Implementation of ACA will not be uniform across the country nor will it offer the same opportunities for all products and
manufacturers. As of August 2013, about half of the 50 states have opted out of the federally subsidized expansion of Medicaid
coverage; most of the politically conservative states have dragged their feet in setting up both the exchanges and the infrastructure
to encourage enrollment.
The Democratic Party "blue states" that are encouraging enrollment and expanding Medicaid will follow a very different script.
Manufacturers with a history of selling to the Medicaid channel and the large sales forces that still have the ability to
call on Medicaid physicians will have the advantage.
And, although the margins in many established branded products will be paper thin due to CPI penalties, pharmaceutical companies
can expect a spillover effect in those states that have expanded Medicaid coverage. Building on precedents from the federal
WIC (womens, infant, and children) program, physicians will frequently not know a patient's eligibility for Medicaid, and
may inappropriately prescribe drugs with preferred formulary status on Medicaid to any and all newly insured patients.
Contraceptives as policy precedent?
So how do we validate this view of muted volume growth, dispersion of opportunity across branded products, and varied geographic
upside? Well, ACA is already here in one class—contraceptives, where federal regulations required all commercial insurance
plans to implement zero co-pays in January 2013. This action should have produced an across the board "windfall" for all branded
contraceptives. However, early results support the "it depends" perspective.
Like the state governments with Medicaid expansion, many insurance plans have decided to implement these regulations with
their own interpretations—in some cases following the letter of the law, and in others, only the spirit. United Healthcare
made only one generic oral contraceptive available at zero co-pay while Harvard Pilgrim (historically one of the most restrictive
payers) put every branded pill, patch, and ring on its primary formulary for zero patient out of pocket.
Past is Prologue
Although it is early, first half results for 2013 show year over year declines in all branded volumes, due to an inexorable
shift to generics despite the improvement in patient cost sharing. Patient co-pays for alternate forms of the contraceptive
pill—rings and patches—fell most dramatically. However, this varied by payer and geography, with more dramatic generic conversion
rates in plans such as United and BCBS of Massachusetts that touted the zero co-pay for generics.
Manufacturers in the contraceptive classes have already seen how ACA's impact will literally be all over the map. They have
gained a year's experience in managed care contracting and co-pay card deployment, the results of which turned their previous
strategies topsy-turvy. The pregnant question: Who needs co-pay cards in Massachusetts for any contraceptive? Why do you contract
One thing is for certain—that ACA will accelerate the pace in which pharmaceutical manufacturers move away from a "one-size-fits-all"
national model of resource allocation. A state-by-state view of the world which is emerging from differences in Part D and
commercial formularies will be necessary to capture any upside that comes from ACA—and to do that without overspending.
Mason Tenaglia is Managing Director of the Amundsen Group and a member of Pharm Exec's Editorial Advisory Board. He can reached at MTenaglia@Amundsengroup.com