Are We Aligned Yet? A Medicare Part D Roundtable - Pharmaceutical Executive


Are We Aligned Yet? A Medicare Part D Roundtable

Pharmaceutical Executive

WINTERTON: It's the classic situation: People who need the benefits most have the least amount of education.

METRO: And even among those who are better off, you are also going to have the issue of attitude. There is a very passive attitude about their healthcare.

CLINTON: Could we look at Part D in terms of threats and opportunities to the different stakeholders? What conflicts does it create that haven't necessarily been there before?

SHERMAN: From what I have heard from pharma executives, they anticipate greater volume, but any plus will be offset by rebates. They look at it as almost neutral. But it obviously beats some of the alternatives.

ZANT: It might be an opportunity now, but it's a threat if pharma doesn't grasp it and support it and encourage it, because the alternatives are negative to pharma.

METRO: I hope the industry can push this as an opportunity to prove its value proposition.

WINTERTON: Do you see that happening as a coalition?

METRO: No. Hopefully to the extent it is going to happen it's probably going to be incrementally, through demonstration projects.

In some respects, the other thing that may be an opportunity is that we are getting all of the segments of the market playing from the same page. You have familiar ground, and you don't have to be slicing and dicing your populations as much. Maybe there is an opportunity for more coordination of strategy, because you are playing in a field of the familiar.

Stephen zocchi, vice president, marketing and sales, Model N: But how do you support that focus? You have a world that is increasingly complex. You have new entities—maybe they are sponsored by familiar parties, but they are new entities. You have the merging of commercial and government business in a way that's never happened before. And with that comes increasing complexity in terms of how you handle administration or planning. Think about price calculations. Medicare is going to use Average Sales Price, which is very complex to calculate. Now, they are proposing a second version of ASP to be added to the mix. So you have increased operational complexities for all pharmaceutical companies and potentially all the parties.

WINTERTON: There is a fundamental conflict built into the system. We want to increase access, but we want to contain costs. This conflict used to be in more isolated markets. Now we are talking essentially 40 percent of the market. The stakes are much higher.

CLINTON: What about other players?

LONG: If you take retail pharmacies, it gives them an opportunity to offer a ninety-day script. That hypothetically allows them to compete better against mail.

On the flip side, their most profitable customer—the cash customer—is now going to be a third-party customer. The independent pharmacy will probably struggle more than chains, and some chains will struggle more than others. Canada could be a loser in this, because nobody is going to Canada for their Medicaid prescription at a three-dollar co-pay. Virtually nobody is going to Canada to trade off a $25 co-pay. So at least some of those cash customers will be back.

SHERMAN: From a PBM perspective, Medco is very dependent on seniors. They make up nine million out of the roughly 60 million people we have under management today—and you can imagine they account for a disproportionate share of our revenue. On top of that, a lot of our mail volume depends on seniors—and mail service is where our margins are, so nine million seniors might represent 35 percent of the prescriptions we handle. If you look at it from a margin perspective, they are even more significant.

If our employer clients discontinue traditional retiree drug benefits, and if we are not able to keep those retirees either in one of our Part D plans or in an employer-sponsored PDP [prescription drug plan], we have lost an important customer. If that happens dramatically, as some people predict it could in '07, that could be a big negative for us. On the other hand, Part D is just another venue in which to compete. When we go to clients, we don't get the traditional question anymore—What do you have in place for our retiree population? Now we have to have innovative solutions.


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