by Tom Norton
If you are an Rx regional sales director or a product marketing manager, I have a somewhat provocative question for you: How exactly are you planning your 2014 Medicaid strategy?
I ask this because as you look over the Medicaid landscape for next year, there is more than a little uncertainty at hand. With Medicaid about to become the basic health care delivery mechanism of the 2010 Affordable Care Act, otherwise known as Obamacare, you would think this might be a simple matter of reviewing the new federal law for guidance. But if that’s the approach you are taking for your 2014 Medicaid planning, let me be the first to tell you, you are going down the wrong path.
Obamacare is premised on the idea that federal government and state governments will cooperate in the delivery of healthcare to an estimated 40 million new Medicaid patients starting on January 1, 2014, with sign up for these new services scheduled to begin on October 1, 2013.
That is all well and good, so far as a reading of the law goes. But when you begin to dig into how the states are actually implementing Obamacare, you soon realize the launch of this new law is not going as smoothly as the framers of the measure had hoped.
As of this writing, and according to the Kaiser Family Foundation, there are 26 states that have said absolutely “no” to state exchanges envisioned by Obamacare and are defaulting to a federal exchange; 7 that have said “no” to parts of Obamacare and have negotiated “Partnership Exchanges” with HHS; and only 18 that have declared they will establish state-based exchanges, and cooperate with new law.
If Kaiser is correct in these assessments and given the current US population of about 313 million, this means that approximately 56% (177 million) of Americans live in states that have said effectively said “no” to Obamacare; 10% (32 million) live in states that have rejected parts of Obamacare; and only 33% (104 million) live in states that will have access to Obamacare’s state exchange offerings.
If these statistics startle you, they should. Thinking about your 2014 “numbers,” how will you manage this situation nationally? In particular, what will happen in those states that are “defaulting to the federal exchange?” Here are two key examples you may want to focus on for your answers.
Florida’s current population is about 19 million. Right now, 3.3 million Floridians (approx. 17% of the state) are enrolled in FL Medicaid. It’s estimated that another 1.3 million Medicaid recipients will be added to Florida’s Medicaid rolls once Obamacare is implemented. This creates a potential situation in which nearly 25% of Florida’s total population is scheduled to be receiving Medicaid Rx care after January 1. Any Rx sales manager or product marketer who is responsible for the State of Florida has to take notice of these numbers.
So how is the implementation of Obamacare going in Florida?
This past winter, Florida’s governor, Rick Scott, a Republican, publicly broke ranks with his Republican Governor Association colleagues, and announced that he was seeking a “deal” for Florida that would accept the essence of Obamacare, i.e., the federal financial support, while adopting a 100% federal provision of insurance services, all of which sunset and be reviewed after three years.
Seemed like a done deal. But when Gov. Scott took his concept to the Florida legislature, he encountered stubborn resistance from the Florida House of Representatives. In the end, the governor gave up and the entire Obamacare package was shelved. Florida, it appears, will default to whatever the “federal exchange” may turn out to be.
So, how as a sales & marketing executive with responsibility for Florida do you plan your sales and/or marketing strategy in this huge, heavily Medicaid impacted state? What drugs will be covered in the “federal exchange?” Will only one drug per category be covered, per the earlier recommendations of the Essential Health Benefits finding put out by HHS? How will you get your drug covered for Florida Medicaid in 2014? How will you get reimbursed? From the state or the feds? And at what rate? Right now, nobody knows the answers to any of these questions.
Let’s look at another important example that is being impacted by Obamacare: Texas.
Texas is now the number two most populous state in the nation with an estimated 2012 population of over 26 million. It’s also one of the fastest growing states in the nation. Given all of this, I don’t think it would be an overstatement to suggest that every Rx sales and marketing director in the country wants a piece of Texas.
So let’s consider the impact of Obamacare’s implementation here. Currently, Texas Medicaid beneficiaries number approximately 5 million individuals, or about 20% of the population. An estimated 2.6 million beneficiaries could be added to the Texas Medicaid rolls under Obamacare. That would total 7.6 million people, or about 29% of the State of Texas population.
Unlike Florida, however, Texas has been a steadfast “no” in cooperating with the federal government on the implementation of Obamacare from the start. Therefore, Texas had no debate about setting up a state exchange for new Medicaid patients. Instead, like Florida, a new federal exchange is supposed to be put into operation for nearly 8 million Texans by January 1, 2014. How this will be accomplished in Austin is unclear at this time.
Again, as regional sales directors or product managers for Texas, how do you plan on “making your numbers” in this huge market for 2014?
Planning Elements for Medicaid Sales & Marketing in 2014
I could go on from here with the specifics of each “no” state, but I think you get the picture. Just Florida and Texas, alone, both among America’s most populous states, account for nearly 10% of the estimated 40 million total Medicaid expansion this new law is supposed drive come January 1, 2014. These two states by themselves stand to generate massive Rx sales that will impact anyone’s national sales or product marketing plan. However, both are essentially blank pages today in terms of how your products will be included on a formulary, what the reimbursement rates will be, who will pay you for their dispensing, and all the rest that goes into making money in a state Medicaid Rx program.
And the same is true for the other 24 “no” states. Nobody has answers. Overall, you are essentially in the dark as to how to plan for about 22 million new beneficiaries with drug coverage.
So how do you to manage your sales and marketing for Medicaid Rx patients in this 2014 environment?
First, you are going to need much better intelligence on what every state has decided to do with its Medicaid Rx program than you have ever had before. Given 40 million new potential, paying customers, you would be foolish not to demand the best, most complete information available on each state. If you don’t have that deep info, frankly, how can you establish sales and marketing goals for 2014?
Second, you will need to figure out how each state will actually administer Obamacare. Will it be by default to the federal exchange; the negotiated “partnership exchanges;” or through separate state exchanges? And depending on which policy the state has chosen to follow, what will that mean to you? Every state will do it differently based on their medical culture, the state’s finances, and the level of cooperation medical providers offer in each state. Understanding all of these factors will be imperative.
Third, I would suggest this situation is anything but static (some states may quickly walk away from Obamacare after it starts; others may decide to join; still more could come up with entirely unexpected solutions for their populations). You will want onsite staff in many of the major state capitols just to keep track of all of this. That could be expensive, but how else are you going to stay on top of all of these developments?
In short, sales and marketing execs are going to have to think way outside of the box in 2014 if they believe their Rx company will enjoy the financial benefits of Obamacare’s new Rx coverage. And this is certainly not to say that the prospects for monetary gain don’t exist. They clearly do, but only if you can figure out how to convert on this Obamacare opportunity in each state.
All of this said, I believe this particular reimbursement opportunity will be unlike any other the US drug industry has ever faced. The reimbursement uncertainly, intrusive politics, and the shear market chaos that is likely to result will be challenging. But it’s also equally clear that if you stand around, waiting to see “how things develop” under Obamacare, you run the risk of substantial Rx sales and marketing losses for 2014, and beyond.
The choice is clear. You have to engage, come what may. So, what’s your Medicaid Sales and Marketing plan look like for 2014?
Tom Norton is principal at NHD Smart Communications. He can be reached at firstname.lastname@example.org