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BIOPHARMACEUTICALS IN MEDICARE, MEDICAID & DEPARTMENT OF VETERANS AFFAIRS CHART PACK
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Page 1: chart pack - PhRMA

Biopharmaceuticals in medicare, medicaid & department of Veterans affairs

chart pack

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taBle of contentsIntroduction 1

Chapter 1 medicare 7 part d 8

part B 36

Chapter 2 medicaid 49

Chapter 3 Veterans affairs 67

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1 • medicare part d

introductionthis chart pack features key facts about prescription medicines in three major government programs medicare, medicaid and the Veterans affairs (Va) drug benefit each provide drug coverage through different methods of administration

medicare insures many of the nation’s retirees and disabled persons, and covers medicines primarily through parts B and d payments for medicines in medicare part d are negotiated by competing private health plans payments for medicines under part B, which are generally injected or infused by a physician, are based on the average of prices negotiated by doctors and other purchasers in contrast, medicaid and the Va use price controls in providing drug coverage to low-income people and veterans, respectively

information displayed here has been compiled from a variety of public and independent sources, and is intended to serve as a useful guide in conversations about the value of biopharmaceuticals in government programs

introduction 1

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1 • Medicare – Part D

prescription drug spending in the u s public programs accounted for approximately one-third of outpatient drug spending in the u s in 2010

*Values may not sum due to rounding **includes employer-sponsored health insurance, including federal, state and local government employee health benefits, administered through private health plans

Medicaid & CHIP,

8.4%

Private Health Insurance,**

45.2%

Patient Out-of-Pocket, 18.8%

Medicare, 23.0% Department of Defense (Includes TRICARE),

2.4%

Veterans Affairs, 1.0%Other Third Party, 1.3%

introduction

u s prescription drug spending, 2010 ($ Billions)*

total $259 1 Billion

source: cms1

2

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1 • medicare

federal spending on Brand medicinessales of brand medicines account for an estimated 8% of federal spending in medicare and medicaid

*spending is for brand drug ingredients, exclusive of distribution costs includes medicare part d spending, drug spending in medicare part B and federal share of medicaid outpatient drug spending

total $9 9 trillion

estimated federal spending on medicare & medicaid, 2011-20192

$777B$9.1T

All Other (e.g., Hospitals, Physicians, Nursing Care,

Generic Drugs, and Brand and Generic

Distribution Costs), 92%

Brand Medicines,* 8%

introduction

source: avalere health3

3

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1 • medicare part dintroduction 4

notes and sources1 centers for medicare & medicaid services, office of the actuary, national health statistics Group, national health expenditures data, table 4 (January

2012), www cms gov/research-statistics-data-and-systems/statistics-trends-and-reports/nationalhealthexpenddata/downloads/tables pdf (accessed 18 october 2012)

2 drug spending estimate does not include spending for prescription drugs used during inpatient hospital stays due to limitations on how data are reported, medicare part B drug spending does not include payments for medical benefit drugs provided to medicare advantage enrollees medicaid drug spending contains a portion of physician-administered medical benefit drugs, but does not include drugs provided through medicaid managed care plans spending estimates do not include the impact of any beneficiary premiums for medicare parts B and d, which would reduce net federal government spending

3 avalere health, federal spending on Brand pharmaceuticals (Washington, dc: avalere health, llc, april 2011), www avalerehealth net/research/docs/20110429_federal_spending_on_Brand_pharmaceuticals pdf (accessed 18 october 2012)

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1 • Medicare – Part D overview • 5introduction 5

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1 • medicare – part d

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1 • medicare

1 medicines in

medicaremedicare is the government program that insures many of the nation’s retirees and disabled persons the following sections provide information on prescription drug coverage under parts d and B, which provide payment for the majority of medicines under the medicare program

outpatient prescription medicines are generally covered by part d, implemented in 2006 to provide prescription drug coverage part d is administered by plans using a competitive bidding system which both achieves savings and preserves the incentives for continued innovation in biopharmaceutical research and development

injected or infused vaccines and medicines that are administered or purchased by physicians are generally covered by medicare part B, which equates to the “medical benefit” provided under commercial insurance plans and primarily provides coverage for physician services

7

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medicare covers medicines under two Benefits, as is common With commercial insurance

This structure exists under Medicare, as well, where the retail pharmacy benefit is called Part D, and the medical benefit is called Part B.

source: r mcdonald1

1 • medicare – part d overview • 8

commercial insurers generally cover most drugs under a retail pharmacy benefit, and patients go to their local pharmacy to pick them up or have them delivered via mail order

however, a minority of drugs are administered by a physician or other health care professional; these drugs generally are covered under a medical benefit by commercial insurers

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part d relies on competition to promote access and control costs

plans paid based on competitive bidding

negotiated discounts for covered medicines

plans attract enrollment through lower bids and quality of coverage

formularies, tiered co-pays, and utilization management tools

rebates and discounts passed on to beneficiaries and the government

plans compete for enrollees

Beneficiary choice of plans

enrollees can switch plans in any year

subsidies assist low-income beneficiaries

no limits on number of prescriptions

defined standard benefit and formulary rules set minimum plan requirements

mechanisms to Promote Access

mechanisms to Control Costs

source: phrma analysis of medpac data Book2

1 • medicare – part d overview • 9

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part d expanded coverage for seniorsin 2011, 90% of medicare beneficiaries had comprehensive drug coverage

0M

10M

20M

30M

40M

50M

2011 After Part D

2005 Before Part D

24M, 59%

17M, 41%

5M, 10%

Comprehensive Drug Coverage

No Comprehensive Drug Coverage

42M, 90%

medicare Beneficiaries With comprehensive drug coverage (in millions)3

source: phrma analysis of data from the lewin Group and cms4

1 • medicare – part d overview • 10

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sources of drug coverage for seniors and the disabledpart d plans covered the majority (about 28 million) of medicare beneficiaries in 2010

4 7 million

prescription drug coverage among medicare Beneficiaries, 2010

4.7M, 10%

5.9M, 13%

8.3M, 18%

17.7M, 38%

9.9M, 21%

no drug coverage

Va, indian health service, medigap, other5

employer/union retiree coverage6

Medicare Advantage (Part D)

Medicare Part D (Stand-Alone)

source: kaiser family foundation7

1 • medicare – part d overview • 1111

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*not including outlays for mandatory administration medicare advantage (part c) expenditures are apportioned among parts a, B and d according to type of service

part d share of medicare expendituresmedicare part d drug spending, including brand and generic, will make up 10 6% of estimated medicare spending in 2012

Part D: Prescription Drugs,

10.6%

Part B: Physician and

Other Professional Services,

42.8%

Part A: Hospitals,

46.6%

total 2012 medicare spending*

$566 7 Billion

source: cBo8

1 • medicare – part d overview • 12 overview • 12

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*number of prescriptions standardized to a 30-day supply

top 10 therapeutic classes of drugs under part d by Volume, 201010

leading therapy classes in part d92% of part d enrollees filled at least one prescription in 2009; part d enrollees filled an average of 4 1 prescriptions per month 9 access to these drugs, which treat chronic conditions, help enrollees maintain health and avoid costly complications

Volume of Part D Prescriptions, Millions*

Percentage of Part D Prescriptions

1 antihypertensives 145 6 10 4%

2 antihyperlipidemics 136 2 9 7

3 Beta adrenergic Blockers 88 9 6 3

4 diabetic therapy 88 2 6 3

5 diuretics 77 4 5 5

6 antidepressants 76 8 5 5

7 peptic ulcer therapy 67 7 4 8

8 analgesics (narcotic) 67 2 4 8

9 calcium channel Blockers 60 3 4 3

10 thyroid therapy 49 5 3 5

Top Ten Total 857.8 61.1%

Total, All Classes 1,406.0 100.0%

source: medpac9-10

1 • medicare – part d overview • 1313

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$0

$100

$200

$300

$400

$500

$600

$700

$800

2004 Estimate for 2004-2013

2012 Estimate for 2004-2013

$334.4B Less

part d costs less than initially projectedtotal part d costs are 43% lower than the initial 10-year cost estimate

cBo projections and tallies of total part d spending for 10-Year period 2004-2013 ($ Billions)

