Your Primer to Healthcare Mergers and Acquisitions

7 Noteworthy Coronavirus News Developments for Pharmacies

Mar 23, 2020

by Alan J. Hymowitz

Volume 7 Issue 6, March 17, 2020

While all of healthcare has been hit hard by the rapid spread of the novel coronavirus, some industries have been affected more than others. Much of the news has focused on the impact to those facilities providing care to clients and patients, such as nursing homes, senior living, hospitals, and urgent care centers, there's another industry that's been greatly impacted but is under the radar: pharmacy.

Pharmacies nationwide have found themselves working overtime to try to satisfy consumer demand for a wide range of products (e.g., hand hygiene, face masks, medications) and services (e.g., filling prescriptions, administering flu shots, pharmacogenetic testing). In fact, concerns about pharmacists feeling overwhelmed received significant media attention from the likes of The New York Times and Advisory Board earlier this year — and that was before COVID-19 officially became a pandemic.

As pharmacists have focused on meeting the needs of customers over these past few weeks, there have been a number of significant news developments that are affecting and will affect how pharmacies run their business, including what's available behind the counter and on the shelves. Until COVID-19 is contained, it is difficult to predict how long it will take for pharmacy operations to return normal.

Here are seven of the most significant coronavirus-related news developments for pharmacies to know.

1. FDA reports coronavirus-related drug shortage.

In late February, the Food and Drug Administration (FDA) reported the first human drug shortage related to the outbreak. As the FDA stated, "The shortage is due to an issue with manufacturing of an active pharmaceutical ingredients (API) used in the drug." APIs are the biologically active component of a drug.

The FDA said it identified about 20 other drugs that source their API or finished drug products from China and has been in contact with firms that develop the drugs to assess whether they face shortage risks. None of these firms have reported any shortages.

Axios reported in February that about 150 prescription drugs are at risk of shortage due to the coronavirus. These include antibiotics, generics, and some branded drugs without alternatives.

2. India restricts API exports.

Earlier in the month, India announced it was at least temporarily halting the export of 26 APIs and medicines made from them to help ensure the country does not experience a shortage for its own people. The Times of India noted that among those APIs and drugs the country was no longer exporting included paracetamol (i.e., acetaminophen), the antibiotic metronidazole, those used to treat bacterial and other infections, and vitamin B1 and B12. BBC, citing the FDA, noted that India accounted for nearly a quarter of U.S. medicines and about a third of medicine ingredients in 2018.

3. Drug supply setbacks possible.

Even though drug shortages are not yet commonplace in the United States, that may well change soon. A recent NPR report discussed the impact of COVID-19 on nine drugmakers with operations in China. Their facilities make a range of pharmaceuticals, with some also producing other health-related products.

The report notes that significant supply disruptions have yet to occur. This is due, in part, to many facilities resuming production now that the spread of coronavirus has slowed in China. Yet some companies are expecting possible challenges due to lingering issues affecting their suppliers. The report notes that some of the largest drugmakers have warned about potential U.S. shortages.

What pharmacies may find comforting is that drug manufacturers build up inventory. Whether enough inventory was built up prior to the pandemic to keep production levels normal or very close to it remains to be seen.

4. Essential supplies in short supply.

Many of the health- and wellness-related supplies that consumers expect to find at their pharmacies are available in limited stock. As Pharmacy Times reports, finding hand sanitizer is becoming increasingly difficult. Other pharmacies are reporting low quantities of disinfecting wipes, rubbing alcohol, and even toilet paper. Some stores have begun placing limits on how many of these "coronavirus-related items" individuals can buy.

Unfortunately, such essentials may remain in short supply and high demand for some time. Last month, Procter & Gamble (P&G) told investors that it expected revenue and profit to be negatively affected by COVID-19, which the company said would be attributable to supply chain disruptions, among other challenges. As a Reuters report noted, P&G relies on nearly 400 suppliers in China that ship more than 9,000 different materials, impacting close to 18,000 different finished products.

5. Sandoz freezes prices on select medicines.

In late February, Sandoz, a Novartis subsidiary, announced it was committing to freezing prices for a "basket of essential medicines" it markets that may help treat patients with coronavirus. In its news release, Sandoz CEO Richard Saynor stated the commitment was made, in part, in response to "… reports that prices for basic medicines such as painkillers and antibiotics are rising substantially as a result of a tightening supply situation for active pharmaceutical ingredients out of China." Reuters reported that this would affect about 20 antiviral and antibiotic drugs.

On March 11, Novartis reiterated its commitment to keeping prices stable.

6. Legislation introduced to spur U.S. pharmaceutical manufacturing.

On March 11, Sens. Marsha Blackburn (R-Tenn.) and Bob Menendez (D-N.J.) introduced the Securing America's Medicine Cabinet Act (SAM-C). Among its purposes: authorize $100 million toward increasing U.S. drug manufacturing — specifically production of APIs. As a joint press release from the senators indicated, only 28% of the manufacturers of pharmaceutical ingredients supplying the United States are in the country. A CNBC report notes that of the 72% manufactured overseas, 13% comes from China.

In the release, the senators pointed to the first drug shortage related to the pandemic.

7. CVS and Walgreen waive delivery fees.

Last week, CVS Health and then Walgreens Boots Alliance announced they would be waiving delivery fees for prescriptions to encourage consumers — especially those at higher risk from COVID-19 — to remain home.

In its announcement, CVS also noted that Aetna (a CVS Health company) is waiving early refill limits on 30-day prescription maintenance medications for members with pharmacy benefits administered through CVS Caremark, among other efforts in response to the coronavirus. Walgreens' announcement highlighted the availability of free delivery on any purchase from its website and purchasing limits on select products.

What to Watch For

We should learn a great deal about how U.S. pharmacies and the pharmaceutical industry will be affected by the coronavirus in the coming weeks. During this time, we will gain a better understanding of the U.S. spread of the virus and whether efforts to slow or contain it are proving successful; how the economies of countries like China and India are recovering; and the overall impact on the drug and supply chain, among other significant developments that will have short- and long-term effects on pharmacies.

Alan J. Hymowitz

Alan J. Hymowitz CM&AA

Managing Director

During the past decade, Alan has facilitated numerous, diverse M+A transactions in the pharmacy marketplace across the country, as well as providing strategic consultation to national pharmacies and similar organizations.  Prior to becoming an M+A advisor, he was a “hands-on” owner and manager in the pharmacy and home infusion healthcare marketplace for over 15 years and successfully sold his pharmacy to a national company after growing and diversifying their income streams in a very competitive market.  Alan's specialties in the pharmacy and home infusion marketplace include long term care, retail pharmacy, specialty pharmacy, and home healthcare, and he has attained the URAC Accreditation and Specialty Pharmacy Consultant designations, in addition to other recognitions.  His educational background includes a Bachelor of Arts from Rutgers University and a Master of Arts from the John Jay College of Criminal Justice.

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