfizer (Lipitor shut out Crestor), GSK (Imitrex shut out Maxalt) and many others too difficult to recall accurately in my present mood. But it is THE established method for first to market brands to protect their franchise when competition arrives. And GILD ignored that precedent. A great brand cannot overcome weak, myopic management. We trusted this well compensated management with doing the right thing, and they fumbled. This is the shame of this debacle.
    all my opinion
    bag

  • Reply to

    The shorsigthedness of the insurers.

    by bearofbleecker Nov 22, 2014 2:36 PM
    bagholder54 bagholder54 Nov 23, 2014 11:33 PM Flag

    Unfortunately it is more complicated than that bucco. Insurers dont look out more than 12 to 24 months in their actuarial projections. So they do not factor in the predicted cost of treating HCV in its late stages. Why? Because the average beneficiary is with a given insurer for 18 months before switching to another. With the ACA this period may actually shrink as switching becomes easier. That's just how they run the business. So do not expect them to cotton to a 'treat em now while its cheaper' logic.
    They know HCV patients will upgrade their plan selection during open enrollment when they are planning to begin expensive antiviral therapy. That way they have a lower deductible and richer pharmacy benefit. At the next open enrollment, they can downgrade to a cheaper plan, now cured. Without exclusions for preexisting conditions, there is a lot more sharing of costs across the pool. But then, that is what insurance is supposed to do.
    all my opinion, bag

  • Please come over to the GILD board and participate in the discussion string "Its More Complicated than Pricing"
    Love to hear some counter arguments for those in the business.
    bag

  • Reply to

    Its More Complicated than Pricing

    by bagholder54 Nov 13, 2014 3:03 PM
    bagholder54 bagholder54 Nov 16, 2014 9:49 PM Flag

    While this is possible crush, I believe the probability is low. You are assuming ABBVs launches into a static price or discount scenario from GILD. This is unlikely - see previous posts. In addition, the ABBV regimen is somewhat less clean relative to Harvoni, and the dosing is subject to compliance and persistence difficulty. These two items should give the thoughtful investor some pause. Another under appreciated factor is physician preference: the majority will want the best drug for their patients. There is little debate on this tho all the clinical evidence is not well established at present.
    Insurers with captive PBMs and independent PBMs alike can only get revenue participation on rebates paid on Rx claims processed through their system/network, and the only way to get those is with a access-based or performance-based contract. An ABBV price $20k under Harvoni with a contract wont have a productive contract bc the share at beginning is low and the risk it will stay low threatens the expected revenues to the PBMs. Contrast that with a 17% rebate contract (yes, the 17% level is significant but that is another discussion) paid on 100% of Harvoni volume, taking the actual price to payer down to the price neighborhood you predicted for ABBV. And there is considerably less risk on these revenues.
    Don't be fooled by PBMs posturing: those messages are intended for their payer clients. Investors need to see thru this.
    I was hoping to get some pharma national accounts people or payer marketing people to come in with some counter arguments or other factors worthy of debate. Come on people, put your experience and judgement on the table here....

    all my opinion
    bag

  • Reply to

    Its More Complicated than Pricing

    by bagholder54 Nov 13, 2014 3:03 PM
    bagholder54 bagholder54 Nov 15, 2014 8:04 PM Flag

    As the largest PBM, ESRX behavior reflects its desire to profit from the creation of the new, huge all-oral HCV category. Strident news releases over past months is, IMO, posturing towards this end. As stated earlier, their best outcome would be a low double digit rebate contract with GILD for decent reimbursement position and reasonable utilization edits. Even better is a similar contract from ABBV. Then their public messages will likely evolve to into the duality of 1) we are providing broad access to life saving anti-infectives for physicians to choose the best option for their patients, blah blah, and 2) through our aggressive negotiation efforts we have lowered the price of these life saving HCV drugs thereby improving access for all blah blah. Then they keep a good chunk of the rebate flows and the US healthcare system does what it does best: enriches all parties in the chain. But I shouldn't criticize it - no other system seems capable of driving such innovation.
    all my opinion, Bag