$769 9

$435 5

source: cBo13

“It’s a competitive market. And we’re seeing the effects of good competition among Part D plans...”11

– CMS Administrator Dr. Donald Berwick

CBO has also reduced its ten-year forecast for Part D spending for the next decade by over

$100 billion in both 2011 and 2012.12

1 • medicare – part d program savings • 14

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share of Brand and Generic prescriptions in part d*

Brand, 40%

Generic, 60% Generic, 80%

Brand, 20%

four out of five part d prescriptions are Genericfrom 2006 to 2011, the generic share of prescriptions dispensed in part d increased from 60% to 80%

2006 (Introduction of Part D) 2011

source: ims health14

1 • medicare – part d program savings • 15

*data includes chain and independent drug stores, mass merchants, foodstores, and long term care mail order data not available

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*ims estimate based on analysis of medicines with anticipated loss of patent protection, 2011-2014 source: m kleinrock15

The Prescription Drug Lifecycle• innovator pharmaceutical companies

invest in and develop novel medicines based on pioneering science

• over time, brand drugs lose patent protection and generic versions of these drugs are introduced which achieve significant cost savings for the part d program

• savings free up program resources for the next generation of medical advances from innovators

the u s prescription drug lifecycle Generates savings for part dthe prescription drug lifecycle is projected to save the part d program $56 billion between 2006 and 2014

estimated savings = $56B

Estimated Cumulative Savings, 2006-2014

Drugs Expected to Lose Patent

Protection 2011-2014*

Drugs That Lost Patent Protection

2007-2010

$27.5B

$28.5B

1 • medicare – part d program savings • 16

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$0.00

$0.30

$0.60

$0.90

$1.20

$1.50

Jan-0

6Jul

-06

Jan-0

7Jul

-07

Jan-0

8Jul

-08

Jan-0

9Jul

-09

Jan-10

Jul-10

Jan-11

Jul-11

Jan-12

Jul-12

Jan-13

Jul-13

Jan-14

Jul-14

Jan-15

Jul-12

Jan-13

Jul-13

Jan-14

Jul-14

Jan-15

Jul-15

Actual

Projected

$1.00

$1.50

$0.65

daily cost of therapy falling under part dsince 2006, the daily cost for the top 10 therapy areas in medicare part d has fallen by a third, and projections show that the daily cost of therapy will drop by another third by 2015

*ten therapeutic classes most commonly used by part d enrollees in 2006, i e ; lipid regulators, ace inhibitors, calcium channel blockers, beta blockers, proton pump inhibitors, thyroid hormone, angiotensin ii, codeine and combination products, antidepressants, and seizure disorders

Cos

t pe

r Day

($)

daily cost of top 10 therapeutic classes* most commonly used by medicare part d enrollees

source: m l aitken and e r Berndt16

1 • medicare – part d program savings • 17

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0.90

0.95

1.00

1.05

2009200820072006

1.01

Includes all Drugs and Biologics, Accounting for

Generic Substitution

drug price index shows little Growth since part d inceptionanalysis by an independent commission shows 1% price growth in part d in four years for a market basket of medicines that includes the mix of brand and generic medicines that patients actually use

Dru

g Pr

ice

Inde

x Eq

ual t

o 1.0

at

the

Star

t of

the

Par

t D

Pro

gram

source: adapted from medpac17

1 • medicare – part d program savings • 18

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non-drug medical spending declined significantly after part dimplementation of part d was associated with a $1,200 decrease in annual non-drug medical spending among enrollees with prior limited or no drug coverage18 – an overall savings of $13 4 billion in 2007, the first full year of the part d program 19

average annual reduction in non-drug medical spending in 2006 and 2007, for Beneficiaries Gaining drug coverage through part d

*other non-drug figure is a phrma estimate of the balance of the total amount and consists of home health, durable medical equipment, hospice, and outpatient institutional services

-$1500

-$1200

-$900

-$600

-$300

$0

Other Non-Drug* Part BPart A

-$816

-$268

-$140

Total Annual Reduction in

Non-Drug Medical Spending of $1,224 per

Beneficiary

sources: J m mcWilliams, et al 18; c c afendulis and m e chernew19

1 • medicare – part d program savings • 19

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reductions in hospitalizations following part d implementationin the first year after introduction of part d, the hospitalization rate declined about 4 1% – an estimated 77,000 hospitalizations avoided annually – for eight conditions20 sensitive to medication adherence

*estimated number of u s hospitalizations avoided annually was extrapolated from 23 states for which researchers had data

77,000 Hospitalizations

Avoided Annually*

500-999

1,000-1,999

0-499

Avoided Hospitalizations

# of States

3,000-4,999

5,000-7,999

2,000-2,999

10

17

13

3

3

5

★★

number of avoided ambulatory care sensitive condition (acsc) hospitalizations by state

source: c c afendulis, et al 21

1 • medicare – part d program savings • 20

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shrinking costs of part destimated 2011 costs for part d are less than half the initial cBo projections,22 when including savings in other health care services as a result of better drug coverage 23

estimated fY2011 part d costs

March 2004 CBO Projection

for 2011

March 2012 CBO Estimate

for 2011

March 2012 Baseline Less Non-Drug Savings for Those

Previously Without Comprehensive Rx Coverage*

$110.6B $65.8B $54.8B

source: phrma analysis of data from cBo, cms, c c afendulis and m e chernew, J m mcWilliams, et al , Bureau of labor statistics24

*cBo estimates assumed no savings in other health care services as a result of part d coverage

1 • medicare – part d program savings • 21

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part d improves enrollees’ access to medicine and saves them moneypeer-reviewed and academic literature confirms medicare part d substantially reduced out-of-pocket costs and increased access to medicine for seniors *

*in comparing results across studies, magnitudes vary due to differences in data and methodology

“…part d was associated with a 16% annual decrease in out-of-pocket spending and a 7% increase in the number of prescriptions ”–American Journal of Managed Care25

“…an enrollee who moves from paying cash to buying through medicare part d pays 24% less for branded prescriptions ”–National Bureau of Economic Research26

“our results indicate that from 2005-2007, part d reduced elderly oop [out-of-pocket] costs per day’s supply of medication by 21 7% and increased elderly use of prescription drugs by 4 7% ”–National Bureau of Economic Research29

“[our] estimates of the overall effect of part d— an approximate 13 1% decrease in expenditures and an approximate 5 9% increase in prescription utilization—are remarkably similar to other predictors of these estimated based on economic theory ”–Annals of Internal Medicine28

“We estimate that medicare part d reduced user cost among the elderly by 18 4%, [and] increased their use of prescription drugs by about 12 8%…” –Health Affairs27

sources: G f Joyce, et al 25; m G duggan and f m scott morton26; f lichtenberg and s X sun 27; W Yin, et al 28; J d ketcham and k simon29

1 • medicare – part d program savings • 22

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Beneficiaries save through plan competition and manufacturer negotiationsnegotiated discounts and rebates on drugs, often as much as 20-30% on brand medicines,30 according to the medicare trustees, help drive plan savings which sponsors can use to reduce costs for beneficiaries 31

• Premiums • Deductibles • Rx Prices • Co-Pays

plans and manufacturers negotiate discounts and rebates

savings to Beneficiaries can appear as reductions in:

sources: cms30; medpac31

1 • medicare – part d1 • medicare – part d Beneficiary impact • 23

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prices on the plan finder Website do not reflect payments to manufacturersdrug prices on medicare plan finder exclude many manufacturer negotiated rebates, but do include part d payments to pharmacies, such as dispensing fees

• net amounts paid by part d plans can be substantially lower than the prices of medicines shown in plan finder as a result of negotiated rebates

• part d plan sponsors may use negotiated rebates to lower premiums, rather than to lower prices at the pharmacy counter:

