Forecasting Medicare: Price Controls in the Years Ahead - Pharmaceutical Executive

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Forecasting Medicare: Price Controls in the Years Ahead
Part D in 2010 will be under price and access pressure. Pharma should develop plans for the future by imagining best- and worst-case scenarios.


Pharmaceutical Executive


On the topic of investing in the right plans, companies' short-term focus must be on helping MA-PDs become the dominant players under Part D. The reason for this is that MA-PDs have a greater interest in measuring outcomes, patient satisfaction, and the appropriate use of pharmaceuticals than do PDPs, which will be increasingly focused on cost, as premiums are reduced and price becomes the competitive advantage to attract members.

In addition, with more people in MA-PDs, it is more difficult to implement the approaches described under the Standard Discount and VA/DoD Model scenarios. To implement these two scenarios, the federal government would be forced to reduce or eliminate benefits, which is not easy to do in public programs.

Move beyond the brand issues In any industry, and especially in pharma, it's difficult to integrate long-term planning and short-term sales, particularly with brand management. With limited budgets, current sales initiatives normally take priority over funding a series of pilot programs that support organizations that integrate and measure outcomes. Even more complicated is the debate over accepting a third-tier position with a plan that has not demonstrated interest in measuring outcomes or patient satisfaction, and as a result does not qualify for the best price.

These are difficult decisions that will force pharma to measure the long-term implications of its choices in an uncertain future. However, without the discipline to make these difficult decisions today, the pharmaceutical industry may be reducing its options in the future.

No one can predict the future of Medicare with certainty. But what executives can be certain of is that Medicare will change and evolve. Even if Part D meets the objectives pharmaceutical manufacturers envision, over time it will come under price and access pressure. Current pricing and contracting strategy will determine both the near-term outcome of MMA and the rules by which the industry must play in the future. As a result, there's no better time than now, at the beginning of the Part D program, to start changing those rules.

Rod Cavin is a principal and managing director of Health Strategies Group. He can be reached at


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