Introduction
The imminent introduction of Medicare Part D will take place with the US drug market in a transitional period. Negative sentiment towards high prices in the US market has gained currency in recent years, while growth in generics continues to outstrip branded drug sales. Concurrently, the industry is facing tougher pricing measures in the EU and cannot afford for these to be replicated in the US.
Scope
- Evaluation of Medicare Part D, including beneficiary enrolment analysis and an overview of the formulary models that will be utilized by providers
- Examination of projected expenditure trends for Part D and the medium to long term repercussions of political re-direction
- Assessment of the impact on current pharmaceutical pricing trends in the US private sector, and an analysis of the relationship with Medicare Part D
- An analysis of pricing trends in key European markets, including an in-depth focus on the German reference pricing system
Highlights
Although Medicare Part D will provide expansive prescription drug coverage to a wider selection of senior beneficiaries, its positive impact on the drug industry will be short lived. Within a few years, the Bush administration will face unsustainable pressure to reduce funding for the scheme and implement more restrictive cost saving measures.
With the private health insurance sector already demonstrating a more cost conscious approach, the use of mechanisms such as tiered co-payments will gain further credence, fuelled by a raft of blockbuster drugs coming off patent.
The European drug market remains a more difficult pricing and reimbursement environment for drug manufacturers. Concern remains that such measures could be repeated in the US, hence heavy industry lobbying.
Reasons to Purchase
- Understand how Medicare Part D will be implemented and its impact on the drug industry
- Assess the implications on pricing measures used in the managed care sector
- Understand the potential convergence between US and European drug pricing trends
CHAPTER 1 EXECUTIVE SUMMARY 4
Scope of the report 4
Key findings 6
CHAPTER 2 WHAT IS MEDICARE PART D? 13
Key Findings 13
Overview 14
Volume Gains Versus Price Discounts 15
Demographic Trends Drive Reform Efforts 15
Negative Sentiment Towards Drug Prices on the Increase 15
Fuelled by European Trends 16
How it works 16
Who Will Enroll 18
CHAPTER 3 BROAD ACCESS TO DRUGS – A FORMULAR(Y) FOR SUCCESS? 20
Key Findings 20
Introduction 21
The US pharmaceutical market 22
Medicare Part D Formularies 24
Outlook 27
CHAPTER 4 HOW MUCH WILL IT REALLY COST? CAN THE GOVERNMENT AVOID BUDGETARY OVERRUN? 29
Key Findings 29
Introduction 30
US Health Expenditure Trends 31
Government Cost Projections 33
The Non-Interference Clause 35
Outlook 36
CHAPTER 5 WHY MANAGED CARE WILL DICTATE MEDICARE PART D 38
Key Findings 38
Introduction 39
Private Insurance Sector 40
Tiered Co-Payments 42
Case Study: Implications of generic simvistatin 45
Tiered Co-Payments in Medicare Part D 47
Beneficiary Migration Patterns 49
CHAPTER 6 THE INFLUENCE OF EUROPEAN PRICING MEASURES ON FUTURE US POLICY 51
Key Findings 51
Introduction 52
European Price Controls 53
Impact on US Pricing Strategies 56
German Drug Pricing 57
Reference Pricing 59
CHAPTER 7 – CONCLUSIONS 62
Medicare Part D – Short Term Fix for Pharma Woes 62
Generics market to remain a thorn in the side of Big Pharma 62
Aggressive co-payments to proliferate in Medicare and managed care plans 63
Me-too drugs to face greatest price cuts 64
Innovative drugs to command higher prices 65
Pfizer finds itself a high profile casualty 65
Is the industry fighting a wider war by ’proxy’? 65
LIST OF TABLES
Table 1: Components of US Market Growth 1999-2003 22
Table 2: Examples of Reference Pricing Impact in Statin and PPI Classes 60
LIST OF FIGURES
Figure 1: Overview of US Health Insurance Sector 14
Figure 2: Standard Medicare Part D Benefit Design for an Individual in 2006 16
Figure 3: Distribution of Medicare Beneficiaries and Prescription Drug Expenditure, 2005 17
Figure 4: Projected Medicare Enrollee Participation in Part D 19
Figure 5: US and European Retail Drug Market Growth Rates (CER) 23
Figure 6: Final Part D Formulary Guidelines: Increased Granularity in the Anti-ulcer Drug Class Benefits Manufacturers 25
Figure 7: The impact of the "All or Substantially All" drug provision on the anti-depressant class category 26
Figure 8: International Health Expenditure Comparison 31
Figure 9: Impact of Medicare Part D on Federal Drug Expenditure 32
Figure 10: Projected Net Federal Cost of Medicare Part D 34
Figure 11: Breakdown of Employer-Sponsored Insurance Schemes, 2004. 40
Figure 12: Annual Growth Rate for Employer-Sponsored Insurance Premiums, 1999-2004. 41
Figure 13: Typical Tiered Co-Payment System, reflecting less coverage for more expensive pharmaceuticals 43
Figure 14: Statin Step Therapy Regime as used by California-based Kaiser Permanente 46
Figure 15: Overview of Pricing and Reimbursement Policy in France, UK, Italy and Spain. 55
Figure 16: Branded Pharmaceutical Sales at Risk by Year 63
Figure 17: Examples of Drug Classes with Exaggerated ’Me Too’ Characteristics 64
Other selected research from the 'USA' category:
US Diagnostic Market Outlook 2014
The Pharmaceutical Parallel Trade Outlook: Challenges to pharmaceutical companies across Europe and the US
Other selected research from the 'Pricing & Reimbursement' category:
Pricing and Reimbursement in The United Arab Emirates
Medicare Part D - Its impact on US drug pricing issues and role as a driver towards European style pricing mechanisms