American health insurance breaks down to a set of channels, including commercial, Medicaid, Medicare and the newest health exchange segment. Each channel aligns to an American audience, based on the needs of a particular population. As a federal health insurance program, Medicare primarily accommodates people at least 65 years of age. The accelerating rate of changing guidelines for Medicare provides significant incentive to pharmaceutical manufacturers and providers to stay current with downstream implications.
Looking back to 2003, the introduction of Medicare Part D, as a result of the Medicare Modernization Act, represented a significant unknown for pharma marketers. At the same time, this new channel of access created an opportunity for manufacturers to develop more strategic relationships with payers. More dynamic benefit design shifted focus to obtaining the best market access and tier status, rather than simply getting on formulary. Today, complex tier structures and advanced utilization management creates more variables for manufacturers. Depending on how highly managed a class is, pharma marketers focus efforts on obtaining better access than competitors and crafting a story from advantaged situations for promotion. Increasing Medicare Part D formulary intricacy provides more opportunities for pharma brand teams to identify wins in competitive market access, from an upgraded tier status to the removal of a utilization management barrier, and promote accordingly.
Recent data from The Centers for Medicaid & Medicare Services (CMS) reveals that preferred pharmacy networks permeate 85% of Medicare Part D plans in 2016. This numbers falls in line with 2015 trends, revealing that these plan structures remain stable and present in the market. Preferred network health plans generate significant cost savings for the healthcare network by providing consumers with incentive to choose their pharmacy, often at the lowest cost. While these preferred cost-sharing networks drive value for the consumer and operationalize payer businesses, pharmacies do not share the same sentiment for these plan structures. Increased competition from lower cost alternative pharmacies means that these networks represent the most substantial source of downsized profits for pharmacies as consumers and payers reap the benefits. Payer consolidation amplifies this issue as pharmacies battle for relationships with the decreasing number of prescription drug plans on the market.
As baby boomers approach Medicare-age, spending on prescription drug benefits rapidly increases. The growing eligible population, combined with increasing drug prices, provides ample evidence that this trend will remain. A recent Kaiser Family Foundation survey reveals that 87% of consumers favor the concept of Medicare, rather than health plans, negotiating medication costs with pharma. To support this advocacy, consumers point out that the government already establishes the cost for tests and procedures for Medicare enrollees so drug negotiations would not be a stretch. Pharmaceutical manufacturers defend the current model, suggesting that aggressively negotiating pricing from Medicare would exhaust much-needed R&D investment.
Innovative care models create a more dynamic Medicare industry than ever before. The system evolves as advancements in the way we look at health insurance coverage changes. One topic in the spotlight as it relates to benefit design, value-based payments, garners the attention of the healthcare spectrum. Major payers shift their strategy for covering drugs to an outcome-based approach, where clinical process measures are weighted heavily in the reimbursement of healthcare. If more plans adopt this model, the Medicare landscape could experience major shifts in the way Americans obtain health coverage.
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