“plan sponsors tend to use rebate revenues to offset plans’ benefit spending (reducing plan premiums) rather than lowering the price of prescriptions at the pharmacy counter ”32

sources: medpac32; medicare gov33

1 • medicare – part d Beneficiary impact • 24

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30%

40%

50%

60%

70%

80%

90%

Pre-Part D Post-Part D

67%

78%

improved treatment adherence for patients With serious conditionspreviously uninsured patients with heart failure were more likely to be adherent to their heart treatment regimens after enrolling in the medicare part d program

*impact of part d on Good refill adherence (>=80% of days covered) numbers are unadjusted descriptive statistics

percentage of patients With Good adherence*

source: J m donahue, et al 34

1 • medicare – part d1 • medicare – part d Beneficiary impact • 25

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*cost figures are before coverage gap discounts as enacted in aca **30-day equivalent prescriptions

part d reduced costs and improved access to medicines for Beneficiaries previously Without drug coverageBeneficiaries gaining drug coverage under part d on average reduced their monthly out-of-pocket costs by $31 while filling more prescriptions 35

2005Before Part D

2007After Part D

Average Out-of-Pocket Cost per Patient per Month* $73 $42

Average Number of Prescriptions per Patient per Month**

1.7 3.5

impact on medicare recipients Gaining drug coverage under part d

$31 in Monthly Savings

1.8 More Prescriptions per Month

source: amundsen Group36

1 • medicare – part d Beneficiary impact • 26

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1 • medicare – part d

*cost figures are before coverage gap discounts as enacted in aca **30-day equivalent prescriptions

part d reduced costs and improved access to medicines for disabled Beneficiariesdisabled beneficiaries37 under age 65 who gained drug coverage under part d on average reduced their monthly costs by $23 while filling more prescriptions

impact on disabled (<65) medicare Beneficiaries Gaining drug coverage under part d

2005Before Part D

2007After Part D

Average Out-of-Pocket Cost per Patient per Month* $50 $27

Average Number of Prescriptions per Patient per Month**

1.3 3.7

$23 in Monthly Savings

2.4 More Prescriptions per Month

source: amundsen Group38

1 • medicare – part d Beneficiary impact • 27Beneficiary impact • 27

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*all original projection estimates are rounded to the nearest dollar

average monthly part d Beneficiary premium, 2006-2013

$0

$10

$20

$30

$40

$50

$60

$70

$80

Original Projection*

Actual

2011 2012 201320102009200820072006

$37

$23

$40$44

$25

$47

$28

$50

$29 $30 $30

$53$56

$30

$61

$22

average Beneficiary premiums far Below original estimatesaccording to cms, “[t]hese very modest increases in premiums are going to make medications more affordable to medicare beneficiaries ”

source: phrma analysis of data from cms and hhs39

1 • medicare – part d Beneficiary impact • 28

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Enrollee Pays 25%

Plan Pays 75%

Enro

llee

Ded

uctib

le

Enrollee Pays 100% Medicare Pays 80%

Plan Pays 15%

Enrollee Pays 5%

*under the defined standard benefit in 2010, there was a deductible of $310, and the coverage gap occurred between the initial coverage limit of $2,830 in total drug spending and $6,440, where catastrophic coverage began source: kaiser family foundation40

Initial Coverage Period Coverage Gap Catastrophic Coverage

part d standard Benefitfrom 2006 to 2010, prior to implementation of the affordable care act, part d’s standard coverage included a deductible, an initial benefit, then a “coverage gap,” followed by catastrophic coverage for those with the highest drug spending (Within some limitations, plans are permitted to offer alternative benefit designs )

1 • medicare – part d Beneficiary impact • 29

structure of defined standard Benefit in part d, 2006-2010*

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*total does not sum to 100% due to rounding **in 2012, the standard deductible was $320

most part d enrollees have a reduced deductiblein 2012, 66% of part d beneficiaries were enrolled in plans (both stand-alone and medicare advantage prescription drug plans) offering a $0 or reduced deductible

percentage of part d enrollees in plans by deductible type, 2012*

source: avalere41

Standard Deductible,**

35%

Reduced Deductible,

10%

$0 Deductible, 56%

1 • medicare – part d Beneficiary impact • 30

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*under the defined standard benefit in 2012 (for non-low income enrollees), the coverage gap occurs between the initial coverage limit of $2,930 00 in total drug spending and an estimated $6,730 39 in total drug spending, where catastrophic coverage begins

declining Brand cost sharing in the coverage Gap*

phase out of coverage Gap in part d Beginning in 2011, beneficiaries receive a 50% discount on brand drugs while in the coverage gap, at a cost to brand manufacturers of $41 billion over ten years (2012 to 2021) 42

sources: phrma analysis of data from pwc42; hhs, medpac, and cms43

18%

42%25%

0%

100%

2020201920182017201620152014201320122011

Starting in 2020, enrollees pay 25% in the gap, same as pre-gap cost sharing in a standard plan.

Across all coverage periods and plan years, Part D plans may employ formularies and utilization management tools to achieve lower costs.

1 Biopharma companies provide a 50% discount on brands, immediately reducing the gap by two-thirds starting in 2011.

2 The gap is further reduced starting in 2013.

50% discount on brand name drugs provided by biopharma companies

Further reductions in the coverage gap

Enrollee cost sharing in the coverage gap

1 • medicare – part d Beneficiary impact • 31

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WA, 30

OR, 30

CA, 33

NV, 29

ID, 33

MT, 33

WY, 33

UT, 33CO, 28

NM, 30

TX, 33

OK, 30

KS, 31

NE, 33

SD, 33

ND, 33MN, 33

IA, 33

MO, 30

AR, 30

LA, 30

MS, 30

AL, 32

FL, 33

GA, 30

SC, 32

NC, 30TN, 32

KY, 31

IL, 33IN, 31

WI, 29MI, 34

OH, 33WV, 36 VA, 30

PA, 36

NY, 29

ME, 28

AZ, 30

AK, 25

NJ, 30

HI, 25

MA, 30

RI, 30

VT, 30

NH, 28

CT, 30

MD, 31 DC, 31

DE, 31

29-32 PDPs

33-36 PDPs

25-28 PDPs

Beneficiaries have choice of planspart d beneficiaries have between 25 to 36 stand-alone prescription drug plan (pdp) options in each state

number of stand-alone pdps per state, 2012

source: cms44

1 • medicare – part d Beneficiary impact • 32

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47%

60%63%

55%59%

53%

Somewhat Satisfied

Very Satisfied

August 2012

October 2011

August 2010

October 2009

September 2008

September 2007

September 2006

March 2006

47%

60%63%

59%

53% 52%

83%

36%

50%

78%

28%

89%

29%

90%

27%88%

29%84%

31%

88%

36%

59%

90%

30%

Beneficiary satisfaction With part d90% of part d enrollees are satisfied with their part d coverage

“overall, how satisfied are you with your prescription drug coverage?”*

source: krc research45*totals may not sum due to rounding

1 • medicare – part d Beneficiary impact • 33

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August 2012

March 2006Understand How Plan Works

Plan Is Convenient to Use

Plan Has Good Customer Service

Co-pays Are Affordable

Monthly Premium Is Affordable

Total Out of Pocket Costs Are Reasonable

Plan Covers All Medicines

92%88%

94%89%

89%85%

86%82%

85%

82%

83%79%

79%72%

seniors rate part d highly on many measuresBeneficiaries report that their plans are affordable and work well

“You’re seeing intelligent behavior on the part of the beneficiary. They can make better choices for themselves.”47

– CMS Administrator Dr. Donald Berwick

sources: krc research46; cms administrator Berwick47

1 • medicare – part d1 • medicare – part d Beneficiary impact • 34Beneficiary impact • 34

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*excludes non-respondents**dual eligibles are those enrolled in both medicare and medicaid duals not choosing a part d plan are autoenrolled in a plan ***limited income is defined as less than $15,000

