PHARMA/POLICY: Part D Sponsors Brace for Intense Competition for Seniors

And you thought that Medicare Part D was a big giveaway to the drug companies and PBMs…. 

Well this article in AISHealth.com’s Managed Care Week suggests that Part D sponsors are gearing up for intense price competition to recruit seniors and that the PDPs (participating drug plans) who will do best are those health plans that understand how to take risk.

That’s a little odd as my understanding of the PDPs’ role in part D for the first couple of years was that if they lost money the government would make up the shortfall. Of course if that’s not the case and they do lose money we could see a repeat of the stampede out of Managed Medicare of the late 1990s –not something the Administration would like to see given how confusing the Part D benefit is in the first place. To be fair I can’t find any references to who’s really at risk, and whether losses by plans will be covered if participants drug costs exceed their premium income.

If anyone does understand this, please add your wisdom into the comments! Here’s the official CMS site.

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  1. I’m Lin from over at http://www.SignalHealth.com.
    There are two government funded backups for the MMA plans, which are already being reimbursed substantially higher than traditional Medicare, not counting the pharmaceutical coverage. One, if a plans’ costs exceed their bid by 3%, CMS will apply a formula and increase their reimbursement. The problem with this is that a MA or MDP plan can submit a low bid, capture market share, and have their extra expenses covered by the government safety net.
    The second provision is a $10 billion slush fund the government can use at its discretion (seven year window)to “bribe” companies into offering a plan if there is not one in any given region.
    At least, that’s what I remember. Basically a subsidy, reinsurance, and bribary.
    I also believe Parts A and B finances are combined actuarily, so that part B premium increases are at least partly used to cover higher pharmaceutical costs.