The Potential Impact of the New
Prescription Drug Benefit on Medicare
Beneficiaries
A Snapshot of the Medicare Part D Market
June 27, 2006
AcademyHealth Annual Research Meeting
Tanisha Carino, Ph.D.
Avalere Health LLC
Avalere Health LLC | The intersection of business strategy and public policy
Medicare Part D: Market-Driven, Plus Oversight
1. Voluntary enrollment
 Stand-alone drug plans (PDPs)
 Medicare Advantage drug plans (MA-PDs)
2. Federal government does not set prices, premiums, or formularies
3. Federal government and plans share financial risk
4. Plans compete for enrollees, within regions, based on premiums,
OOP, benefit design, reputation
5. Beneficiary protections
 Low-income subsidy
 Formulary protections
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Reminder: Medicare Part D Standard Benefit Design
Beneficiary Cost-Share
Catastrophic
Coverage
No Coverage
(“donut hole”)
Partial Coverage
Plan’s Coverage
5% coinsurance
2006
2007
$5,100
$5,4511
$2,250
$2,400
$250
$265
100% cost-sharing
25% coinsurance
Deductible
1Equivalent
to $3,850 in out-of-pocket spending: $3,850 = $265 (deductible) + $534 (25% costsharing on $2,135) + $3,051 (100% cost-sharing in the “gap”).
Source: Office of the Actuary, Centers for Medicare and Medicaid Services.
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As of June 2006, Nearly 23 Million Medicare Beneficiaries
Have Enrolled in Part D
Total Medicare Beneficiaries: 42.8 Million
20
15.8 Million
Medicare Beneficiaries in Millions
15.0 Million
15
10
1.1
Unenrolled (NonLIS Eligible)
3.3
Unenrolled
(LIS-Eligible)
1.2
New MA-PD
Enrollees
0.1
2.0
1.0
LIS Facilitated
Enrollment
2.6
Previous MA
Enrollees
1.9
TRICARE
4.4
1.6
0.1
FEHBP
Retiree Coverage
(Non-Subsidy)
6.9
Retiree Subsidy
0.5
5
9.4
0.6
12.0 Million
Indian Health Service
VA
SPAP Coverage
Active Workers (Medicare
as Secondary Payer)
PDP Enrollees
6.1
Dual Eligibles
in MA-PDs
Dual Eligibles
in PDPs
0
Active enrollment
Passive enrollment
Part D
Pre-existing coverage
Non-Part D
Note: Totals do not sum due to rounding.
Source: Avalere Health Analysis of Data from Department of Health and Human Services, June 14, 2006
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Key Policy Question in 2006
How much variation in benefit package design will
Medicare beneficiaries face in the Medicare Part
D market in 2006?
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Avalere Health’s DataFrame™
 Proprietary database on 3,000 Medicare PDPs and MA-PD plans
nationwide
» Integrates CMS publicly available data with commercial data
 Data elements include:
» Premiums and cost-sharing
» Drug level detail on formulary positioning
– On or off formulary
– Tier placement
» Use of utilization management tools
– Prior authorization, dosing limits, step therapy
» Pharmacy networks
 Data current as of February 2006, except where noted
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National Market: MA-PD Plans Commonly Charge Lower Part
D Premiums Than Stand-Alone PDPs
500
Number of Plans
400
MA-PD Plans
(Median Premium = $19.46)
300
PDPs
(Median Premium = $36.01)
200
100
0
$0- $5
$5$10
$10$15
$15$20
$2025
$25$30
$30$35
$35$40
$40$45
$45$50
$50$55
$55$60
$60$65
$65- $70- $100- $120- $140- $160$70 $100 $120 $140 160 $200
Premium Range
Source: Avalere Health analysis of Medicare Part D plan data.
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National Market: Most Beneficiaries Enrolled in PDPs Chose
Plans with Premiums Below 2006 Average Premium
100
27
80
Percent
62
60
$32.20 or Higher
Less than $32.20
40
20
73
38
0
Percent of Plans Above and Below
$32.20
Percent of Enrollees Choosing Plans
Above and Below $32.20
Source: Centers for Medicare and Medicaid Services. 2007 CMS Annual Bidding Conference.
