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Navigating Practical Issues for PBMs in Medicare Part D: Insights from the 2005 Conference

This overview discusses practical issues facing Pharmacy Benefit Managers (PBMs) in Medicare Part D, based on insights shared by Bob Atlas during the NASI Medicare Modernization Conference in January 2005. Key topics include the complexities of merging PBMs, contracting options, risk factors, and the fluid drug market. It highlights the challenges of enrollment, marketing, and adverse selection, providing valuable lessons for PBMs to effectively navigate Medicare Part D's evolving landscape.

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Navigating Practical Issues for PBMs in Medicare Part D: Insights from the 2005 Conference

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  1. Practical Issues for PBMs in Medicare Part D Bob Atlas NASI Medicare Modernization Conference January 27, 2005

  2. Largest PBMs (Total PBMs ~ 70) *Undergoing merger. †Figures cannot be summed – possible double counting.

  3. 4 PBM Medicare Contracting Options CMS A PBM’s Own Stand-alone PD Plan Insurer’s Stand-alone PD Plan Medicare Advantage PD Plan D off limitsif bid forA or B PBM at risk B C D Pharmacy Subcontractor Pharmacy Subcontractor Fallback Plan Contractor PBM not at risk for underwriting losses

  4. SOURCES OF RISK No reliable history Fluidity of drug market Fast-changing product mix Manufacturer price setting Little control over prescribers Skewed enrollment Low take-up Adverse selection RISK PROTECTIONS Plan design rules Formulary guidelines Actuarial equivalence Risk-adjusted rating Government risk sharing Specific case stop-loss Aggregate gain/loss sharing Late enrollment penalty PDP Risks and Risk Buffers

  5. Population-Related Considerations Lessons from Rxdiscount card? • Voluntary enrollment • Consumer inertia, confusion, fear • Marketing concerns • 7 million dual eligibles • Drop from Medicaid Rx 1/1/06 • Auto-enrolled in Medicare PDPFall ‘05 • 1.5 million nursing home residents • Pharmacy network disconnect • Packaging and distribution

  6. Drug Selection – Formulary Guidelines • Government contractor set model guidelines – 146 classes • Payers wanted ~90 classes – Pharma wanted >200 classes 2 drugs required in each class Source: U.S. Pharmacopeial Convention, Inc., August 2004 and December 2004

  7. CONTACT INFORMATIONbob.atlas@comcast.net

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