Business Strategy in the Medicare Market: The PBM · PDF fileBusiness Strategy in the Medicare...
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Medco is a registered trademark of Medco Health Solutions, Inc. © 2006 Medco Health Solutions, Inc. All rights reserved. Business Strategy in the Medicare Business Strategy in the Medicare Market: The Market: The PBM Perspective PBM Perspective October 16, 2006 October 16, 2006 The Third National Medicare Congress David B. Snow, Jr. Chairman & CEO, Medco Health Solutions, Inc
Transcript of Business Strategy in the Medicare Market: The PBM · PDF fileBusiness Strategy in the Medicare...
Medco is a registered trademark of Medco Health Solutions, Inc.© 2006 Medco Health Solutions, Inc. All rights reserved.
Business Strategy in the Medicare Business Strategy in the Medicare Market: The Market: The PBM PerspectivePBM Perspective
October 16, 2006October 16, 2006
The Third National Medicare Congress
David B. Snow, Jr.Chairman & CEO, Medco Health Solutions, Inc
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© 2006 Medco Health Solutions, Inc. All rights reserved.
Medicare opportunity for PBMs doublesMedicare Part D creates new PBM market
No Coverage
Medicare HMO
Employer
Dual Eligibles
Medigap
Note: Enrollment estimates from Kaiser Family Foundation Medicare Chart Book, Summer 2005. Distribution from Medicare Advantage News, January 19, 2006. Employer Primary 2006 includes Federal Retiree Coverage (TRICARE, FEHB)
2005 (42.0MM Lives, ~$120B) 2006 (43.1MM Lives, ~$133B)
Market not served by PBMs
No Coverage
Medigap/Other
Creditable Coverage
Employer Primary
PDP/MA-PD
Market served by PBMs
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© 2006 Medco Health Solutions, Inc. All rights reserved.
The Issues PBMs Considered:
Public/Private Partnership?
Stand Alone Fully Insured Drug Benefit?
Underwriting Data?
Pent up Demand?
Will “The Tools” Survive?
How to Motivate Dual Eligibles?
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© 2006 Medco Health Solutions, Inc. All rights reserved.
To Play or Not to Play
Employer SponsoredMedigap
MedicareHMOs
DiscountCard
PDPMAPD
1985 2004 2006
~$45 BillionAverage Annual ~$60 Billion
Average Annual ~$133Billion
AverageAnnual
PROTECT
GROW
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© 2006 Medco Health Solutions, Inc. All rights reserved.
Pre-Launch Anxiety and UncertaintyWill the benefit be a success?
Private industry is critical to successWill anyone participate? Will we need fallback plans?Will we be within budget projections?
How do I best work with CMS and my business partners?
What value do/could I add?How do I meet inevitable challenges?What capabilities must I build?
What are my best alternatives?Who should I turn to for advice?
What is Medicare Part D?
CMS
PharmacyIndustry
Part D Beneficiaries
Employers
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© 2006 Medco Health Solutions, Inc. All rights reserved.
The Beneficiary Perspective:Overwhelming Market Choices
3000+ Part D options offered nationally
1,429 Prescription Drug Plans (PDPs)
458 Medicare Advantage (MA) plans
276 MA plans with Special Needs Plans
Between 11 to 21 benefit options by region
10 National organizations covering 62%
4 “near-National” plans
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© 2006 Medco Health Solutions, Inc. All rights reserved.
What Did They Choose?
Medicare Advantage Drug Plan3
Stand Alone PDP
Dual Eligibles Auto-enrolled
into PDPCreditable
Employer/Union Coverage2
Estimated to Have Other Creditable
Coverage1
1 Includes Veterans Administration, Indian Health Service, employer plans without retiree subsidies, and employer plans for active workers.2 Includes employer/union, FEHBP, and TRICARE coverage.3 Approximately 594,000 dual-eligibles are enrolled in Medicare Advantage drug plans and are reported in this category.Source: HHS, April 20, 2006
No Known Source of Creditable Coverage
24%10.4 MM
14%6.1 MM
14%6.0 MM
24%10.4 MM
13%5.5 MM
10%4.7 MM
Total withPart D Drug
Coverage: 22.5MM (53%)
43.1 Million Lives
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© 2006 Medco Health Solutions, Inc. All rights reserved.
The Launch: Implementation ChallengesPublic-private partnership begins to weaken
Enrollment logic and delays, particularly among the low income membership in PDPs, lead to State intervention
Consumer education challenges
Customer service support
Subsidy program – eligibility verification and reporting
Politics begin to take a more significant rolein the Medicare Part D benefit. Communications become
uni-lateral, with over 300 year to date ‘directives’ andpolicy changes, most with significant process implications.
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© 2006 Medco Health Solutions, Inc. All rights reserved.
Making the public-private partnership work
We all have similar interests:Choice and access for Medicare beneficiariesMember education and benefit understandingCost management to ensure long term benefit sustainabilityEase of benefit administrationProgram stability
We can work together, similar to what was done whenbenefit was constructed, to make the benefit stronger.
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© 2006 Medco Health Solutions, Inc. All rights reserved.
Evolution of Medicare D MarketIncreasing focus on the individual
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
2006 2007 2008 2009 2010 2011 2012 2013
PDP
MA-PD
SNPs
Employer
Other
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© 2006 Medco Health Solutions, Inc. All rights reserved.
Premium Performance – 2006 vs. 2007Private Sector Competition leads to lower beneficiary cost
$32.20
$27.35
$24.00
$25.00
$26.00
$27.00
$28.00
$29.00
$30.00
$31.00
$32.00
$33.00
2006 2007
-15.1%
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© 2006 Medco Health Solutions, Inc. All rights reserved.
Public-Private Partnership Model(The Larger Agenda)
Non-MMAParticipants $3650 pmpy1
MMAParticipants
$2878 pmpy
With 43.1M individuals participating in the MMA, annualpharmacy savings are ~$33B.
What savings would be possible on the medical side if we eliminate the fiscal intermediary approach in favor ofprivate sector competition?
>25% Reduction
1 Source: Medicare Trustees Report, CBO estimate of savings pmpy for beneficiaries participating vs. not-participating in Medicare Part D.
