Jan
25

PMSI’s for sale, part 2

SInce I learned of PMSI’s pending sale, I’ve been digging thru financial reports and talking with customers and industry folk to find out more.
Turns out FY 2007 (ended 9/30/07) was a down year for both revenue and profit at PMSI-Tmesys (PMSI). Although top-line increased 1%, that was primarily due to the acquisition of Health Advocates (HA) for $83 million (about 4.2x revenues). When you consider the overall WC Rx inflation rate was 6.5% and add in HA’s revenue, PMSI’s core business actually declined by about $50 million, or around 11% from 2006 to 2007.
The news was worse for profits, which dropped by 45%, while reserves for bad debt increased by $3.7 million. Notably, the MSA business contributed a whopping $12.4 million in gross profit – although that number looks awfully high. Given what they paid for it, I would not be surprised if dollars were shifted around to make the acquisition look good – 4.2 times revenues is awfully expensive.
It should also be pointed out that 2006 was not a stellar year; although revenues increased 4% from the previous year (while WC Rx inflation was close to 10%), profits had declined by 11% from 2005.
Clearly the company’s owners have not acted precipitously.
Competitive pressure certainly played a part in ABC’s decision to sell off the firm; as noted here Coventry has been aggressively pursuing new business, and PMSI has already lost one large customer that by itself will cut 2008 revenues by another 10%.
Despite what some commenters think (and write), I don’t think it is fair to hammer the (relatively) new management at PMSI. The company had started declining years ago, and had started to turn itself around under the prior president, David Weidner. The company also lost its best spokesperson, Phil Walls PharmD, who has since moved onto another PBM. Weidner was replaced by Mark Hollifield, who brought in a new sales and marketing team (can’t speak to the sales side, but the marketing has been rather uninspired).
What does not appear to have changed is the complacent culture at PMSI – although the company had done innovative work in several areas, it was very slow to market, could not move quickly, and seemed more interested in having meetings than delivering on commitments to customers.
Cultures are notoriously hard to change, and this may well be a case in point.
We’ll get into what a buyer would get when next we meet.


Jan
25

PMSI is for sale

The largest workers compensation PBM, PMSI-Tmesys, is on the block. The company’s owner announced the sale yesterday, noting that it is being spun off so the parent, Amerisouce Bergen, can concentrate on the core business of drug distribution.
PMSI-Tmesys has suffered through client losses of late, the latest CNA’s departure at the end of last year. Declining margins may also have played a role in the decision, as price pressure from competitors, coupled with the drastic cuts in reimbursement in NY and CA, have likely contributed to the company’s failure to meet financial goals in 2007.
With revenues exceeding $400 million, PMSI-Tmesys is the leader in the space, providing drugs, durable medical equipment, and other services to many WC payers. Reading between the virtual lines, it looks like Amerisource’s senior management is expecting a strategic buyer, as the company has been in the process of shopping PMSI-Tmesys for a few weeks already.
More to follow…


Jan
24

UPDATE – What do Republicans really think about Universal coverage?

My post on the GOP Presidential candidates and universal coverage elicited more than a few responses, most of which were cordial and helpful. Several took exception to the poll I cited (conducted by GOP pollster Tony Fabrizio’s firm) noting (accurately) that it was over six months old.
Fortunately, a comprehensive analysis of polling data re health care was just published. There’s a lot here, but the net is this – lots of Republicans support universal coverage. For example, in a NYTimes poll from late 2006, 44% of the Republicans polled favored “requiring…everyone have health insurance, with government helping to pay for insurance for those who cannot afford it.”
That is a lower percentage than the June poll; the difference could be in the wording of the questions or perhaps the population’s concern had grown over the eight months.
UPDATE – Another, very recent poll found similar support among Republicans for universal coverage – fully 65% would support reform that helped reduce the number of uninsured (23% favoring a plan to cover everyone, even if it would result in substantial additional spending and the remainder looking for a less ambitious plan that would likely only cover some of the currently uninsured)
The same poll found a slight majority of Republicans (53%) did not favor an individual mandate (a topic that is related to but not the same as universal coverage).
Comparing poll results can be touchy as the questions are usually different; Fabrizio’s June poll found 51% of Republicans agreed with the statement “Universal health care coverage SHOULD BE a guaranteed right of every American” (original emphasis).
And yet another poll, this one by the Commonwealth Fund, found a similar result – 52% of Republicans were strongly or somewhat in favor of requiring individuals to have health insurance coverage, with government help for those with limited incomes. (for independents the corresponding figure was 68%)
The Fabrizio poll is remarkably detailed and provides a breakdown of the perspectives of specific groups of Republicans. There are three segments that are most favorably disposed to universal coverage.
“Moralists” are the largest single group, accounting for 24% of all Republicans. Among the ‘moralists’, 48% were in favor of universal coverage. This segment is predominantly Born Again or Evangelical, poorer than the average, and disproportionately female.
13% of those polled were identified as “government knows best” Republicans (isn’t that an oxymoron?). The GKB folks were typically female and McCain fans, and fully 93% were supportive of universal coverage.
The third group, ‘Heartland’ Republicans (also 13%), were also McCain backers. Predominantly midwesterners, 72% supported universal coverage.
Digging ever deeper into the numbers, Republicans were more concerned with the cost of care (42%) than with covering everyone (19%). (Listening to Sen. Obama on health care makes me wonder if he carefully studied Fabrizio’s poll before coming out with the PR spin for his health reform plan; although Obama’s reform initiative is virtually identical to Sen. Clinton’s (except for mandated universal coverage), he has been consistently emphasizing cost control.)
While there are clear differences between the two camps, they do agree on one major issue: fewer than one in five voters, Republican or Democrat, believe it is the employer’s responsibility to ensure that people have health care.