Individuals With Disabilities

Limited Income***Dual Eligibles**All Seniors With Medicare Rx

Satisfied

Not Satisfied

90%

9%

95%

5%

91%

8%

83%

16%

satisfaction of selected Groups of part d enrollees, 2012*

satisfaction With part d is high among the most Vulnerabledual eligibles and beneficiaries with limited incomes exhibit the highest satisfaction rate with their drug coverage

source: krc research48

1 • medicare – part d Beneficiary impact • 35

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part B Generally covers injected and infused medicines, representing significant medical advances

Breakthrough in Colorectal Cancer:“progress in the management of colorectal cancer [with medicines] has been rapid during the past five years the development of novel treatments … has created a host of different management options from which to choose ”49

– new england Journal of medicine

Avoiding Debilitating Disease:“[a]mong the most effective treatments available for rheumatoid arthritis”50 and “opening up a new era of targeted biologic therapies for rheumatoid arthritis ”51

– new england Journal of medicine

– arthritis foundation

Preventing Blindness:“[t]he most significant advance in the treatment of macular degeneration in the history of the disease ”52

– upi

sources: new england Journal of medicine49-50; arthritis foundation51; upi health news52

1 • medicare – part B1 • medicare – part B 36

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doctors, hospitals, health systems, and other purchasers negotiate

discounts and rebates

savings lead to reductions in:

in part B, Beneficiaries save through price negotiations Between manufacturers and providersdiscounts and rebates negotiated by doctors, hospitals, health systems, and other purchasers are factored in the medicare part B payment (called “average sales price” or “asp”) rate and lead to lower costs to the medicare program and beneficiaries

sources: 42 u s c §1395w–3a (2003)53; medpac54

$

1 • medicare – part B 37

• part B premiums

• part B deductibles

• part B coinsurance

Page 42: chart pack - PhRMA

1 • Medicare – Part B

Physician Services and All Other

Part B Spending, 91.1%

91.1%, $190.5B

Total $209.1 Billion

Brand and Generic Drug Spending,

8.9%

part B expenditures, 2010

prescription drug share of part B expendituresspending on prescription medicines accounted for 8 9% of part B spending in 2010

source: phrma analysis of data from medpac and cBo55

1 • medicare – part B1 • medicare – part B 3838

Page 43: chart pack - PhRMA

total drug costs in medicare part B have Been stablesince 2006, the annual total cost for drugs under medicare’s part B program have shown little increase

*data for 2011 are not included because the cms asp drug pricing file is only currently available through the third quarter of 2011

average sales price-Based payments over time ($ Billions)*

Tota

l Pay

men

ts

$0

$6

$12

$18

$24

$30

20102009200820072006

source: the moran company56

1 • medicare – part B 391 • medicare – part B 39

Page 44: chart pack - PhRMA

1 • medicare – part d

average price Growth in medicare part B less than medical inflationWhile medical inflation has increased since 2006, the trend of volume-weighted average sales price (asp) changes for medicare part B drugs has remained essentially flat

$0.00

$2.00

$4.00

$6.00

$8.00

$10.00 Medical Price Index (CPI-M)

Weighted Average Sales Price (ASP)

300

320

340

360

380

400

420

Weighted Average Sales Price (ASP) Projected

2006

2007

2008

2009 2010 2011

Medical Price Index (CPI-M) Projected

Wei

ghte

d A

SP

Med

ical

Pric

e In

dex

(CPI

-M)

source: the moran company59

1 • medicare – part B1 • medicare – part B

Weighted asp57 vs cpi-m58

40

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1 • medicare

notes and sources1 r mcdonald, “managing the intersection of medical and pharmacy Benefits,” Journal of managed care pharmacy 14, suppl 4 (2008): s7-s11, www amcp org/

data/jmcp/Jmcpsupp_s7-s11 pdf (accessed 18 october 2012)

2 phrma analysis of medicare payment advisory commission, data Book: health care spending and the medicare program (Washington dc: medpac, June 2011), http://medpac gov/documents/Jun11dataBookentirereport pdf (accessed 5 august 2012)

3 comprehensive drug coverage is defined as drug coverage through medicare part d (2011 only), employer-sponsored plans, medicaid, Veterans health administration, indian health services and state pharmaceutical assistance programs in 2005, many medicare beneficiaries had limited drug coverage through medigap and medicare advantage plans (high deductibles, high copayments, annual benefit limits) Because these medigap and medicare advantage plans did not offer comprehensive drug coverage, they are excluded in 2005

4 the lewin Group, Beneficiary choices in medicare part d and plan features in 2006 (falls church, Va: the lewin Group, september 2006) drug coverage data obtained from several sources including: centers for medicare & medicaid services (cms), current population survey, kaiser state health fact sheets and national conferences of state legislatures; phrma analysis of medicare advantage, cms, cost, pace, demo, and prescription drug plan contract report—monthly summary report (data as of January 2011), www cms gov/mcradvpartdenroldata/ep/itemdetail asp?filtertype=none&filterBydid=-99&sortBydid=2&sortorder=descending&itemid=cms1243102&intnumperpage=10 (accessed 2 may 2012)

5 includes Veterans affairs, retiree coverage without rds, indian health service, state pharmacy assistance programs, employer plans for active workers, medigap, multiple sources and other sources

6 includes retiree drug subsidy (rds) and federal employees health Benefits plan (fehBp) and tricare retiree coverage

7 kaiser family foundation, medicare: a primer (menlo park, ca: kaiser family foundation, april 2010), www kff org/medicare/upload/7615-03 pdf (accessed 12 september 2012)

8 phrma calculation of medicare benefit payment projections from congressional Budget office, march 2012 medicare Baseline, spreadsheet (13 march 2012), www cbo gov/sites/default/files/cbofiles/attachments/43060_medicare pdf (accessed 18 october 2012)

9 medicare payment advisory commission, report to the congress: medicare payment policy (Washington dc: medpac, march 2012), www medpac gov/documents/mar12_entirereport pdf (accessed 18 october 2012)

41

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1 • medicare

10 phrma analysis of medicare payment advisory commission, data Book: health care spending and the medicare program (Washington dc: medpac, June 2011), http://medpac gov/documents/Jun11dataBookentirereport pdf (accessed 5 august 2012)

11 call with center for medicare & medicaid services administrator dr donald Berwick, 4 august 2011

12 furthermore, cost projections keep coming down, as the congressional Budget office (cBo) has reduced its 10-year forecast of part d spending by over $100 billion in each of the past two years in march 2012, cBo reduced its medicare part d spending projection for 2013-2022 by $107 billion in april 2011, cBo reduced its part d spending projection for 2012-2021 by about $120 billion cBo, “updated Budget projections: fiscal Years 2012 to 2022,” (march 2012): 9, www cbo gov/sites/default/files/cbofiles/attachments/march2012Baseline pdf (accessed 1 september 2012); cBo, “preliminary analysis of the president’s Budget for 2012,” (18 march 2011): 12, www cbo gov/ftpdocs/121xx/doc12103/2011-03-18-apB-preliminaryreport pdf (accessed 15 september 2012)

13 phrma analysis of data from the congressional Budget office’s medicare part d Baselines for 2004-2011

14 ims institute for healthcare informatics, national prescription audittm (december 2011)

15 m kleinrock, cost savings in medicare part d: the prescription drug lifecycle (ims institute for healthcare informatics, august 2012), http://phrma org/sites/default/files/196/iihimedicared2pp0812f pdf (accessed 20 september 2012)

16 m l aitken and e r Berndt, “medicare part d at age five: What has happened to seniors’ prescription drug prices?” (ims institute for healthcare informatics, July 2011), www phrma org/sites/default/files/202/ihiimedicarepartdreport-final pdf (accessed 17 october 2012)

17 adapted from medicare payment advisory commission, report to the congress: medicare payment policy (Washington dc: medpac, march 2012), www medpac gov/documents/mar12_entirereport pdf (accessed 1 June 2012)

18 J m mcWilliams, a m Zaslavsky, and h a huskamp, “implementation of medicare part d and nondrug medical spending for elderly adults With limited prior drug coverage,” Journal of the american medical association 306, no 4 (2011): 402–409

