Managed Care Matters

Big pharma has done well so far, very well. Helped by broad formularies, the addition of millions of people to their customer base, and myriad Part D plan sponsors, many with minimal negotiating power, pharma manufacturers have seen profits jump, driven in large part by price increases (as well as more people with drug "insurance").

Lots of people have enrolled, albeit after a careful analysis of cost-benefit, an analysis that will inevitably lead to financial problems.

There are as many as 90 different Part D plan sponsors, ranging from UnitedHealthcare to Humana to Coventry (Advantra Rx). The two largest, UHC and Humana, have 45% of the stand-alone Part D market .Expect the Coventrys to disappear from many markets over the next two years, as their lack of market share, buying power, and traction in the market forces them to either sell out or get crushed by the big players.

Sources also indicate that there are still problems with the dual-eligibles, those folks that are covered by Medicare because they're old enough and Medicaid for financial or physical reasons. The issue appears to be these dualies are enrolled in Part D as well as other plan(s), making it hard to sort out who is liable for what.

Meanwhile, Part D sponsors are not exactly rolling in profits, and probably won't be. Humana and UHC are both reporting loss ratios in the high nineties, consistent with their competition.