PBMs,%20PDPs%20

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PBMs, PDPs MA-PDsWhich Way Is Up?

• Bob Atlas
• THE SECOND NATIONAL MEDICAREPRESCRIPTION DRUG
  CONGRESS
• November 1, 2005

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Medicare Plays for PBMs
CMS
A
PBMs Own Stand-alone PD Plan
Medicare Advantage PD Plan
Insurers Stand-alone PD Plan
Qualified Employer PD Plan
E off limitsif bid forA or B
PBM at risk
B
C
E
D
Pharmacy Manager
Fallback Plan Contractor
Pharmacy Manager
Pharmacy Manager
PBM not at risk for underwriting losses
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Largest PBMs, Pre-MMA (Total PBMs 70)
PBM Ownership Lives (Millions)
Caremark Rx Publicly traded 80
Medco Health Solutions Publicly traded 60
Express Scripts Publicly traded 50
WellPoint Pharmacy Mgmt. Insurer WellPoint 43
PharmaCare Pharmacy CVS 30
MedImpact Privately held 27
Argus Health Privately held 24
Prime Therapeutics Insurer 8 Blues 9
CIGNA Healthcare Insurer CIGNA 9
Aetna Pharmacy Mgmt. Insurer Aetna 8
Prescription Solutions Insurer PacifiCare 6
Includes WellPoint-Anthem merged PBMs. Figures
cannot be summed probable double counting.
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Largest PBMs - Participation in Part D
PBM National PDP National PDP Regional PDPs MA-PDs
PBM Own (Brand) Partner Regional PDPs MA-PDs
Caremark Rx SilverScript Coventry Sub Sub
Medco Health Solutions YOURx - Sub Sub
Express Scripts - - Sub Sub
WellPoint Pharmacy Mgmt. Unicare Mcare Rx ? ?
PharmaCare (CVS) - Universal Amer. Sub Sub
MedImpact - - Sub Sub
Argus Health - - Humana Sub
Prime Therapeutics - - Parent Blues Parent Blues
CIGNA Healthcare CIGNATURE Rx - - ?
Aetna Pharmacy Mgmt. Aetna Mcare Rx - - ?
Prescription Solutions PacifiCare - - ?
Walgreens Health Initiatives - United (AARP) WellCare Sub Sub
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PDP Advantages vs. MA-PD

• EASIER ENROLLMENT
• Keep same medical providers
• Default enrollment of 6.5M duals
• Obvious choice for 1.2M nursing home residents
• Simple take-up for 4.7M current Medigap
  enrollees
• Encouragement from retail pharmacists invested
  in PDPs

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Medicare Managed Care Got Boost in MMA

• MA plan capitations raised
• 10.6 in 2004
• 6.6 in 2005
• 4.8 in 2006

• 10B stabilization fund for regional PPOs
  2007
• Addition of Part D

426
412
6.6
5.9
5.1
235
Mar 99
Mar 03
Aug 05
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MA Plan Advantages vs. Stand-Alone PDPs

• COST SAVINGS POTENTIAL
• Buy down PD price bid/cost-sharing using medical
  care savings
• Spread administrative costs over broader revenue
  (per head) base
• Manage Rx usage via leverage with physician
  prescribers
• Better odds of normal or favorable population
  selection

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Premiums for MA-PDs vs. PDPs
Distribution of Prescription Drug Benefit
Premiums
MA-PD
PDP
MA-PD Median Premium 21.70
PDP Median Premium 36.66
Unweighted, based on listings of MA-PDs
(N22,741 plan options including Rx, by counties)
and PDPs (N2,184 plan options, by PDP regions)
as shown on CMS website as of October 27, 2005
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Significance of Biased Selection
Average Annual Net Rx Benefit by Age Cohort and
Health Status
Source Lifetime financial benefit of the new
prescription drug law, Muse and Associates,
August 2004