The Medicare Prescription Drug, Improvement and Modernization Act of 2003, or MMA, is the senior drug benefit bill reached after years of wrangling by individuals along all points of the political spectrum. Like any piece of hotly debated legislation, the drug bill represents years of effort by dedicated people to craft a complicated piece of legislation intended to meet the needs of diverse constituencies.
Mainly, the bill's architects needed to balance and consider the following:
* State and federal governments trying to manage ballooning Medicare and Medicaid costs.
* Senior citizens, most of whom are on low or fixed incomes, who are the greatest consumers of our industry's products.
* The financial viability of the pharmaceutical and biotech industry, one of the major engines of the national economy.
This bill attempted to do the difficult. Suffice to say, given the budgetary constraints of the state and federal governments, this piece of legislation was masterfully crafted. Let's examine the results of this effort and take a look at some of the main features of the bill and what they mean to you, the sales representative in the field.
Drug discount cards
Until the full benefit begins in 2006, seniors may purchase prescription drug discount cards for a nominal annual fee of about $30. The cards offer discounts of roughly 10% to 25% off the retail price of prescription drugs at the pharmacy counter. This measure was intended to offer some relief to those without prescription drug coverage until the full benefit takes effect. However, recognizing that some people can't afford the discount cards or the remaining price of the drugs, the government is offering no-cost cards with a $600 annual allowance for those who meet certain low-income guidelines. Also, the pharmaceutical industry is putting more emphasis on its patient assistance programs in the interim.
Tips for pharmaceutical reps: There are about 100 different drug discount cards offered by pharmacies, pharmacy benefit management companies and pharmaceutical manufacturers, and each offers discounts on different products depending on its sponsor. Find out which cards offer discounts on your products, including any cards offered by your own company, and alert your physicians to this benefit for their patients. Remind physicians that the cards are free to those who can't afford them and fall within certain income guidelines. Don't forget to offer your company's patient assistance programs, where applicable.
Introducing Medicare Part D
Beginning January 1, 2006, the MMA will initiate drug coverage for the approximately 10 million Medicare beneficiaries who have no drug benefit today, at a cost expected to exceed $530 billion over the next 10 years. The MMA establishes Medicare Part D, outpatient prescription drug coverage to be administered by pharmaceutical benefit managers. Because drug coverage is being extended to those who currently have no drug benefit, the market for pharmaceuticals and biotech products is expected to grow.
At present, Medicare has three parts:
* Part A, which pays for hospital bills, including drugs used in the inpatient setting.
* Part B for doctor bills, including drugs administered in an outpatient setting.
* Part C, formerly known as Medicare+Choice, established as part of the Balanced Budget Act of 1997, which encouraged health maintenance organizations to participate in the Medicare program.
Through the HMO benefit package structure of Part C, the Medicare program first began to provide an outpatient prescription drug benefit. However, because Medicare reimbursements did not meet the cost of providing extensive medical and drug coverage to the HMO participants, many plans dropped out and beneficiary participation declined. One of the features of the MMA is a plan to restructure Part C, renaming it "Medicare Advantage" and increasing reimbursements to HMOs to bring them back into the fold. As reimbursement increases have taken effect in 2004, some resurgence of Medicare HMOs has already begun.
Tips for pharmaceutical reps: Look for this resurgence of Medicare HMOs in your territory. Get to know the health plans that are participating and familiarize yourself with their formularies. These plans represent the beginning of a more comprehensive senior drug benefit, and therefore a larger market for your products.
How Medicare Part D will work
Medicare Part D will work as follows:
1. A number of PBMs will bid for the Centers for Medicare & Medicaid Services contracts to provide the drug benefit on a regional basis. These PBMs will act as Medicare drug benefit administrators and will be called Prescription Drug Plans, or PDPs. There may be as few as 10 or as many as 50 PDP regions. The PDPs will negotiate with manufacturers on price, and it is expected that they will establish formularies in their regions.
2. Medicare beneficiaries may choose to enroll in Part D through a PDP. If they have a current drug benefit as part of either a retiree package or a privately purchased Medigap plan, they will have to choose between their current insurance and Part D; they cannot participate in both. Enrollment is not mandatory. Low-income individuals who receive their drug benefit through a state Medicaid program will automatically be switched to the Medicare Part D benefit.
3. Part D will be structured like a traditional health insurance benefit. The beneficiary will be responsible for:
* A $35 monthly premium ($420 annually).
* A $250 annual deductible.
* 25% of the next $2,000 in drug costs.
* All costs between $2,250 and $5,100 in drug costs.
This results in a total out-of-pocket liability of $3,600 plus $420 for premiums per beneficiary per year for the standard benefit package. One of the most controversial elements of Part D is known as the "doughnut hole,"' which refers to the fact that the beneficiary pays 100% of drug costs between $2,250 and $5,100. Catastrophic coverage begins when annual drug costs have exceeded the $5,100 threshold. At that point, the beneficiary pays the greater of $2 for generics and $5 for brand-name drugs, or 5% of remaining drug costs.