19 c c afendulis and m e chernew, “state-level impacts of medicare part d,” american Journal of managed care 17, suppl 12 (october 2011)

20 short-term complications of diabetes; chronic obstructive pulmonary disorder; congestive heart failure (chf); angina; uncontrolled diabetes; asthma; stroke; acute myocardial infarction (ami)

21 c c afendulis, et al , “the impact of medicare part d on hospitalization rates,” health services research 46, no 4 (2011): 1022–1038

42

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1 • medicare

22 the congressional Budget office (cBo) has not recognized the effects that part d may have on reducing expenditures elsewhere in medicare in official estimates in general, cBo has not recognized preventive health products or services as producing budgetary savings see, e g cBo letter to the honorable nathan deal, 7 august 2009, www cbo gov/sites/default/files/cbofiles/ftpdocs/104xx/doc10492/08-07-prevention pdf (accessed 1 september 2012)

23 the congressional Budget office’s estimates for part d outlays have fallen significantly due to lower than projected spending per enrollee, lower than projected enrollment in part d, lower than projected annual increases in drug spending, and savings in non-drug health care costs as a result of better drug coverage

24 phrma analysis of data from congressional Budget office’s (cBo), march 2012 medicare Baseline (march 2011); cBo’s march 2004 medicare Baseline (march 2004); medicare Board of trustees, 2012 annual report of the Board of trustees of the federal hospital insurance and federal supplementary medical insurance trust funds (april 2012); c c afendulis and m e chernew, “state-level impacts of medicare part d,” american Journal of managed care 17, suppl 12 (october 2011); J m mcWilliams, a m Zaslavsky, and h a huskamp, “implementation of medicare part d and nondrug medical spending for elderly adults With limited prior drug coverage,” Journal of the american medical association 306, no 4 (2011): 402–409; Bureau of labor statistics, consumer price index – all urban consumers (cuur0000sao) (retrieved 24 July 2012)

25 G f Joyce, et al , “medicare part d after 2 Years,” american Journal of managed care 15, no 3 (2009): 536–544

26 m G duggan and f m scott morton, “the effect of medicare part d on pharmaceutical prices and utilization,” nBer Working paper W13917 (national Bureau of economic research, april 2008)

27 f lichtenberg and s X sun, “the impact of medicare part d on prescription drug use by the elderly,” health affairs 26, no 6 (2007): 1735–1744

28 W Yin, et al , “the effect of the medicare part d prescription Benefit on drug utilization and expenditures,” annals of internal medicine 148, no 3 (2008): 1–14

29 J d ketcham and k simon, “medicare part d’s effects on elderly drug costs and utilization,” nBer Working paper 14326 (national Bureau of economic research, september 2008)

30 medicare Board of trustees, 2012 annual report of the Board of trustees of the federal hospital insurance and federal supplementary medical insurance trust funds (april 2012), www treasury gov/resource-center/economic-policy/ss-medicare/documents/tr_2012_medicare pdf

31 medicare payment advisory commission, data Book: health care spending and the medicare program (Washington dc: medpac, June 2011), www medpac gov/documents/Jun11dataBookentirereport pdf (accessed 5 august 2012)

43

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1 • medicare

32 medicare payment advisory commission, report to the congress: medicare payment policy (Washington dc: medpac, march 2012); 358, www medpac gov/documents/mar12_entirereport pdf (accessed 1 september 2012)

33 image from medicare gov, medicare plan finder, www medicare gov/find-a-plan/questions/home aspx (accessed 18 october 2012)

34 J m donahue, et al , “the medicare drug Benefit (part d) and treatment of heart failure in older adults,” american heart Journal 160, no 1 (2010): 159–165

35 patient cost excludes premiums but includes all patient contributions to drug costs, such as co-payments, coinsurance, and any amounts applied to deductible

36 amundsen Group, Verispan longitudinal data, analysis for phrma (may 2008)

37 “disabled beneficiaries” refers to individuals younger than 65 who qualify for medicare based on a determination of disability analysis does not include medicare-medicaid dual eligible population, which had drug coverage in 2005 under medicaid

38 amundsen Group, Verispan longitudinal data, analysis for phrma (may 2008)

39 all original projection estimates are rounded to the nearest dollar and taken from medicare Board of trustees, 2004 annual report of the Board of trustees of the federal hospital insurance and federal supplementary medical insurance trust funds (march 2012): 164 actual average premium figures for 2006, 2007, and 2008 are taken from 2008 annual report of the Board of trustees of the federal hospital insurance and federal supplementary medical insurance trust funds (march 2008): 180 2009 average premium taken from centers for medicare & medicaid services (cms), “lower medicare part d costs than expected in 2009,” press release (14 august 2008) 2010 and 2011 average premium taken from cms, “premiums for medicare prescription drug plans to remain low in 2011,” press release (18 august 2010) 2012 average premium taken from cms, “medicare prescription drug premiums Will not increase, more seniors receiving free preventive care, discounts in the donut hole,” press release (4 august 2011) department of health and human services, “medicare prescription drug premiums to remain steady for third straight year,” press release (6 august 2012), www hhs gov/news/press/2012pres/08/20120806b html (accessed 18 october 2012)

40 J hoadley, l summer, e hargrave et al , “medicare part d 2011: the coverage Gap”, kaiser family foundation data spotlight (september 2011)

41 avalere health analysis of 2012 ma and part d landscape file and July 2012 enrollment data

42 phrma analysis of data from pwc, “implications of the us supreme court ruling on healthcare,” health research institute (June 2012)

44

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1 • medicare

43 hhs Budget in Brief for fY2012, “advancing the health, safety and Well-Being of our people,” (february 2011); medicare payment advisory commission, report to the congress: medicare payment policy, table 13-1 (Washington dc: medpac, march 2012); centers for medicare & medicaid services, “announcement of calendar Year (cY) 2012 medicare advantage capitation rates and medicare advantage and part d payment policies and final call letter,” (4 april 2011), www cms gov/medicare/health-plans/medicareadvtgspecratestats/downloads/announcement2012 pdf (accessed 18 october 2012)

44 centers for medicare & medicaid services, “2012 medicare part d stand-alone prescription drug plans,” a landscape source file (data as of 6 october 2011)

45 medicare today, seniors’ opinions about medicare rx: seventh Year update (Washington, dc: krc research, september 2012), www medicaretoday org/mt2012/krc%20survey%20of%20seniors%20for%20medicare%20today%2010%2002%202012 pdf (accessed 1 september 2012)

46 ibid

47 centers for medicare & medicaid services administrator dr donald Berwick as quoted in matt doBias, “medicare success finds fans on the right,” politico (4 august 2011)

48 medicare today, seniors’ opinions about medicare rx: seventh Year update (Washington, dc: krc research, september 2012), www medicaretoday org/mt2012/krc%20survey%20of%20seniors%20for%20medicare%20today%2010%2002%202012 pdf (accessed 14 october 2012)

49 r J mayer, “two steps forward in the treatment of colorectal cancer,” editorial, new england Journal of medicine 350, no 23 (2004): 2335-42

50 n J olsen and c michael stein, “new drugs for rheumatoid arthritis,” new england Journal of medicine 350, no 21 (2004): 2167-79

51 arthritis foundation president and ceo dr John h kippel as quoted in J donn, “’smart’ drug proves potent against rheumatoid arthritis,” the star-ledger (17 June 2004)

52 dr david Brown, the methodist hospital, as quoted in “Good result for macular degeneration shots,” upi health news (5 october 2005)

53 social security act, public law no 74-271, 49 stat 620 (1935), §1847(a) as added through medicare prescription drug, improvement, and modernization act of 2003, public law no 108-173, 117 stat 2239 (dec 8, 2003), www ssa gov/op_home/ssact/title18/1847a htm (accessed 15 october 2012)

54 medicare payment advisory commission, report to the congress: impact of changes in medicare payment for part B drugs (Washington, dc: medpac January 2007), www medpac gov/documents/jan07_partb_mandated_report pdf (accessed 1 may 2012)