Jan
23

Warning on Fentora

The FDA has issued a warning notice for off-label use of Fentora after three deaths were linked to off-label usage of the fentanyl tablet.
One issue may be related to the substitution of Fentora for another powerful pain medication, Actiq. Both are manufactured by Cephalon, but Fentora is absorbed more quickly than is Actiq. Therefore, the same dosage of Fentora may result in more of the drug being absorbed into the bloodstream.
Cephalon has been plagued by accusations of aggressive detailing, including encouraging physicians to prescribe the drug off-label. Another recent article indicates the pharma industry has been aggressively lobbying the FDA to allow this type of detailing, which evidently has been going on for two years despite restrictions against the practice.
Of note to workers compensation insurers, Fentora appears to be becoming increasingly popular for treatment of back pain in some areas.
What does this mean to you?
If you are a WC payer, find out which claimants are taking Fentora and figure out why and if it is appropriate. Not only is the drug dangerous, it is also very expensive.


Jan
23

What does the recession mean for workers comp?

The US is either in a recession or about to be. What does that mean for workers’ comp?
Broadly speaking, there are no studies that indicate WC costs decline as a result of recessions; in general costs tend to increase. An analysis of Minnesota data published in 2002 indicated that costs rise during recessions for two reasons – claims rates (by far the most important factor) increase as does disability duration.

Continue reading What does the recession mean for workers comp?


Jan
22

The latest on NY’s WC Rx changes

New York announced significant (some would say drastic) changes to the state’s WC Laws and Regulations last summer. These changes will result in a dramatic decrease in WC premium rates in the state, something long overdue, and much welcomed. There is a lot of good in the new regs, but there are also a couple of problems.
The one issue that is most troubling pertains to drugs.

Continue reading The latest on NY’s WC Rx changes


Jan
18

Corruption in the implant business

The sleazy world of surgical implants has been exposed recently, with reports of doctors receiving kickbacks, huge settlements by manufacturers, and outrageous pricing.
Just when you thought “finally, a company gets hammered“, we find out that the corruption doesn’t stop with the implant manufacturers, but infects the regulators themselves.
The US Attorney who settled the case against Zimmer for $311 million forced Zimmer to pay his former boss, John Ashcroft, between $28 and $52 million over 18 months (on a no-bid contract) to oversee the settlement. According to Ashcroft’s firm, the fees are justified because they have hired an additional 30 employees and outside consultants for this project, and Ashcroft himself has actually traveled to Indiana several times (several times!!) to oversee the work.
Ashcroft, the former Attorney General, was US Attorney Chris Christie’s boss.
Among the terms of the Ashcroft deal are:
–$150,000 to $250,000 per month for travel and incidentals
–$750,000 as a monthly retainer
–hourly fees up to $895
No wonder Ashcroft’s spokesman said the firm “was pleased about the deal”.
And no wonder implant prices are so high – they have to be to afford the payoffs, both legitimate and illegal.
This is disgusting.


Jan
16

Third Party Solutions – the latest news

TPS, a subsidiary of Fiserv, has had a rather tumultuous recent history. For sale for a reported $200+ million, then taken off the block when no buyers appeared. Left behind when Fiserv sold the rest of its health business to United Healthcare earlier this year. Meanwhile, TPS was buying its sole competitor, WorkingRx for a reported $25-50 million (highly contingent on AR collections).
Earlier this week I noted that WorkingRx has filed over a hundred individual cases in Utah naming specific employers liable for ‘shortpays’ (payments of less than WRx thinks they’re owed). In my opinion, WRx overreached; the filings named the pharmacies that filled the scripts – and when employers find out which pharmacies are behind this mess, they will be none too happy.
WRx’s General Counsel, Rex Huang, left the firm just before the end of the year.
With Huang’s departure, the rapid disappearance of senior staff at WRx is now close to complete.
The third party biller market is now a monopoly, and some pharmacy chains indicate the pricing proposals from TPS are starting to reflect that.


Jan
16

Cavalcade of Risk is up

Colleague and blog mentor Julie Ferguson is this week’s host of the Cavalcade of Risk. Got to get her to show me how to do those cool photo inserts…