PBMs, PDPs & MA-PDs: Which Way Is Up? Bob Atlas THE SECOND NATIONAL MEDICARE PRESCRIPTION DRUG CONGRESS November 1, 2005.

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Presentation transcript:

PBMs, PDPs & MA-PDs: Which Way Is Up? Bob Atlas THE SECOND NATIONAL MEDICARE PRESCRIPTION DRUG CONGRESS November 1, 2005

1 Medicare Plays for PBMs PBM’s Own Stand- alone PD Plan PharmacyManager Medicare Advantage PD Plan Fallback Plan Contractor Insurer’s Stand- alone PD Plan PharmacyManager CMS PBM at risk PBM not at risk for underwriting losses A BCE E off limits if bid for A or B PharmacyManager QualifiedEmployer PD Plan D

2 Largest PBMs, Pre-MMA ( Total PBMs ~ 70) *Includes WellPoint-Anthem merged PBMs. † Figures cannot be summed – probable double counting. PBMOwnership Lives † (Millions) Caremark RxPublicly traded 80 Medco Health SolutionsPublicly traded 60 Express ScriptsPublicly traded 50 WellPoint Pharmacy Mgmt.*Insurer – WellPoint 43 PharmaCarePharmacy – CVS30 MedImpactPrivately held 27 Argus HealthPrivately held 24 Prime TherapeuticsInsurer – 8 Blues 9 CIGNA HealthcareInsurer – CIGNA 9 Aetna Pharmacy Mgmt.Insurer – Aetna 8 Prescription SolutionsInsurer – PacifiCare 6

3 Largest PBMs - Participation in Part D PBM National PDP Regional PDPs MA-PDs Own (Brand)Partner Caremark Rx SilverScriptCoventrySub Medco Health Solutions YOURx-Sub Express Scripts --Sub WellPoint Pharmacy Mgmt. Unicare M’care Rx PharmaCare (CVS) -Universal Amer.Sub MedImpact --Sub Argus Health --HumanaSub Prime Therapeutics --Parent Blues CIGNA Healthcare CIGNATURE Rx-- Aetna Pharmacy Mgmt. Aetna M’care Rx-- Prescription Solutions PacifiCare-- Walgreens Health Initiatives - United (AARP) & WellCare Sub

4 PDP Advantages vs. MA-PD EASIER ENROLLMENT Keep same medical providers Default enrollment of 6.5M duals Obvious choice for 1.2M nursing home residents Simple take-up for 4.7M current Medigap enrollees Encouragement from retail pharmacists – invested in PDPs

5 Medicare Managed Care Got Boost in MMA MA plan capitations raised  10.6% in 2004  6.6% in 2005  4.8% in 2006 $10B “stabilization fund” for regional PPOs Addition of Part D Mar ‘99Mar ‘03Aug ‘05 Contractors Enrollees (Millions)

6 MA Plan Advantages vs. Stand-Alone PDPs COST SAVINGS POTENTIAL Buy down PD price bid/cost-sharing using medical care savings Spread administrative costs over broader revenue (per head) base Manage Rx usage via leverage with physician prescribers Better odds of normal or favorable population selection

7 Premiums for MA-PDs vs. PDPs Distribution of Prescription Drug Benefit Premiums* MA-PD PDP MA-PD Median Premium ~ $21.70 PDP Median Premium ~ $36.66 *Unweighted, based on listings of MA-PDs (N=22,741 plan options including Rx, by counties) and PDPs (N=2,184 plan options, by PDP regions) as shown on CMS website as of October 27, 2005

8 Significance of Biased Selection Average Annual Net Rx Benefit by Age Cohort and Health Status Source: “Lifetime financial benefit of the new prescription drug law,” Muse and Associates, August 2004