45

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1 • medicare 46

55 phrma calculation of data from the congressional Budget office, march 2011 medicare Baseline (march 2011) and the medicare payment advisory commission, data Book: health care spending and the medicare program (Washington dc: medpac, June 2012), www medpac gov/documents/Jun12dataBookentirereport pdf (accessed 1 october 2012)

56 the moran company, trends in Weighted average sales prices for prescription drugs in medicare part B, 2006-2011 (august 2011)

57 asp as defined for the medicare part B program is the manufacturer’s average price to all nonfederal purchasers in the united states, net of most discounts and rebates (other than rebates under the medicaid drug rebate program)

58 cpi-m (consumer price index for medical care) is the u s government’s measure of average price levels across all medical goods and services

59 the moran company, trends in Weighted average sales prices for prescription drugs in medicare part B, 2006-2011 (august 2011)

Page 51: chart pack - PhRMA

1 • medicare 47

Page 52: chart pack - PhRMA
Page 53: chart pack - PhRMA

2 • medicaid

2 medicines in

medicaidmedicaid provides health coverage for low-income and disabled individuals, and is jointly funded by state and federal governments under the affordable care act, medicaid eligibility is scheduled for expansion in 2014 each state administers its own medicaid program within broad federal guidelines some states administer pharmacy benefits directly, while beneficiaries in other states receive drug benefits from medicaid managed care plans drugs sold to medicaid beneficiaries are subject to statutory rebates policies meant to reduce the cost or use of medicines in medicaid often result in barriers to access for patients, and have been shown to be associated with poor health outcomes for beneficiaries

49

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2 • medicaid

Brand prescription drugs are about 4% of total medicaid spending

medicaid spending, 2010

Other Health, Residential and Personal Care,2 16.9%

Administration Costs,3 7.4%

Brand Prescription Drugs, 3.5%Generic Prescription Drugs, 1.5%

Durable Medical Equipment, 1.2%

Nursing Facilities, 11.2%

Professional Services,1 13.8%

Home Health, 6.5%

Hospital Care, 38.0%

total $401 4 Billion

source: phrma analysis of data from cms, hhs office of inspector General, and the lewin Group4

50

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2 • Medicaid

prescription drugs projected to Be small share of medicaid spending through 2020in 2010, medicaid drug spending, including brands and generics, was $20 2 billion

*Years 2011 and beyond are projections as of January 2012 other services not shown separately include durable and non-durable medical products, home health care expenditures, other health, residential and personal expenditures, and others **prescription drug spending includes brand and generic ingredients, pharmacy, and distribution costs

total medicaid spending and spending by selected service, 2000-2020 (in Billions)*

Prescription Drugs**PhysiciansNursing Homes

Hospitals

Total Medicaid

$0

$200

$400

$600

$800

$1,000

20202018201620142012201020082006200420022000

source: cms5

51

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2 • Medicaid

medicaid price controlsas a condition of a drug being covered by medicaid, drug manufacturers pay a rebate to the states and cms based on a statutory formula

• the base rebate for brand medicines is the greater of 23 1% of the average manufacturer price (amp) or the difference between amp and a manufacturer’s “best price” (the best price to generally any non-governmental purchaser) for the drug

• Brand manufacturers pay an additional rebate if their amp increases more than inflation

• many states also require additional state supplemental rebates on brand medicines

• Generic manufacturers also pay a statutory rebate of 13 0% of amp

• cBo has said that medicaid price controls distort the market, resulting in higher prices elsewhere 6-7

In FY2010, the cost to manufacturers of Medicaid rebates totaled $11.4 billion.8

sources: cBo6-7; cms8

price controls in medicaid are manifested through the rebate program

52

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2 • Medicaid

“average manufacturer price” (amp) is not the average price received by manufacturers

• amp is defined in statute and is used to calculate medicaid rebates

• While originally intended only for use in the rebate calculation, over the years amp has also become a metric for pharmacy reimbursement and has been redefined to reflect the price paid by retail community pharmacies

• amp excludes many manufacturer sales, discounts, and rebates for example, it excludes prices paid by mail order pharmacies, physicians, clinics, or hospitals and rebates received by managed care organizations and pharmacy benefit managers

• this definition results in amps that are higher than the average price manufacturers actually receive

• excluding many manufacturer rebates and discounts from the definition of amp results in higher medicaid rebates because amp is the critical component of the formula

source: phrma, based on information from medicaid gov and cBo9

53

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2 • Medicaid

medicaid rebates on prescription medicines increase substantially under acaindependent analysts estimate the expansion of medicaid prescription drug rebates in the affordable care act could increase brand manufacturers’ costs by more than $40 billion over 10 years (2012-2021) 10

note: Graphic is illustrative only sources: pwc health research institute10; medicaid gov11

Medicaid Rebates Before ACA

Base rebate increased from 15.1% to 23.1%

Medicaid rebate extended to Managed Care Organizations (MCOs)

Medicaid eligibility expands

AMP definitional changes cause further rebate increase

54

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2 • Medicaid

0

10

20

30

40

50

60

2014ACA Coverage

Expansion Begins

2010ACA Begins Phasing In

2009Pre-ACA

Rebates Could Apply

to as Many as26 Million

More People12

*point-in-time measurement

medicaid rebates apply to more people under acadrug purchases by beneficiaries in medicaid managed care organizations (mcos) became eligible for statutory rebates in 2010 Beginning in 2014, medicaid rebates could apply to medicines used by up to 26 million additional people

Mill

ions

of

Indi

vidu

als*

Expansion of Medicaid Eligibility 9M

17M16M

29M28M26M

Inclusion of Managed Care Lives

Medicaid Beneficiaries

Receiving Pharmacy Benefits

Through FFS

source: phrma analysis of data from cms, cBo, and kaiser family foundation13

55

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2 • Medicaid

administration of pharmacy Benefit in medicaid Variesin many states, managed care organizations (mcos) administer medicaid pharmacy benefits, while in others, states administer benefits directly in a few states, benefits are administered by either entity, depending on patient therapy

*states in which certain classes of drugs are not included in the mco drug benefit

0%

1-49%

50-75%

76-100%

WA*

67%

OR*

78%

CA*

61%

NV65%

ID

MT

WY

UTCO9%

NM76%

TX

OK

KS*

64%

NE

SD

NDMN68%

IA

MO

AR

LAMS15%

AL

FL47%

GA74%

SC70%

NCTN

KY21%

IL2%

IN

WIMI*75%

OH85%

WV VA73%

PA67%

NY78%

ME

AZ93%

AK

NJ* 97%

HI

MA38% RI 83%

VTNH

CT

MD* 84% DC 75%

DE★

99%

percentage of recipients receiving drug Benefits through an mco by state, 201014

source: avalere15

56

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2 • Medicaid

states limit access to prescription medicines in medicaidnearly all states use preferred drug lists (pdls),* and 16 states limit the number of prescriptions that beneficiaries can fill each month

*even though every state is guaranteed sizable statutory discounts on all medicines, states may also define a list of medicaid covered medicines (i e , preferred drug lists) with cms approval patients seeking access to medicines not on the pdl must obtain prior authorization

PDL and Monthly Limit on Number of Prescriptions16

WA

OR

CA(6)

NV

ID

MT

WY

UTCO

NM

TX(3)

OK(6 total, 2 brand)

KS(5)

NE

SD

ND MN

IA

MO

AR(6)

LA(4)

MS(5 total, 2 brand)

AL(5 brand)

FL

GA

SC(4)

NC(8)TN (5 total,

2 brand)

KY(4)

IL(3 brand)

IN

WIMI

OHWV

(4) VA

PA(6)

NY

ME(4 brands)

AZ

AK

NJ

HI

MARI

VTNH

CT

MD DC

DE★

PDL

source: kaiser commission on medicaid and the uninsured17

57

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2 • Medicaid

restrictive state medicaid preferred drug lists may reduce adherence and lead to poor outcomesin alabama, 51% of patients discontinued statin therapy after preferred drug list (pdl) restrictions were imposed, compared to 39% in the previous period 18

therapy discontinuation rates Before and after pdl implementation in alabama*

“access restrictions may deter patients, especially vulnerable low-income patients, from adhering to important therapies, which could ultimately drive up long term medical costs ”18

– D. Ridley and K. Axelsen

*in comparison, another state (north carolina), which did not institute a pdl, experienced no significant change in therapy discontinuation during the same period

% o

f M

edic

aid

Pati

ents

W

ho D

isco

ntin

ued

Ther

apy

0%

10%

20%

30%

40%

50%

60%

39%

51%

Before pdl after pdl

source: d ridley and k axelsen18

58

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2 • Medicaid

use of prior authorization to contain costs may not Be clinically appropriatein maine’s medicaid program, treatment disruptions increased by 29% after implementation of a prior authorization (pa) policy among patients initiating schizophrenia therapy with atypical antipsychotics 19

“Our results indicate that PA and step therapy requirements for new users of [atypical antipsychotics] may result in problematic disruptions in therapy among patients with schizophrenia.”19

– Stephen Soumerai, et al.