  • Reply to

    Its More Complicated than Pricing

    by bagholder54 Nov 13, 2014 3:03 PM
    bagholder54 bagholder54 Nov 14, 2014 9:52 PM Flag

    there are many shades to consider. Some insurers are vertically integrated in that they have a PBM captive to manage the insured and the ASO lives together or apart. For their insured lives, the insurer is both fiduciary and payer; not so for the ASO lives where the insurer merely manages the health and pharmacy benefit for self insured firms. [Most firms over 3000 or perhaps 5000 employees are self insured. The insurance company headlining their health benefits is in a administrative role only. Risk is borne by the large employer.] In these cases, the insurer's PBM may manage for their own financial benefit, just as the independent ones like ESRX do. To answer your question, a low price drug without a rebate contract will provide lower cost to the employer in my example, but little or none to the PBM. [another aside, PBMs discount their per Rx processing fees to win business; they make it up in keeping a share, some say a large share, of rebate flows from mfrs. ] This explains how a PBM can come up empty handed in the low cost/no rebate example above. They will fight this. They much prefer large rebates on high cost, high utilization drugs like HCV. My guess is they will offer similar reimbursement (since these are anti-infectives after all) and drive a rebate contract with preferences in utilization edits, or I should say, absence of utilization edits. In this way one brand can be granted preference over another in exchange for rebates. In this situation, GILD has the advantage since they have all the share.
    all my opinion.

  • Reply to

    Its More Complicated than Pricing

    by bagholder54 Nov 13, 2014 3:03 PM
    bagholder54 bagholder54 Nov 14, 2014 9:35 PM Flag

    No, predicting share of second or later to market brands is mostly guesswork.

    Let's go a bit deeper now. In a previous post I wrote of exclusive preferred position on formulary. This is sought in competitive classes where therapeutically equivalent brands fight for payer preference. It doesn't apply as well to anti-infectives, after all, most would agree that physicians should not have access barriers to drugs that fight infections. This may be the case for HCV, I simply am not certain. However, in this case, both Harvoni and ABBV's brand might have similar reimbursement. Neither gains an advantage from a superior position on a given fiduciary's formulary. Then the two mfrs fight it out with physicians - where marketing prowess is key. GILD is an experienced marketer of anitvirals, ABBV has somewhat limited experience. It is important to note however, that without preference for reimbursement or utilization edits, there is little incentive for either mfr to offer a rich rebate contract to the fiduciary. The fiduciaries will fight for rebate participation given the enormity of these flows.
    Now those fiduciaries are likely to continue to enforce pharmacy edits on utilization. Not everyone gets an $80K drug regimen. These edits are rules such as prior authorization (they vary, but examples include: only specialists may prescribe, only cirrhotic patients can access drug or only past failures can get it.). Dose and frequency and duration of trmt edits can also be applied. These edits are not put up on a whim. The fiduciary has a P&T committee that sets utilization rules for expensive drugs. Pharma has varying influence with these people, who usually serve confidentially on that committee just to avoid pharma onslaught.

    IMO, best outcome would be no exclusivity, limited contracts, reasonable utilization edits and a slug fest in the physician marketplace.
    all my opinion.

  • Reply to

    Its More Complicated than Pricing

    by bagholder54 Nov 13, 2014 3:03 PM
    bagholder54 bagholder54 Nov 14, 2014 9:16 PM Flag

    I have no training or expertise in pharmacology law. My best guess is that GILD will ignore this patent app of ABBV, forcing that org to make the first move. Either that or they will seek redress with the patent office.
    my opinion only.

  • Reply to

    Its More Complicated than Pricing

    by bagholder54 Nov 13, 2014 3:03 PM
    bagholder54 bagholder54 Nov 14, 2014 3:12 PM Flag

    thank you.
    let me add some clarity if I might. The term payer is used rather loosely. The ultimate payer, sometimes called drug benefit sponsor, are the private and public employers and Medicare/aid. PBMs, insurers and others are actually fiduciaries of these payers, even tho they themselves are sometimes referred to as payers. It is these fiduciaries that form contracts with pharma mfrs for positioning of a brand or set of brands on the fiduciary's formulary. It is important to understand that the fiduciary is responsible for managing at the drug benefit level for the ultimate payer; they are not required to seek the lowest price on each brand.
    These fiduciaries, like Express Scripts and others, have grown mightely since the mid 90s on two sources of revenue: mail order Rxs and rebates from pharma mfts. They are inclined to seek the largest rebate flows, paid quarterly, that they can. This is how a first-in-class mfr retains such high market share when the competition arrives. Now if ABBV set a price fifty percent below Harvoni, then all bets would be off, but they are unlikely to do that. They are most likely to set a shadow price, that is, a bit below Harvoni, and try to maximize share thru physician promotion. They may find a marketing hook in some genotype of the other. Since they have no share at launch, and little at one year, a rebate contract will not provide the fiduciary an incentive to place them on formulary.

