2011 Part D Market Share: A Win for Humana and Walmart

Humana (NYSE:HUM) recently announced that it will begin reporting its operating results in four business segments: Retail, Employer Group, and Health and Well-Being Services. Humana’s Retail segment includes Medicare Advantage, Medicare Part D Prescription Drug Plans (PDPs), and HumanaOne individual health plans. See Humana Makes Financial Announcements (press release).

Next Monday, Humana will report results for the first quarter of 2011. Based on my independent analysis of CMS data on Part D plans, the company will have a lot to brag about next week for its Retail segment:

• Humana had a net gain of about 570,000 PDP enrollees, more than any other organization in 2011.

• The Humana Walmart-Preferred Rx Plan, a preferred pharmacy network PDP launched in October 2010, is now the fifth-largest PDP in the U.S.

At the time the Humana-Walmart plan was announced, I predicted that other payers would roll out preferred pharmacy networks—one of my four big trends for 2011. Guess what? United Health’s (NYSE:UNH) Prescription Solutions (now OptumRx), the biggest player in Medicare, just launched its own preferred network design. Details below.

TOP 10 PDP ORGANIZATIONS

Data on PDP enrollment are freely available for downloading on this CMS page: Medicare Advantage/Part D Contract and Enrollment Data. Email me if you would like an Excel spreadsheet with the raw data that I use in the analysis below.

Here are the top 10 PDP parent organizations as of January 14, 2011. The top 10 represent 83% of all enrollees in a stand-alone plan.

UnitedHealth remained at the top of the list in 2011, due in part to its affiliation with AARP. However, Humana made the biggest gains in net enrollment in 2011. CVS Caremark (NYSE:CVS) and Healthspring also posted large increases.

Note that Universal American (#3) is now owned by #4 CVS Caremark although they are reported separately in the 2011 CMS data. See CVS-UAM: Part D Powerhouse with a Surprising Alliance for details on the unusual partnership behind this deal.

TOP 10 PDPs

A parent organization can sponsor multiple PDPs, so let's take a look at the top 10 individual PDPs:

As you can see, the Humana Walmart Preferred Rx Plan went from nothing to become the fifth largest national PDP, with 4.5% of all PDP enrollees in 2011. Given Walmart's geographic footprint, the plan's share in certain regions will be even higher.

Some observations:

• The Humana-Walmart PDP has a very low monthly premium ($14.80) combined with an incentivized preferred network design. In other words, a Part D beneficiary’s out-of-pocket costs are lower at 4,200 preferred pharmacies (Walmart, Sam’s Club, Neighborhood Market, and Humana’s RightSource mail-order pharmacy). See Walmart-Humana: An Inevitable Surprise for Pharmacies and PBMs.

• At the time the Walmart-Humana plan was announced in October, I predicted that other payers would roll out preferred networks. So perhaps you won’t be surprised to learn that UnitedHealth’s Prescription Solutions PBM recently announced a new “Value Network” of 20,000 pharmacies. Check out the press release Prescription Solutions’ Pharmacy “Value Network” Provides Choice for Clients and Consumers While Keeping Rising Costs in Check.

• You may recall NCPA's Odd Reaction to the Walmart-Humana Part D Plan. NCPA railed on about patients "being financially coerced to get their medications at Walmart stores” and “reading the fine print.” I guess they have a lot more to complain about now that seniors have made their plan choices.

READY FOR 2014?

Humana's new reporting structure clearly positions the company for the exchanges that will be created by health care reform. See Health Reform: Impact on Drug Channels. As the Wall Street Journal noted:

"Management has said the company plans to take its retail experience selling Medicare plans to seniors and use it to market plans to other consumers as the new U.S. health overhaul expands coverage to millions more Americans in the coming years." (source)

Based on their success with the Walmart plan, it looks like they are on the right track for 2014.