*discontinuity in treatment refers to a gap in therapy, a change of medicine, or augmentation with another antipsychotic medicine **151 of 222 patients experienced discontinuities after pa implementation, a rate of 68% the discontinuity rate after pa implementation was 29% higher than the pre-pa rate, implying a pre-pa discontinuity rate of 53% comparison state (new hampshire), which did not institute a pa policy, did not experience a significant change in treatment disruptions during the same period

treatment disruption rates Before and after implementation of

prior-authorization policy in maine**

% o

f M

edic

aid

Pati

ents

Who

Ex

perie

nced

AA

Tre

atm

ent

Dis

cont

inui

ties

*

0%

10%

20%

30%

40%

50%

60%

70%

PAPre-PA

53%

68%

source: s soumerai, et al 19

59

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2 • Medicaid

Greater adherence to medicines in medicaid can reduce spending on other health care servicesamong medicaid beneficiaries with congestive heart failure, total health care costs for adherent patients* were 23% lower than those of non-adherent patients

health care spending by level of adherence among medicaid Beneficiaries With congestive heart failure

*defined as patients with a “medication possession ratio” (i e , total days supply of medication divided by number of days between first fill and the last day patient had no medication available) of 80% or higher

Ave

rage

Ann

ual H

ealt

h C

are

Spen

ding

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

Prescription Drug Costs

Other Medical Costs

Greater Than 95%80 to 95%Less Than 80%

$2,212

$2,915

$23,112$17,832

$14,418

$3,247

source: esposito, et al 20

60

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2 • Medicaid

increasing prescription drug cost-sharing for medicaid patients may lead to higher total medicaid costsfor patients with very low incomes, even small increases in cost-sharing can reduce access to needed care, which can lead to poor outcomes and increased program costs

increased drug copayments in Georgia’s medicaid program led to:21

reduced use of prescribed medicines among cancer patients…

…and a subsequent increase in emergency room visits…

…resulting in higher total medicaid costs

127 Fewer Rx Days

8% Higher Probability of

ER Visit

$2,288 Higher Costs

source: s subramanian22

61

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2 • Medicaid

notes and sources1 professional services includes physician and clinics, dental and other professional

2 other health, residential and personal care includes school health, worksite, residential mental/substance abuse, some ambulance, medicaid home/community waivers

3 administration costs includes federal and state administration and net cost of private insurance

4 phrma analysis based on data from centers for medicare & medicaid services, office of the actuary, national health statistics Group, national health expenditures data, table 4 (January 2012); u s department of health and human services, office of inspector General, higher rebates for Brand-name drugs result in lower costs for medicaid compared to medicare part d (august 2011); the lewin Group, potential federal and state-by-state savings if medicaid pharmacy programs were optimally managed (february 2011)

5 centers for medicare & medicaid services (cms), office of the actuary, national health statistics Group, national health expenditures data, table 4 (January 2012); cms, office of the actuary, national health statistics Group, national health expenditure projections 2010-2020 (January 2012)

6 congressional Budget office letter to senate finance committee chairman chuck Grassley (r-ia), 21 June 2005

7 congressional Budget office, how the medicaid rebate on prescription drugs affects pricing in the pharmaceutical industry (January 1996), www cbo gov/sites/default/files/cbofiles/ftpdocs/47xx/doc4750/1996doc20 pdf (accessed 18 october 2012)

8 centers for medicare & medicaid services, financial management report for fY2002 through fY2010, cms-64 Quarterly expense report, www cms gov/research-statistics-data-and-systems/computer-data-and-systems/medicaidBudgetexpendsystem/cms-64-Quarterly-expense-report html (accessed 26 april 2012)

9 phrma analysis of medicaid gov, provisions of the patient protection and affordable care act, public law no 111-148, 124 stat 119, §2501 (2010): 487-504, www healthcare gov/law/resources/authorities/title/ii-role-of-public-programs pdf (accessed 1 september 2012); congressional Budget office director douglas elmendorf letter to the honorable paul ryan (r-Wi), 4 november 2010

10 the $40B cost of increased medicaid rebates that pwc reports does not include the cost of paying those larger rebates for individuals who will newly receive medicaid coverage under the aca pwc health research institute, implications of the us supreme court ruling on healthcare (June 2012)

62

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2 • Medicaid

11 phrma analysis of medicaid gov, provisions of the patient protection and affordable care act, public law no 111-148, 124 stat 119, §2501 (2010): 487-504, www healthcare gov/law/resources/authorities/title/ii-role-of-public-programs pdf (accessed 1 september 2012)

12 in states where the drug benefit was partially carved out, the entire drug benefit was considered carved out for the purpose of estimating the number of lives covered by medicaid rebates states with carved-out drug benefits and mco enrollment as a percentage of total medicaid enrollment were assumed to be constant through 2014 in the absence of the aca

13 phrma analysis based on the following data sources: centers for medicare & medicaid services (cms), 2009 medicaid managed care enrollment report (data as of 30 June 2009); cms, 2010 medicaid managed care enrollment report (data as of 1 July 2010); cms, “dual eligible enrollment as of June 30, 2009”, table; cms, “dual eligible enrollment as of July 1, 2010”, table; kaiser family foundation, “comprehensive medicaid managed care organization acute care Benefit carve-outs, october 2010” at www statehealthfacts org/comparemaptable jsp?ind=987&cat=4; congressional Budget office (cBo), march 2009 Baseline: medicaid (June 2009); cBo, march 2011 Baseline: medicaid (march 2011); cBo, march 2012 Baseline: medicaid (march 2012); cBo, updated estimates for the insurance coverage provisions of the affordable care act (march 2012); cBo, estimates for the insurance coverage provisions of the affordable care act updated for the recent supreme court decision (July 2012)

14 Vermont medicaid managed care is through the state’s publicly sponsored mco texas requires mco formularies to adhere to the state’s prescription drug list

15 avalere analysis of centers for medicare & medicaid services, 2010 medicaid managed care enrollment report (data as of 1 July 2010)

16 numbers indicate the monthly prescription limit for brands and generics, unless otherwise specified most states exempt children and institutionalized beneficiaries from these limits prescription limit data as of 2010 in most cases

17 pdl information as of 2011 kaiser commission on medicaid and the uninsured, moving ahead amid fiscal challenges: a look at medicaid spending, coverage and policy trends - results from a 50-state medicaid budget survey for state fiscal Years 2011 and 2012 (october 2011) data on monthly prescriptions limits from the kaiser commission on medicaid and the uninsured medicaid Benefits online database (october 2010), http://medicaidbenefits kff org/service jsp?yr=5&cat=5&nt=on&sv=32&so=0&tg=0 (accessed 1 october 2012) data for some states updated from other sources: colorado’s 8 scripts per month limit “suspended temporarily”, see national conference of state legislatures, “medicaid pharmaceutical state laws and policies, 2001-2012” at www ncsl org/issues-research/health/medicaid-pharmaceutical-laws-and-policies aspx; pennsylvania script limit data from pennsylvania health law project, medical assistance prescription coverage limit: a factsheet for consumers (January 2012), www phlp org/wp-content/uploads/2012/01/rx-reduction-fact-sheet-2012 pdf; no script limit in Georgia from Georgia department of community health, Georgia medicaid fee-for-service pharmacy program frequently asked Questions (revised 19 april 2012): 6, http://dch georgia gov/sites/dch georgia gov/files/imported/vgn/images/portal/cit_1210/51/49/148869272Ga_medicaid_ffs_frequently_asked_Questions_revised-4-19-12 pdf (accessed 18 october 2012)

