For many pharmaceutical and biotechnology companies, 2005 has been a hectic year as they work to understand the potential
implications of and prepare for the new Medicare Part D prescription drug benefit. Earlier in the year, manufacturers were
scrambling to make Part D-related contracting decisions. These decisions had to be made quickly, with limited information—a
requirement that will continue for pharma and biotech for the rest of 2005 as they prepare for Part D.
While the pharmaceutical and biotechnology industry might like to take a moment to catch its breath following the contracting
crunch, there is still a daunting amount of work to be done before the new benefit goes into effect on January 1, 2006. Companies
still need to assess their own levels of "Part D readiness" and define and implement required changes to their structures,
processes, strategies, and tactics.
In September, CMS will award bids to MCOs and PBMs, and we will learn which plans will administer the benefit in 2006. But
many key variables will remain unknown for quite some time after January 1, and manufacturers will not have the luxury of
waiting for complete or perfect information before making Part D-related decisions. With more than 40 million Medicare beneficiaries
in the US, the stakes are high for manufacturers, and the window for making strategic decisions is closing. Companies need
to move forward with their Part D readiness planning now, develop hypotheses, and make informed projections on how the Medicare
market will play out in 2006 and beyond.
Part D will shift the market dynamics and revenue potential of many products at the national, regional, district, and physician
levels. The variables that will determine the magnitude and impact of these shifts include:
- Portion of total prescriptions represented in the Medicare population
- Part D sponsors' approach to managing a given pharmacologic class
- Positioning on Part D formularies
- Number of beneficiaries and total prescriptions at stake in the Medicare population in a given geographic area.
There are a myriad of marketing- and selling-related items that manufacturers need to address over the next few months to
ensure they are prepared for Part D—planning points that can be segmented into four primary areas: brand management, managed-markets
marketing, managed-markets sales, and field sales. The following section introduces some of the specific items that manufacturers
need to consider in each area.
Brand marketers must develop a detailed understanding of how Part D will affect their products, and coordinate their efforts
closely with their colleagues in managed-markets and field sales. This will be especially critical for brands that are heavily
used by seniors or dual-eligibles—Medicare beneficiaries who also qualify for Medicaid. Roughly one-third of dual-eligibles
are under the age of 65. Therefore, Part D will affect a number of products (such as HIV medications and antipsychotics) not
typically associated with the elderly. There are four important areas for brand marketers to address:
PLANNING AND FORECASTING Historically, most brand teams haven't placed much emphasis on Medicare beneficiaries. Now they need to ask some basic questions,
- How can we effectively segment the Medicare population?
- What criteria (such as health status, geography, dual-eligible status, income, current source of prescription coverage) should
be used in segmenting the Medicare population?
- How do the various segments behave differently?
- Who are the most important influencers of healthcare decisions for the different segments?
- Which segments are most attractive to our brand?