Category Archive for "Healthcare"

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Below Zero and Falling Fast: R&D Productivity as an Enterprise-Wide Crisis

We estimate current returns on R&D spending of -7% – before costs of capital – for a typical R&D portfolio (typical in terms of # of projects, mix of projects by phase of development, and mix of projects by large

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President’s Budget Proposal Points to More Pressure on Innovators

  The congressional ‘super committee’ created by the Budget Control Act (“BCA”) this summer and tasked with cutting the cumulative 2013-2021 deficit by $1.2T by November 23[1] met for the third time on September 22. Ahead of that meeting, President

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A Detailed Comparison of the AWP Replacements: AMP v. NADAC

This note compares the two drug acquisition cost benchmarks (Average Manufacturer Price or AMP, and National Average Drug Acquisition Cost or NADAC) that CMS intends to make public. NADAC values have not been calculated or published; however because Alabama’s Average

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CMS Starts to (Kind of) Publish AMP – Why This Matters

Generic dispensing (i.e. gross) margins are far higher than branded dispensing margins throughout the drug trades (wholesalers, retailers, and PBMs). In our view this is primarily due to the traditional use of average wholesale price (AWP) as a benchmark for

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A Simple Formula for Drug (and Biotech and Spec Pharma) Stock Selection

Therapeutic (drug, biotech and specialty pharma) stocks tend to gradually outperform their peers in the year or so preceding and following major anticipated product approvals. The exception is the period immediately surrounding the scheduled regulatory action, where risks are skewed

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CMS Takes Concrete Steps Toward Replacing AWP

On August 4, 2011 CMS hosted a meeting to update external stakeholders on the status of the implementation and roll-out of the national actual acquisition cost (AAC) survey, the existence of which Secretary Sebelius first revealed in a letter to

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The Market Appears to Misprice Risks to Healthcare Earnings from the Budget Control Act

Since details of the Budget Control Act were made public, Hospitals have meaningfully underperformed the broader Healthcare industry; Large-Cap Pharmaceuticals, Specialty Pharmaceuticals, Biotech and Medical Devices have performed in-line This implies that the Act’s committee fails to produce legislation, which

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Healthcare and the Budget Control Act of 2011

The Budget Control Act calls for $2.1T to $2.5T in cumulative deficit reduction for the period 2013 – 2021. $917B of this is in the form of ‘up-front’ cuts in discretionary spending, and has no appreciable effect on health spending

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ESRX, MHS, and the PBM Bear Case

We update and summarize our PBM bear case in light of ESRX’ bid for MHS Generic dispensing margins (est. $9.01 / Rx) should fall toward brand levels (est. $5.77 / Rx) if average wholesale price (AWP) is replaced by a

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Why Employers Are Likely to Drop Health Insurance – A Simplified View

All else equal, employers ‘compete’ for employees with compensation packages of wage + benefits, the primary benefit typically being health coverage Logically, employers will seek to produce compensation packages of net wage and health coverage as efficiently as possible; and,

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