Medicare: D Day - Pharmaceutical Executive

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Medicare: D Day
The Medicare drug benefit may still be almost a year away, but the crucial deadline for pharma companies is just around the corner.


Pharmaceutical Executive


Marketing Mix. Under Part D, marketers will also need to reassess their overall approach to marketing to key customer groups—MCOs, PBMs, providers, and seniors. Thus, for each customer group, companies will need to consider: What is the right value proposition and positioning? What messages are appropriate? What is the right promotional mix and how should we allocate resources?

Seniors, who will become a more important patient segment for many prescription brands, are likely to receive a barrage of DTC marketing through various media, including television, newspapers, and direct mail, as well as through their respective Part D plan sponsors. Pharmaceutical marketers will need to determine the optimum approach for reaching this new patient segment.

Managed Care Sales and Account Management. The relationships between MCOs, PBMs and pharma companies are likely to change as the same parties begin to interact on two different books of business—commercial managed care and Medicare. To illustrate: If a pharma company is dealing with the same pharmacy director on both Medicare and commercial contracts, the director may be motivated to drive parity between the two books of business. Because Medicare rebates will likely be significant, the pharmacy director may try to pressure the manufacturer to offer increased rebates on the commercial side as well. Under this scenario, the pharma company's overall profit margins could be squeezed. To prevent such an outcome, manufacturers will need to be strategic about how they approach account management for MCOs and PBMs involved in both commercial managed care and Medicare Part D.

Field Sales. Given the new regions defined for Medicare Part D, companies will need to re-evaluate certain geographic areas, because their importance could change significantly. Companies will need to consider making appropriate adjustments to their sales force size, structure, and alignment, as well as to how resources (for example, sampling and promotional dollars) should be allocated across the sales force.

Also, as things shift under Part D, sales force incentive compensation plans are likely to become outdated and will need to be realigned. Consider the following hypothetical situations: In a territory with a large number of Medicare beneficiaries and favorable Part D formulary positioning for key products, a rep may have to do very little work to meet his goals and achieve a maximum bonus. In a territory with fewer beneficiaries and/or mixed coverage for key products, a rep may expend Herculean efforts but barely "move the needle" and fail to receive an appropriate bonus.

A product's formulary position under Part D may also have a significant effect on the product's overall sales performance because of increased or decreased physician prescribing. If a physician who has been a historically strong prescriber learns that the product does not have adequate formulary coverage under Part D, she may be less likely to continue prescribing that medication, and her new mindset could spill over to non-Medicare patients. Such changes can ultimately affect product sales and necessitate adjustments to pull-through approaches.

Although pharmaceutical marketers have much to consider before developing product-specific strategies, there is still a window of opportunity to act now—a window that is rapidly closing as the timeline shortens. In addition, pharmaceutical companies must look down the road and anticipate what the long-term ramifications of the Medicare benefit are likely to be. A watch-and-wait approach at this critical juncture would be very short-sighted indeed.

Kevin Barnett is senior vice-president, Managed Markets Practice, Campbell Alliance. He can be reached at


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