Market Report Source

Overview

Introduction

The roll-out of Part D in January 2006 represented a significant leap forward, since it provided coverage for outpatient drugs for Medicare patients for the first time. A high number of both patients and insurance providers are now involved in the program, as a result of strong patient enrollment.

Scope

• Overview of Part D enrollment, plus an analysis of how it has impacted the healthcare insurance market, and the branded and generic drug environment
• Analysis of how Part D plans have changed from 2006 to 2007
• Analysis of problems faced by Part D since its roll-out, and the identification of possible improvement areas going forward Identification of how key issues such as the dual eligible patient population and drug sourcing in the donut hole are shaping Part D evolution

Highlights

Uptake into Part D has been strong, and despite the size and complexity of the program, patient satisfaction has been relatively high. The program faced a number of teething problems during roll-out, which have largely been resolved (e.g. IT issues); however, there are still a number of issues that haven’t been remedied. A significant factor to impact Part D is the way that plan providers have handled patients covered by both Medicare and Medicaid. Providing these ‘dual eligibles’ with adequate coverage has been a significant challenge, particularly during the roll-out of the program. The choice facing Part D beneficiaries about where to source drugs when they enter the gap in coverage in Part D programs (termed the donut hole) is also impacting plan providers and patients, since patient choice in this situation has a significant impact on market dynamics.

Reasons to Purchase

• Gain a clear understanding of how Part D has evolved since its roll-out in January 2006
• Understand the problems that Part D has faced, together with identifying areas for improvement
• Gain insight into the key issues that are shaping Part D currently and in the future

Table of Contents

CHAPTER 1 EXECUTIVE SUMMARY

Scope of the report

Key findings

CHAPTER 2 PART D: REVIEW OF THE PAST YEAR AND FUTURE DIRECTION

Overview of the usage of Part D in its first year

Patient enrollment in Part D has been strong

Part D beneficiaries have selected PDPs over MA-PD programs

Although the program has been going for a relatively short period of time, clear leaders in Part D provision have already emerged

Increased employer reliance on Part D is set to continue to drive strong enrollment in Part D in the future

Part D has significantly impacted the branded and generic drug marketplace, as well as the healthcare insurance providers

Currently, Part D is driving sales of both branded and generic drugs

Part D is also driving the growth of insurance companies, despite the significant financial risk of the scheme

There are a range of subtle differences in benefit design and formularies between 2006 Part D schemes and 2007 schemes

Although Part D costs to the patient are rising slowly, this is not set to significantly impact enrollment

The rise in the number of coverage plans and expanded formularies both increase the complexity of Part D

The requirement for six required categories of drugs in Part D formularies remains largely unchanged going into 2007

Future perspectives: 2007 will be similar to 2006, however, the Part D landscape is likely to change significantly from 2008 onwards

Patient switching is low going into 2007

2008 is likely to see a significant change in Part D structure and delivery, leading to greater switching

CHAPTER 3 PERSPECTIVES: PROBLEMS AND IMPROVEMENTS

Although there have been a range of problems with Part D, the incidence of these has fallen since its roll-out

Roll-out problems at the beginning of Part D have reduced drug access

Healthy senior citizens are angry with Part D enrollment criteria

Drug prices are slightly higher under Part D, although this does not appear to be significantly impacting Part D beneficiaries

Enrollees have had a number of problems accessing information on Part D, making it harder for these patients to gain optimal drug coverage

CMS helplines are more reliable than insurance plan helplines, yet there is still scope for improvement

Pharmacists and physicians are not well-enough trained in Part D, nor do they have enough time or resources to help patients navigate Part D

A number of pharmacies have faced significant cashflow problems as a result of Part D

Restrictive Part D plan requirements cause an increase in unnecessary hospitalizations

Part D is still overly complex, leading to coverage disruptions

Part D’s complexity is making life difficult for Part D beneficiaries

There are key improvement opportunities to make Part D easier to navigate for patients

Patient and physician perspectives reveal that Part D is generally approved of, even if there are key improvement opportunities

Patients generally approved of Part D, even if they are not very enthusiastic about the program

Physician and pharmacist impressions of Part D are generally favorable, although they also believe the program is too complex

CHAPTER 4 SIGNIFICANT FACTORS INFLUENCING PART D FROM A PROVIDER AND PATIENT PERSPECTIVE

Dual eligibles are a critical Part D patient population because of their high cost, yet they have faced significant problems

Part D’s complexity is a particular challenge to dual eligibles

Dual eligibles were transferred onto Part D on the first day of its implementation

Dual eligible healthcare is co-ordinated by a number of stakeholders who need to interact effectively

A large proportion of patients on Medicare are relatively unaware of low-income assistance

Dual eligibles faced problems being recognized and charged appropriately by Part D providers

Dual eligibles need to be continuously assessed

Patients source drugs from a range of options once they hit the donut hole

Patients deciding to stick in the Part D scheme can use specialized Part D plans, plus LISs and PAPs

Part D programs that provide donut hole coverage are scarce, although there are plans to increase the number

Financial support for Part D patients: LISs and MSPs are the primary financial support for low-income Part D patients

There is scope for PAPs to continue to be used in the donut hole

Patients sourcing pharmaceuticals outside Part D use PAPs, parallel importation and discount/free drug schemes

Patients turn to parallel importation from Mexico and Canada for cheap pharmaceuticals, both inside the donut hole and out

Beneficiaries can use the Part D appeals process to obtain necessary drugs

There are two key political factors shaping Part D evolution

The financial blow to the states following the transition of Medicaid patients to Part D has been softened by an improved state clawback

The recent change in Democrat/Republican power mix is changing the Part D landscape

CHAPTER 5 BIBLIOGRAPHY

Publications and online articles

CHAPTER 6 GLOSSARY

Glossary of terms

List of Tables

Table 1: Breakdown of Part D enrollment for top 10 providers, July 2006

List of Figures

Figure 1: At least half of the patients with access to Part D have enrolled in the plan

Figure 2: There have been a number of problems in Part D, for which a range of solutions have been proposed

Figure 3: Patient perspectives, six months after roll-out, 2006

Figure 4: Medicare-eligible seniors’ impressions of Part D, 2006

Figure 5: Proposals judged by seniors as important when changing Part D

Figure 6: Pharmacists have more concerns than physicians over core problems with Part D

Figure 7: Part D patients’ options for sourcing pharmaceuticals depend on whether they continue sourcing from Part D or if they leave the scheme

Figure 8: Sources of coverage in the donut hole for Part D enrollees