Summary
One of the things those living in other countries find most difficult to understand about the US is that its healthcare system is no system at all. Never designed by any central authority, it is an ad hoc network that just grew up, with different kinds of coverage provided to different kinds of citizens by different kinds of payers. Employers, insurers, private charities, state and local governments, and the federal government all pick up part of the bill, as do the patients themselves, in a crazy set-up that leaves too many with inadequate care and, some argue, a few with such generous medical benefits that they overuse scarce resources. What constitutes standard medical practice, including the prevalence of prescribing drugs and the drugs selected, varies greatly not only from one region to another, but even from one locality to another quite close by.
The segment of the population with the best organised healthcare consists of those over the age of 65 years. Since 1965, a federal programme called Medicare has provided the core healthcare coverage for them, as well as for people with disabilities. The basic Medicare plan lets beneficiaries go to any physician or hospital that participates in the programme (as almost all do), with the assurance that a good chunk of the cost will be paid for by the government and that the remainder will be billed at rates set by the federal government at levels well below what most providers would otherwise charge.
But with few exceptions - such as medications administered in a physician's office or as part of a hospital stay - the Medicare programme has never covered drugs. At any given time, roughly three-quarters of the 43 million people enrolled in Medicare also have some degree of drug coverage, obtained in one of four ways: via their former employer as part of their retirement benefit package; via a "Medigap" insurance policy they buy to pay for healthcare costs not covered by Medicare; via a managed care private plan alternative to the usual fee-for-service Medicare; or via enrolment in the Medicaid programme for the poor. However, figures compiled by the Kaiser Family Foundation (KFF), which has deeply involved itself in collecting data on the Medicare programme, suggest that the three-quarters figure actually overstates the number of older Americans with medication insurance, since some of that number have it for only a portion of a year, but do not qualify for it during another part of the year.
As of 1 January 2006, Medicare has its own drug coverage, but it, too, offers a huge range of options - so many that a lot of senior citizens are bewildered by the choices. The government - and private companies poised to profit from the programme - have been working hard to convince older Americans to sign up for the programme, but estimates still vary widely - from 20-30 million - on how many really will. The Centers for Medicare & Medicaid Services (CMS) is guessing that 25% of those eligible will stay instead with the coverage they gained on retirement from a former employer or union, and that 15% will take it through Medicare managed care rather than a stand-alone plan.
Even if enrolment is at the low end of expectations, the new Medicare drug benefit will make a big difference to pharmaceutical. Says Anthony C. Hooper, president of the US pharmaceutical arm of Bristol-Myers Squibb: "We are approaching a quantum change in the way we do business." It is unarguable that the volume of drug sales will go up. Until now, KFF reports, "Medicare beneficiaries without drug coverage filled one-third fewer prescriptions, on average, than beneficiaries with some form of drug coverage - a difference in drug use that persists across a range of individual characteristics, including health status and income." In other words, because they cannot afford them, a good number of senior citizens are going without drugs that they need or that at least could be helpful. That should no longer be true. Add the pent-up demand among the 10 million or more without coverage to the more generous coverage available in 2006 to millions more who have had some level of coverage, and a big boost in the volume of drug sales in the US is likely.
But it is far from clear that that volume increase will be reflected in the pharmaceutical industry's bottom line.
Experience for individual companies will vary depending on the specific mix of drugs in their portfolio and the market position of each of those drugs. Likely winners and those less sure to prosper from the new programme are pinpointed in this report, as well as other reasons that the increased drug buying by Medicare beneficiaries may not be a bonanza. They include:
- the structure of the benefit itself and the power it gives insurers to demand big discounts from drugmakers;
- the narrowness or expansiveness of the formularies those plans are relying on, and the fact that those preferred drug lists are likely to be constantly in a state of flux;
- uncertainties about both how many will actually enroll in the programme and who they are in terms of their medication needs and previous coverage - in other words, how much new demand the Medicare drug benefit will actually create;
- new studies related to the programme that will pinpoint which treatments are the most effective - and thereby boost demand for some drugs and curtail it for others;
- the greater use under the programme of medication management techniques;
- the strong likelihood that details of the programme itself will be changing, probably as early as 2007.
The pharmaceutical industry as a whole must rise to the challenge or run the danger that the US will begin imposing some sort of price controls on medications. Individual firms must be agile enough to gain sales but do so at a price that still returns a profit.
It is often the case that every golden opportunity has a lurking danger, but that is true in spades for the new Medicare drug benefit.
|