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2 • Medicaid

18 d ridley and k axelsen, “impact of medicaid preferred drug lists on therapeutic adherence,” pharmacoeconomics 24, suppl 3 (2006): 65-78

19 s soumerai, f Zhang, d ross-degnan et al , “use of atypical antipsychotic drugs for schizophrenia in maine medicaid following a policy change,” health affairs 27, no 3 (2008): w185-w195

20 d esposito, a d Bagchi, J m Verdier et al , “medicaid Beneficiaries With congestive heart failure: association of medication adherence With healthcare use and cost,”american Journal of managed care 15, no 7 (July 2009): 437-435

21 outcomes were measured during six-month periods before and after copay increase in Georgia impact estimates are adjusted to reflect changes in a similar state with no change in co-pays over same period “rx days” is the number of prescriptions multiplied by the number of days supply over a six-month period

22 s subramanian, “impact of medicaid copayments on patients with cancer: lessons for medicaid expansion under health reform,” medical care 49, no 9 (september 2011): 842-7

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3 • Veterans Affairs1 • medicare part d

3 medicines in

Veterans affairsthe u s department of Veterans affairs (Va) serves a special population – veterans with service-related disabilities and, in some cases, their families the Va administers the smallest of the three public drug benefit programs featured here the Va uses price controls for prescription medicines, and also uses a more restrictive drug formulary than medicare part d plans many veterans use other coverage for their medicines rather than rely exclusively on Va coverage

3 • Veterans affairs 6767

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3 • Veterans affairs

Va price controlsto participate in medicaid and medicare part B, drug manufacturers are subject to statutory price controls for medicines sold to the “Big 4” government agencies: Va, department of defense, public health service and coast Guard

• pharmaceutical companies are required to sell medicines at the lower of two controlled prices:1

1 Federal Ceiling Price (FCP). a minimum 24% discount off the “non-federal average manufacturer price” (non-famp) a statutory formula requires additional discounts if necessary to prevent the fcp from rising faster than the rate of inflation

2 Federal Supply Schedule (FSS) price. manufacturers must disclose to the Va the prices they make available to their commercial customers on a drug-by-drug basis, the parties identify a customer who purchases the drug at the lowest price on terms substantially similar to the Va the fss price must be no greater than the price paid by this “tracking” customer

• in the mid-1990s, the Va also instituted a national formulary that included closed and preferred classes of medicines in some instances, for placement of medicines on formulary, Va requires further discounts below the fcp

source: 38 u s c §8126 (1992)1

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3 • Veterans Affairs

0%

20%

40%

60%

80%

100%

2nd Highest Enrollment Part D PDP

Highest Enrollment Part D PDP

VA

39%

84% 83%

Va formulary covers fewer Brand drugs than part dfor 2011, the Va formulary included far fewer brand name drugs than part d

percentage of Brand name drugs most commonly used by seniors included in formularies2

source: the lewin Group3

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3 • Veterans Affairs

0%

5%

10%

15%

20%

0%

5%

10%

15%

20%

25%

30%

2008 20102005

17.3%

11.0%

8.2%

17.0%

26.0%

28.6%

11.0%

2008 20102005

Veterans prefer more drug coverage than Va offersVa enrollees obtain many prescriptions outside the Va system

enrollees planning to use Va system primarily for rx4

prescriptions obtained outside Va system5

sources: department of Veterans affairs4-5

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3 • Veterans Affairs

Va formulary excludes medicines commonly prescribed by community physiciansin a 2003 Va pilot program allowing veterans to use non-Va physicians,6 42% of prescriptions written by community physicians were not available on the Va formulary

of prescriptions Written for Veterans by community physicians

42% not available on the Va formulary

58% Were available on the

Va formulary

source: dr Jonathan perlin, department of Veterans affairs7

35% Were Converted to the

VA Formulary

65% Could Not Be Converted to the

VA Formulary*

Total Number of Prescriptions Written Of Prescriptions Not Initially Available on the VA Formulary

*Va pharmacists worked with community physicians to convert prescriptions to the Va formulary results are through week 20 of the pilot program

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3 • Veterans Affairs

many Va enrollees supplement their Va drug coverage With part d or private insurance7 8 million veterans enrolled in the Va health care system in 2010; almost 1 5 million were also enrolled in medicare part d, and 2 million had private drug insurance

percentage of Va enrollees reporting other sources of drug coverage, 2010

Medicare Part D

Private Rx Coverage

0%

5%

10%

15%

20%

25%

30%

19%

25%

source: department of Veterans affairs8

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0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

Taking Smaller Doses of Rx

Didn't Fill Rx 1+ Times

Cost-Related Non-Adherence

Part D, 2006VA, 2003

22.5%

16.9%

14.5%

11.8%

7.0%

4.8%

Primary Rx Coverage Source, Year

treatment adherence improved for Veterans after enrolling in part dBeneficiaries whose primary drug coverage was through the Va in 2003 and through part d in 2006 reported lower rates of non-adherence to therapy after enrolling in part d

Beneficiaries reporting non-adherence to rx therapy

source: d G safran, et al 9

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notes and sources1 Veterans health care act of 1992, public law no 102-585, 106 stat 4971, §603(a)(1), (4 november 1992)

2 the analysis began with the top 300 drugs with the highest script volumes for the 65 and older population 17 of the top 300 are not covered by the part d program due to statutory and regulatory requirements, and three influenza vaccines are covered by part B the analysis was conducted using the remaining 280 part d covered drugs

3 the lewin Group, 2011 comparison of Va national formulary and formularies of the highest enrollment plans in medicare part d and the federal employee health Benefit program (16 february 2011)

4 u s department of Veterans affairs, 2010 survey of Veteran enrollees’ health and reliance upon Va (July 2011): 54

5 u s department of Veterans affairs (Va), 2008 survey of Veteran enrollees’ health and reliance upon Va (september 2009): 41; Va, 2007 survey of Veteran enrollees’ health and reliance upon Va (may 2008): 73; Va, 2010 survey of Veteran enrollees’ health and reliance upon Va (July 2011): 42

6 the transitional pharmacy benefit (tpB) was a temporary program to help veterans who were unable to get their initial primary care appointment with a Va doctor within a 30 day time period under the program, Va would fill prescriptions from private physicians until a Va physician examined the veteran and determined an appropriate course of treatment the Va reported that 8,298 veterans had prescriptions filled through the program

7 dr Jonathan perlin, deputy under secretary for health, u s department of Veterans affairs, statement to the house of representatives, subcommittee on health of the committee on Veterans’ affairs, department of Veterans affairs providing certain Veterans With a prescription-only health care Benefit, hearing, 30 march 2004 (serial no 108-34): 15

8 u s department of Veterans affairs, 2010 survey of Veteran enrollees’ health and reliance upon Va (July 2011): 26

9 d G safran et al , “prescription coverage, use and spending Before and after part d implementation: a national longitudinal panel study,” Journal of General internal medicine, 25(1):10-7, 2009

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3 • Veterans Affairs 75

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f u l l c o lo r

b l ac k

w h i t e

R e s e a r c hP r o g r e s sH o p e

R e s e a r c hP r o g r e s sH o p e

R e s e a r c hP r o g r e s sH o p e

Pharmaceutical Research and Manufacturers of America

950 F Street NW, Suite 300Washington, DC 20004

www.phrma.org

BIOPHARMACEuTICALS IN MEDICARE, MEDICAID & DEPARTMENT OF VETERANS AFFAIRS

Fall 2012Version 1.0


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