For people who are living at or close to the federal poverty limit, the premiums and deductibles are reduced or waived completely, depending on their income and cash-on-hand. The current eligibility is based on a percentage of the federal poverty limit and the individual's total assets.
Simply stated
Sometimes a picture is worth a thousand words. The chart above shows the out-of-pocket costs and coverage of the new Medicare outpatient drug benefit. Not shown is the approximately $35-a-month premium beneficiaries will be expected to pay, which totals an additional $420 annually.
Part D market opportunities
As previously discussed, when the full benefit takes effect in January 2006, the market for pharmaceutical and biotech products will grow by about 10 million people. For manufacturers with product lines that treat the many diseases of aging, this increased market will represent a huge growth opportunity. In an effort to position themselves for this emerging market, many manufacturers have already put programs in place to raise awareness of their products. Many are offering some products at low or no cost to Medicare beneficiaries who have no benefit today in an effort to encourage brand loyalty before the drug benefit begins.
You can find out from your district sales managers where this effort is occurring in your company and if it affects any of your therapeutic categories.
Tips for pharmaceutical reps: Be aware of the growth opportunities in your product lines that treat diseases of aging. Promote products in those therapeutic areas to physicians, and offer your company's brand awareness programs wherever applicable.
Diabetes and cardiovascular screenings
The MMA encourages disease management initiatives, particularly in the areas of cardiovascular disease and diabetes. Blood screenings for early signs of cardiovascular disease and diabetes screening tests will be covered beginning January 1, 2005. As early-stage disease is diagnosed, the screening programs will present an opportunity to treat patients with lifestyle modifications and drug therapy in the hope of postponing or avoiding advanced disease and its later complications.
Tips for pharmaceutical reps:If your company has product lines that treat cardiovascular disease and diabetes, the screening programs will represent an opportunity to promote your products for these patients.
Changes affecting IV, oncology drugs
One of the more controversial measures of the MMA involves a reduction in reimbursements for specialty products administered in a physician?s office or outpatient clinic. This largely affects oncology drugs, and many oncologists claim the changes in Medicare reimbursement may cause up to a 40% reduction in their income, something that could cause clinics to close across the country.
In brief, until this year Medicare reimbursed physician-administered drugs at a price of the "average wholesale price" minus 5%, with the "spread," or markup on the drug over acquisition cost, providing a large portion of the clinical oncologist's income stream. The MMA is changing the reimbursement structure to gradually reduce this markup until the cost of the drug will be based on a new figure called the "average sales price" plus 6% in 2005, which represents a smaller base figure and markup than the old AWP minus 5% calculation.
To offset the loss of the spread or markup, the MMA has increased physician administration fees to cover the costs of their services, but oncologists say the reimbursement falls far short of previous amounts and does not cover the difference. This debate continues within the oncology community, and dialogue is proceeding between oncologists and Medicare officials regarding the calculation of the ASP.
Medicare demonstration act
As part of the effort to reduce the cost of physician-administered drugs, the MMA has established a Medicare Drug Replacement Demonstration project, which has dedicated $500 million to cover prescription drug therapies for specified chronic conditions. The chronic conditions include multiple sclerosis, certain kinds of cancer, rheumatoid arthritis, osteoporosis, pulmonary hypertension, secondary hyperparathyroidism, Paget's disease, hepatitis C and cytomegalovirus retinitis. Specific drugs are listed to be utilized in the treatment of the aforementioned conditions. Demonstration project drugs must be used to "replace" drugs that are currently covered under Medicare Part B. Unlike Medicare Part B drugs, these expensive demonstration project drugs may not have to be administered in a doctor's office. At least 40% of the project's money is dedicated to oral anti-cancer drugs. Up to 50,000 Medicare beneficiaries without a drug benefit are eligible to participate in the program. The demonstration project will begin this fall, with participants (chosen by lottery) able to purchase the oral and self-injectable drugs through the Part D benefit structure, including low or no copays or deductibles for low-income seniors chosen for the demonstration.
Tips for pharmaceutical reps: If you sell physician-administered specialty products, you are most likely aware of the pressures your physicians -- and especially oncologists -- may be under. Consult with your district sales managers to find ways to help your physicians continue to provide your products to their patients.
Finger to the wind
As with any ongoing issue, circumstances could take an unpredictable turn depending upon the outcome of an election or a court decision, so keep your finger to the wind. At this point, the value of the Medicare Modernization Act is an attempt to provide the best prescription drug coverage to the most people at the least cost to the system.
The MMA achieves a fine balance among these competing interests, but the debate is far from over. As political winds shift and budget projections change, the bill still could be altered in ways that could seriously undermine the intent of the legislation: to provide a drug benefit to seniors without breaking the bank or the back of industry.
In the meantime, you can be aware of the provisions of the MMA in force today and make use of them in your sales efforts, while preparing yourself and laying the groundwork with your physicians to build market share when the full benefit takes effect in 2006.
