Transcript PBMs, PDPs & MA-PDs: Which Way Is Up? Bob Atlas November 1, 2005

PBMs, PDPs & MA-PDs:
Which Way Is Up?
Bob Atlas
THE SECOND NATIONAL MEDICARE
PRESCRIPTION DRUG CONGRESS
November 1, 2005
Medicare Plays for PBMs
CMS
A
PBM’s Own
Standalone
PD Plan
PBM at risk
Insurer’s
Standalone
PD Plan
B
D
C
Pharmacy
Manager
Qualified
Employer
PD Plan
Medicare
Advantage
PD Plan
Pharmacy
Manager
E off limits
if bid for
A or B
E
Pharmacy
Manager
Fallback
Plan
Contractor
PBM not at risk for underwriting losses
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Largest PBMs, Pre-MMA (Total PBMs ~ 70)
Lives†
PBM
Ownership
Caremark Rx
Publicly traded
80
Medco Health Solutions
Publicly traded
60
Express Scripts
Publicly traded
50
WellPoint Pharmacy Mgmt.*
Insurer – WellPoint
43
PharmaCare
Pharmacy – CVS
30
MedImpact
Privately held
27
Argus Health
Privately held
24
Prime Therapeutics
Insurer – 8 Blues
9
CIGNA Healthcare
Insurer – CIGNA
9
Aetna Pharmacy Mgmt.
Insurer – Aetna
8
Prescription Solutions
Insurer – PacifiCare
6
(Millions)
*Includes WellPoint-Anthem merged PBMs. †Figures cannot be summed – probable double counting.
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Largest PBMs - Participation in Part D
PBM
Caremark Rx
Medco Health Solutions
Express Scripts
WellPoint Pharmacy Mgmt.
National PDP
Own (Brand)
Partner
Regional
PDPs
SilverScript
Coventry
Sub
Sub
YOURx
-
Sub
Sub
-
-
Sub
Sub


Unicare M’care Rx
MA-PDs
PharmaCare (CVS)
-
Universal Amer.
Sub
Sub
MedImpact
-
-
Sub
Sub
Argus Health
-
-
Humana
Sub
Prime Therapeutics
-
-
Parent Blues
CIGNA Healthcare
CIGNATURE Rx
-
-

Aetna Pharmacy Mgmt.
Aetna M’care Rx
-
-

PacifiCare
-
-

-
United (AARP)
& WellCare
Sub
Sub
Prescription Solutions
Walgreens Health Initiatives
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PDP Advantages vs. MA-PD
EASIER ENROLLMENT

Keep same medical providers

Default enrollment of 6.5M duals

Obvious choice for 1.2M
nursing home residents

Simple take-up for 4.7M
current Medigap enrollees

Encouragement from retail
pharmacists – invested in PDPs
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Medicare Managed Care Got Boost in MMA

MA plan capitations raised


10.6% in 2004
 6.6% in 2005
 4.8% in 2006

$10B “stabilization fund”
for regional PPOs 2007+
Addition of Part D
426
412
6.6
5.9
5.1
235
Contractors
Enrollees
(Millions)
Mar ‘99
Mar ‘03
Aug ‘05
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MA Plan Advantages vs. Stand-Alone PDPs
COST SAVINGS POTENTIAL

Buy down PD price bid/cost-sharing using medical care savings

Spread administrative costs over broader revenue (per head) base

Manage Rx usage via leverage with physician prescribers

Better odds of normal or favorable population selection
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Premiums for MA-PDs vs. PDPs
Distribution of Prescription Drug Benefit Premiums*
MA-PD
$0
$0-10 $1020
$20- $3040
30
$40- $5060
50
$60- >$70
70
MA-PD Median Premium ~ $21.70
PDP
$0
$0-10 $1020
$20- $3040
30
$40- $5060
50
$60- >$70
70
PDP Median Premium ~ $36.66
*Unweighted, based on listings of MA-PDs (N=22,741 plan options including Rx, by counties) and
PDPs (N=2,184 plan options, by PDP regions) as shown on CMS website as of October 27, 2005
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Significance of Biased Selection
Average Annual Net Rx Benefit by Age Cohort and Health Status
Constant 2006 Dollars
$6,000
$5,319
$5,000
Good
Poor
$4,000
$3,114
$3,000
$2,145
$2,000
$981
$1,000
$0
$63
65-74
$315
75-84
Age Cohort and Health Status
85+
Source: “Lifetime financial benefit of the new prescription drug law,” Muse and Associates, August 2004
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