Medicare effect seen in earnings

September 1, 2006

National Reports-Some recent media reports have indicated that the Medicare drug benefit has been responsible for increased earnings for pharmaceutical companies and increased membership for health plans. That may or may not be the case, say industry watchers.

NATIONAL REPORTS-Some recent media reports have indicated that the Medicare drug benefit has been responsible for increased earnings for pharmaceutical companies and increased membership for health plans. That may or may not be the case, say industry watchers.

Robert Taketomo, PharmD, MBA, president/CEO at Ventegra in La Jolla, Calif., says the Medicare drug benefit definitely has rewarded many of the companies that service Medicare plans. "The financial incentive to provide products and services to support this program were enormous, and the benefits of the initial 'Medicare effect' are being seen in many earnings reports," Taketomo says.

It is important to recognize that the majority of beneficiaries are individuals who were previously enrolled in Medicaid, says Kimberly P. McDonough, PharmD, president of Advanced Pharmacy Concepts, a pharmacy benefits audit and consulting firm in North Kingstown, R.I. "Pharma was required by law to provide rebates to all states for Medicaid expenditures," she explains. "Many states also negotiated supplemental rebates. These rebates are not mandated under Medicare. It is my sense that, with some exceptions, the Medicare rebates are not as broad or high as those received by Medicaid. This would be beneficial to pharma."