The Impressive Size of the HMO Population in the United States gives it Great Influence over the U.S. Pharmaceutical Market

Dublin (PRWEB) February 9, 2006 -- Research and Markets (http://www.researchandmarkets.com/reports/c32238) has announced the addition of Recent HMO Pharmacy Trends to their offering

The impressive size of the HMO population in the United States gives it great influence over the U.S. pharmaceutical market. HMOs' aggressive cost-control measures, fluctuating membership, and changing pharmacy benefits, along with the influence of Medicare reform, will ensure that the HMO/pharmaceutical industry relationship remains dynamic and an arena that warrants close attention.

This report from Decision Resources is based largely on data from annual HMO pharmacy surveys conducted by HealthLeaders-InterStudy. The report examines overall HMO pharmacy survey data, including total pharmaceutical spending, formulary usage and design, patient copayments, coinsurance, and the use of pharmacy benefit managers. It then focuses on pharmacy trends in the public sector (Medicare and Medicaid HMOs) and considers the future impact of the new Medicare prescription drug benefit (Medicare Part D), which is scheduled to take effect on January 1, 2006.

The size of the HMO population in the United States gives it great influence over the U.S. pharmaceutical market. HMOs have been especially aggressive in introducing cost-containment mechanisms into their pharmacy programs in both private and public sector programs. This emphasis on cost control shows no signs of abating in the near future. Indeed, a recent slowdown in the annual growth rate of HMO pharmacy spending suggests that cost-containment measures have been at least somewhat effective, an achievement that will encourage the continuation of this strategy.

HMOs are generally successful at enforcing their formulary restrictions, although formulary adherence has declined slightly in recent years. Formulary drugs' share of commercial HMOs' total pharmaceutical expenditures declined from 89.5% in 2000 to 75.1% in 2003, then recovered to 81.3% in 2004.

Most commercial HMO members who have a pharmacy benefit are in two- or three-tier formularies. In 2004, 83% of commercial HMOs had at least some of their members in two-tier formularies and 95% made use of three-tier formularies for at least some members. The use of four- or five-tier formularies for at least some members increased from 6% of commercial HMOs in 2003 to 12% in 2004.

The highest mean copayment for preferred brands rose from $31.38 in 2003 to $47.18 in 2004, an increase of 50%. The highest mean copayment for nonpreferred brands grew by 42%, from $50.87 in 2003 to $72.27 in 2004. Such aggressive increases present HMO members with an unambiguous choice between greater use of generics and increased out-of-pocket costs.

The introduction of the new Medicare prescription drug benefit on January 1, 2006, will have a major impact on Medicaid pharmacy provision. Dual eligible beneficiaries will receive their prescription drug coverage under Medicare rather than Medicaid. This development will substantially reduce the states' pharmaceutical spending, but also their bargaining power with drug manufacturers. As a result, 72% of states expect to receive reduced manufacturer rebates. To compensate, states might form multistate purchasing pools to increase their negotiating strength with pharmaceutical companies.

In 1999, 84% of Medicare HMO enrollees had access to generic and branded drug coverage, but only 25% of enrollees had such coverage in January-February 2004. The new Medicare prescription drug benefit, scheduled to take effect on January 1, 2006, is intended to broaden access to drug coverage in the Medicare population. This benefit will be available through Medicare HMOs, but the Centers for Medicare and Medicaid Services (CMS) expects only a minority of Medicare beneficiaries to choose this option.

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Laura Wood

Senior Manager

Research and Markets

Fax: +353 1 4100 980

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