April 5, 2006
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National Market: Most Beneficiaries Enrolled in MA-PD Plans
Chose Plans with $0 Premiums
100
27
$32.20 or higher
23
Percent
80
60
23
38
$0.01 or $32.19
40
54
20
36
$0
0
Percent of MA-PDs by Premium
Percent of Enrollees Choosing MAPDs
Source: Centers for Medicare and Medicaid Services. 2007 CMS Annual Bidding Conference.
April 5, 2006
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National Market: In General, MA-PD Plans Charge Lower
Deductibles Than PDPs
PDP Deductible
MA-PD Plan Deductible
$250
24%
$250
34%
Reduced
3%
$0
58%
Reduced
8%
$0
73%
Source: Avalere Health analysis of Medicare Part D plan data.
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National Market: More MA-PD Plans Provide Coverage
in the Coverage Gap Than PDPs
PDP Coverage Gap
Brand &
Generic
2%
MA-PD Plan Coverage Gap
Brand &
Generic
5%
Generic
Only
13%
None
85%
Generic
Only
19%
None
76%
Source: Avalere Health analysis of Medicare Part D plan data.
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National Market: 4-Tier Structures Are Most Common Among
Part D Plans
MA-PD Plans
PDPs
Number of
Tiers in Plan
Number of
Plans
Percentage of
Plans
Number of
Plans
Percentage of
Plans
1 Tier
12
<1%
21
1%
2 Tiers
111
8%
250
17%
3 Tiers
533
37%
223
15%
4 Tiers
496
35%
779
52%
5 Tiers
276
19%
186
12%
6 Tiers
1
<1%
11
<1%
7 Tiers
0
0%
5
<1%
8 Tiers
0
0%
4
<1%
Four tier
structures most
common among
Part D plans
PDPs have between
1 and 6 tiers
• Average 3.6 tiers
MA-PD plans have
up to 8 tiers
• Average 3.6 tiers
Source: Avalere Health analysis of Medicare Part D plan data.
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National Market: Plans Switch from Copays to Coinsurance in
the 4th Tier
Most Common Cost-Sharing for Each Tier for 4-Tier Plans (copay Large jump from tier 1
to tier 2 to encourage
or coinsurance)
PDPs
MA-PD Plans
Most Common CostSharing
Most Common CostSharing
Tier 1
$10
$5
Tier 2
$22
$28
Tier 3
$60
$58
Tier 4
25%
25%
use of generics
Copays used on lower
tiers; coinsurance
usually used on
highest tier
In general, higher costsharing in Part D than
commercial
Source: Avalere Health analysis of Medicare Part D plan data.
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20 Most Common Drugs Found on the 4th Tier of 4-Tier Plans
Cancer
Anemia
Lupron Depot*
Zoladex*
Neupogen*
Neulasta*
Procrit*
Aranesp*
Multiple Sclerosis
Rebif
Avonex*
Copaxone
Betaseron
These drugs are on the 4th
tier on over 70% of 4-tier
plans
Other
Fabrazyme
Fuzeon
Cerezyme
Peg-Intron*
Saizen
Actimmune*
Raptiva
Rheumatoid Arthritis
Humira
Remicade*
Enbrel
Many drugs found on the
4th tier of 4 tier plans are
eligible for Part B
coverage in certain
situations
A very small number of
drugs found on the 4th tier
are generics
*In some (or most) cases, covered under Medicare Part B
Analysis uses October 2005 data.
Source: Avalere Health analysis of Medicare Part D plan data.
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Four States: Variation in Use of Drug Utilization Tools Within
States
 On average beneficiaries in NY, CA, TX, FL will see PDPs with 11% of drugs
subject to prior authorization
» This percentage does not vary by premium level
 However within these states, plans offer tremendous variation in the percentage
of drugs subject to PA
Number of Drugs on Formulary Requiring Prior Authorization
California
Florida
New York
192
173
205
2%-39%
2%-39%
2%-39%
11.2
10.7
11.8
Average Number of Drugs
Texas
153
Overall
181
Percent of Total Drugs
(Range)
.3%-39% .3%- 39%
Average Percent of Total
Drugs (%)
10.0
10.9
Source: Avalere analysis of October 2005 DataFrame.
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Future Questions
 Over time will we see greater consolidation in the Medicare
Part D market?
 Will increased consolidation lead to more or less generous
benefit package designs and greater cost savings to the
Medicare program?
 How will CMS and others evaluate the impact of commercial
benefit designs on the Medicare beneficiaries?
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