With rebate contracting season now well underway, we thought it might be a good time to return to an issue that we’ve discussed recently with a number of industry participants, including new pharmaceutical manufacturers bringing products to the market for the first time.

For many pharma companies waiting for FDA approval of their first NDA, the months leading up to agency approval are filled with a variety of activities ranging from investor meetings, pricing and reimbursement issues, manufacturing planning, and sales and marketing strategy, to name a few. 

Not to be ignored, however, is a company’s approach to managed markets and payer relationships.  As most industry participants are well aware, developing an effective managed care strategy for obtaining formulary access - and therefore product reimbursement – from health plans, commercial insurers and government funded health care programs is a critical component of any comprehensive commercialization strategy.

One strategic prong that many new manufacturers consider is contracting with Medicare Part D plans.  With total enrollment in drug plans covered under Part D (Part D Plans and Medicare Advantage) approaching 40 million lives according to CMS’ latest figures from June 2014, the Part D market constitutes a significant revenue opportunity. 

But without proper advance planning, new manufacturers could be shut out of the Part D market and excluded from Part D formularies for an extended period of time, damaging company prospects for product adoption and leading to the loss of significant revenue and potential market competitiveness.  

To ensure that a product can obtain formulary placement with Part D plans, CMS regulations require drug manufacturers to have a Medicare Coverage Gap Discount Program Agreement in place with CMS by January 30th in the year prior to formulary placement.  

In other words, if a new manufacturer with a newly approved product, or an existing manufacturer seeking to list its products on Part D formularies for the first time, did not have a Medicare Coverage Gap Discount Agreement in place by January 30, 2014, those products would be excluded from coverage under Part D beginning January 1, 2015, and potentially through 2016.  

So, for start up pharma companies or other first time entrants expecting to make Medicare Part D formulary access and reimbursement a component of their managed markets strategy in the next couple of years, please be advised to explore the details surrounding Medicare’s Coverage Gap Discount Program.  For those who do not, exclusion from Medicare Part D has the potential to significantly impair go-to-market strategies and projected product revenues. 

However, if pharma companies have missed the January 30, 2014 deadline, certain arrangements may be available to ensure that products can obtain eligibility for Part D coverage in 2014 and 2015 while arrangements are made to contract with CMS for the 2016 plan year.

Additional information can be obtained by contacting us via the contact form.