Reprinted from DRUG BENEFIT NEWS, biweekly news, proven cost management strategies and unique data for health plans, PBMs, pharma companies and employers.
By Anthony Vecchione, Editor
August 19, 2011Volume 12Issue 17
The Aug. 4 announcement from HHS that average Medicare Prescription Drug Plan (PDP) premiums will not increase in 2012 reflects lower drug utilization and the increased availability of generics, experts tell DBN.
According to HHS, the cost of the average Medicare PDP premium in 2012 will be roughly $30, about flat from the 2011 average premium of $30.76. These figures are based on bids submitted by Part D plans for the 2012 plan year.
“Everything is very positive from a vendor or carrier perspective. I think that they have a couple of things going in their favor. First of all, if we take a look at a vendor or a carrier, these are one-year deals, so their downside is limited,” Michael Jacobs, national clinical practice leader at Buck Consultants, tells DBN.
In addition, Jacobs says that as a result of premiums not increasing, people are more likely to stay with their current Part D plan. “That’s a pretty good reason to stick around and build trust and faithfulness, and it also lets people on relatively fixed incomes survive a little bit easier in the current economic climate. I think for the providers, it’s probably a good thing, moving forward, that they will build up some additional loyalty with their current customers,” Jacobs says.
No Increase for Part D Premiums
Industry analysts point to the big wave of products that are going to pose generic competition in 2012 as one of the major factors keeping average premiums flat over the past few years. “Many of the plans were able to take advantage of predicting lower costs, assuming turning all those people that are on products like Lipitor over to generics. That’s certainly good for PBMs and plans,” Bonnie Washington, senior vice president of Avalere Health, LLC, tells DBN.
Lipitor, a statin and the world‘s biggest selling drug, loses patent protection in November. Generic competition is expected to cut into Lipitor’s annual sales of almost $11 billion.
Washington points to the low-premium, narrow-network product launched in October 2010 by Humana Inc. and Wal-Mart Stores, Inc. (DBN 10/8/10, p. 1). But, she warns, “there is competition in Part D to be able to attract that group of seniors who are looking for a low premium and provide an alternative to Humana/Walmart,” Washington says.
“Companies will try to modify their current programs or create new ones with premiums below $30 to compete with the $14.95 Humana-Walmart plan,” Washington says.
Washington says that plans and PBMs are trying to figure out new ways to keep costs low through mail order and preferred pharmacy networks. “If Part D is working well with low premiums and good competition, that is generally good for the plans and the PBMs that are participating in it.”
She adds that over the past five years, a fair number of people switched plans. “From 2009 to 2010, approximately 1.5 million low-income beneficiaries had to change plans. That number decreased to about 500,000 in 2011 due to the ACA changes. We are waiting to hear about the number for 2012.” Washington contends that if premiums remain stable, member retention will improve. “It’s a lot more efficient to have somebody year after year than to go through all the transitions.”
George Van Antwerp, general manager, pharmacy solutions at Silverlink Communications, Inc., says, “the model for managing prescription trend that the PBMs have applied in the commercial space such as formulary, utilization management, preferred networks and mail order were used for PDP, and the fact that premiums won’t go up is a validation that these tools can be used in Medicare.”
“If you look at all the stuff going on around managed Medicaid, validating that it works in Medicare is probably great for the business case around, ‘Can you apply these same frameworks? Can they help manage prescription drug costs within the Medicaid world?’ which I think is a big discussion area right now,” Van Antwerp tells DBN.
Van Antwerp says that in addition to the generic fill rate going up with Lipitor losing patent protection, more people are using lower-cost channels including a preferred pharmacy like the Walmart Humana Preferred Rx Plan and 90-day distribution at either mail order or retail.
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