Diplomat finishes off fiscal year strong
Diplomat closed 2017 in a strong position as it moves to position itself as a broader-based healthcare company, according to its full-year and fourth-quarter results released Tuesday. The Flint, Mich.-based independent provider of specialty pharmacy services brought in $1.15 billion in revenue for the quarter ended December 31, 2017, and $4.49 billion in revenue for the full year ended the same date. The earnings report caps a full year for Diplomat, during which its rejiggered business strategy also was by the retirement of longtime CEO and co-founder Phil Hagerman.
Diplomat’s quarterly revenue represents a 1% increase over the previous-year quarter, which it said was driven by completed acquisitions — which included the nearly $600 million cash-and-stock purchase of pharmacy benefit manager LDI Integrated Pharmacy Services, as well as the $45 million cash-and-stock acquisition of PBM National Pharmaceutical Services. It also acquired specialty and infusion pharmacy Focus Rx. The quarter’s gross margin grew to 8.1% from 7.3% in the year-ago period, with gross profit per prescription dispensed rising $11 to $353. Net income for the quarter was $6.5 million, compared with a $1.1. million loss a year ago.
Offsetting the company’s quarterly revenue was its decision to exit less profitable contracts at the end of 2016 and lower demand for hepatitis C drugs. The company’s selling, general and administrative expenses for the quarter were $90.6 million, a $13.6 million increase over the prior-year period that Diplomat said was due to employee cost, mostly form acquisitions. As a percentage of revenue, SG&A expenses grew 1%. Its increase in net income was attributed to a $10 million improvement in income taxes driven by a new lower tax rate reduction, as well as a one-time $4.7 million impairment expense from the prior-year period.
For the full-year, Diplomat’s revenue marked a 2% increase over full-year 2016. The company attributed this increase to its acquisitions and offset by the same factors as its quarterly results. The company’s gross profit was $348.7 million, marking a 7.8% margin — an improvement of $24.1 million and 0.4 percentage points over 2016. SG&A for the year were $330.1 million, up $52.3 million over 2016, which the company said was largely due to an increased, acquisition-driven employee cost. Net income dropped to $15.5 million from $28.3 million in the previous year, which Diplomat attributed to a $28.5 million drop in operating income and a $4.1 million increase in interest expenses related to its new financing arrangement that began in Q4. Adjusted earnings per share hit $0.84, up nine cents per share over 2016.
“Our strong performance for the fourth quarter and full year reflects the successful execution of our strategy, as well as the actions we took to position Diplomat for long-term growth, including entering the PBM market and bolstering our bench of talent,” interim CEO Jeff Park said.
For 2018, Diplomat said it expects to see revenue of between $5.3 billion and $5.6 billion, with expected net income of between $4.5 million and $13 million. It expects adjusted EPS to be between $0.87 and $0.97.
“As evidenced by our 2018 outlook, we are confident in our ability to build on this momentum and capture the growth opportunities ahead,” Park said. “As we execute on our go-to-market strategies across specialty, infusion and PBM, we are focused on continuing to accelerate growth and profitability, and enhance value for our shareholders while keeping our patients at the center of everything that we do.”
PhRMA highlights potential savings of outcomes-based contracts
The Pharmaceutical Research and Manufacturers of America has taken a look at the impact value-based contracts have on patient costs, and found that they deliver savings. The Washington, D.C.-based organization found that in the past two years, patients with HIV, high cholesterol and diabetes whose health plans implemented value-based contracts for their medications had 28% lower out-of-pocket costs, on average, than patients in other plans.
The organization’s report also highlights the potential for outcomes-focused contract to save costs for the broader healthcare system alongside patients. It projects that the United States could reduce healthcare spending by $12 billion a year if it can leverage outcomes-based contracts to cut diabetes spending by 5%. Part and parcel of outcomes-based contracts, PhRMA said, is a bigger financial stake from healthcare companies — which can lead to lower co-pays.
However, the report notes that PhRMA members — both manufacturers and payers — have said that barriers to widespread adoption of these contracts remain. Barriers include uncertainty regarding Food and Drug Administration rules about manufacturer communication, concern over violating the federal anti-kickback statute and worries about how contracts would effect metrics related to cost reporting.
The report notes that though these early results are promising, there’s a lot that has to be accomplished from a public policy standpoint that address PhRMA members’ concerns.
“Results-based or value-based contracts can reduce health care system costs and can make medicines more affordable and accessible for patients,” PhRMA president and CEO Stephen Ubl said. “The health care market is starting to move in this direction, but we need public policy reforms that allow greater flexibility for innovative payment arrangements that lower out-of-pocket costs and enable patients to access the right treatments the first time.”
Lupin launches generic Axiron
Lupin has introduced its generic Axiron (testosterone topical solution). The company had previously received approval from the Food and Drug Administration for the product, which is indicated for replacement therapy in males for conditions associated with deficient or absent endogenous testosterone.
Lupin’s generic Axiron will be available in a dosage strength of 30 mg per actuation. The product had a market size of $179 million for the 12 months ended December 2017, according to IQVIA data.