    Some have suggested that GILD has weak payer relations due to their relatively sheltered business in HIV drugs. There is probably some truth to this, but I know that they are truly paranoid (in Grove's sense) of payers. This is likely to make them step up to offer significant discounts (up to 17% but maybe beyond) for exclusive preferred position. Exclusive is the key word here. Those large money flows for all Rxs accrue to the fiduciary and they in term provide the brand with
    exclusive preferred position on formulary. out of space ...

  • Reply to

    Its More Complicated than Pricing

    by bagholder54 Nov 13, 2014 3:03 PM
    bagholder54 bagholder54 Nov 14, 2014 12:28 AM Flag

    last part
    All eyes and ears should be on what GILD is likely to do. Dont expect them to announce contracts; they are closely guarded by both parties. But they will be instrumental in GILD holding the lion's share of the HCV market. The ABBV payer relations people are excellent, they proved that in the anti-tnf class. But they can really only expect to battle their way to a 10% maybe 20% share at year three. But that will still be a highly successful brand. I'm holding GILD and ABBV.
    My two cents and all my opinion.

  • Reply to

    Its More Complicated than Pricing

    by bagholder54 Nov 13, 2014 3:03 PM
    bagholder54 bagholder54 Nov 14, 2014 12:26 AM Flag

    continued from above
    GILD owns the share. If GILD acts rationally, and in advance of ABBV launch as in now, they will form exclusive preferred contracts with these fiduciaries that offers say 15 or 17% rebates ON ALL RX VOLUME. That will be huge cash flows to PBMs and others, dwarfing what could be obtained from the ABBV contract. It is important to realize a low price point by ABBV provides no revenues to the PBMs; all the savings are enjoyed by the ultimate payer. But that payer is not making the formulary decision here.
    Payers will use utilization edits to mandate the lower cost agent you say. Maybe, some will, but in my example, most will not. Why take the far weaker contract when you can get a slice of all volume and legitimately claim to your sponsors you are beating back the high cost of HCV drugs? Its complicated, but rebate flows interfere with incentives in the payer - fiduciary relationship.
    It all depends on whether GILD acts rationally and forms these exclusive contracts now and until competition arrives. Their price point is high enough to accommodate a large rebate budget for their commercial people. If they do, then a competitor will launch into a non-preferred reimbursement. There are dozens of examples of first to market mfrs contracting on the eve of competition. Pfizer stunted Crestor's launch for years in the high potency statin class in this manner. GSK did same in the triptan class. Its common, its effective and its expected by payers. And its legal.

  • I was in mfr - payer relations for twenty years beginning at the beginning, when Merck contracted with Kaiser in Calif for a preferred spot on an institutional formulary in 1989. That was the shot no one heard around the world. But it began an amazing transformation in the management of pharmacy benefits, out-patient included.
    I'm writing about the GILD - competitor debate over pricing and discounting after reading too many simplistic explanations. A brief para in your story this morning finally got me going.
    GILD is behaving exactly as a first in class or category mfr is expected to do. Set price wherever and dont discount. Payers, and their fiduciaries know and expect this. The handwringing is about the price point chosen, high for an anti-infective. But that's a different discussion.
    The investor discussion is now is all about where a competitor (now not MRK, but maybe ABBV) might set its price and discounts. No one I have read has commented on what GILD might do after a competitor arrives, let alone now, in the months preceding that arrival. But it is there and now that, IMO, the commercial future of the HCV category will be decided.
    Pharma offers discounts in the form of rebates. These are a fixed amount based on market share, paid on a per Rx basis to payers and fiduciaries of many types. In many cases, rebate revenue is the largest cash flow of their business. Rebate flows from the high-share mfr, in my example GILD, will be largest. But GILD is not offering rebates you say. Because until now they did not have to. But they will !
    If ABBV sets its regimen price 10% below Harvoni and offers say a 10% rebate some payers might be tempted but most will not. Why? The rebate flow on zero or low share is zero or low money to payers, which are mostly payer's fiduciaries, like the PBM Express Scripts. As I said, rebates are revenues to them, regardless of drug price point. CONTINUED NEXT

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