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Q: Financial Analyses of Medicare Drug Plan Companies ( Answered 5 out of 5 stars,   1 Comment )
Subject: Financial Analyses of Medicare Drug Plan Companies
Category: Health > Medicine
Asked by: healthresultsgroup-ga
List Price: $200.00
Posted: 29 May 2006 09:13 PDT
Expires: 28 Jun 2006 09:13 PDT
Question ID: 733361
Hi.  I am looking links to presentations, briefings, and other
analyses on the financial implications of the new Medicare
prescription drug benefit (aka, Medicare Part D) on the largest
publicly traded, US-based companies offering Medicare drug plans.

In Medicare Part D, there are two kinds of plans, typically offered by
large health insurers or pharmacy benefit management (PBM) companies:
Prescription Drug Plans (PDPs) and Medicare Advantage prescription
drug plans (MA-PDs).  The largest publicly traded companies
participating in Part D (either as a PDP or MA-PD or both) are
UnitedHealth Group, Humana, CIGNA, Caremark, Aetna, WellPoint, and
Coventry Health Care.

Regarding these companies, I am particularly interested in
presentations, briefings, reports, or analyses of (1) financial
statements since the launch of Medicare Part D in January 2006, (2)
drug plan business strategies and operational efficiencies, and (3)
short and long-term impact of Part D on company finances and market

This could include (1) presentations or analyses by Wall Street firms
and investment firms; (2) briefing by health plans and other
organizations with Medicare drug plans (e.g., conference call
briefings provided by the companies above to Wall Street analysts as
part of release of their quarterly or annual financial statements
[10-K or 10-Q); and (3) public presentations (often in PPT or PDF
format) by actuaries, pharmacy benefit consultants, or academics.

Happy to answer any questions.  Thanks.

Clarification of Question by healthresultsgroup-ga on 29 May 2006 14:14 PDT
Please note that the comment provided below by klbr-ga is unrelated to
my question.  I assume it was posted here my mistake and is intended
for another question.
Subject: Re: Financial Analyses of Medicare Drug Plan Companies
Answered By: bobbie7-ga on 29 May 2006 18:54 PDT
Rated:5 out of 5 stars
Hello again Healthresultsgroup,

The results of my research are as follows:

Wall Street Report
The high points of recent health plan conference calls

Read the complete article here:


Some Insurers Report Temporary Losses in Medicare Part D

 ?Publicly traded managed care organizations (MCOs) active in the
Medicare prescription drug benefit program generally reported that
higher costs arising from Part D products' introduction helped to
drive down net income in the first quarter of 2006.?

Information provided for the following companies:

WellPoint, Inc.
UnitedHealth Group 

Read the complete article here:
Reprinted from the May 11, 2006, issue of MEDICARE ADVANTAGE NEWS,
biweekly news and analysis on the Medicare (and Medicaid) managed care


Part D Progress Report
PCMA Third Annual
Specialty Pharmacy Symposium
April 25, 2006
The information contained in this presentation is current as of April 2006.
Downloads PDF here: (29 pages)


Drug plans boost HMO revenue
New Medicare 'Part D' program helps fuel 32 percent rise for quarter
Sacramento Business Journal
May 21, 2006

"Part D has been a tremendous boost to certain health plans," said
Albert Lowey-Ball, a Sacramento healthcare consultant. "And this will
be an ongoing enhancement to their bottom lines."

Public companies boom 

UnitedHealth Group 

?UnitedHealth Group (NYSE: UNH), the giant Minnesota-based company
that bought PacifiCare Health Systems Inc. last year, added 5 cents a
share to its first-quarter earnings, beating the company's own
Its start-up costs for Part D totaled $80 million, a drop in the
bucket compared to the $6 billion UnitedHealth expects to receive from
the program this year.

UnitedHealth signed up 3.3 million subscribers for its stand-alone
Part D plan by the end of the first quarter. Another 1.2 million got
it through the company's HMO plan. Far more were expected by this
week's deadline, and others should trickle in over the year, despite a
penalty for signing up late.
"We expect to reach 5.5 (million) to perhaps 6 million people in the
overall program by the end of the year," said UnitedHealth spokesman
Tyler Mason. "For the senior markets, the growth potential before us
is truly exciting."

WellPoint Inc.

?WellPoint Inc. ?signed up 1.3 million Part D members in the first
quarter and expects to have as many as 2 million by year-end. We
believe Part D presents a revenue opportunity of $1.4 billion," said
company spokeswoman Kellie Bernell.
Operating revenue at WellPoint's pharmacy unit increased by $103.3
million in the first quarter over the same period last year, primarily
due to increased prescription volume and better drug contracts,
company financial statements say. The company reported almost 110
million prescriptions, an increase of more than 26 million -- 31
percent -- primarily as a result of Part D.?

Health Net Inc

?Increased enrollment in the Medicare drug program helped Health Net
Inc. more than triple its first-quarter profits.  Health Net earned
$76.6 million, or 65 cents a share, compared to $21.3 million, or 19
cents a share, for first-quarter 2005. The earnings topped analyst
estimates of 62 cents a share."

?? added about 255,000 Medicare Part D members in the first quarter,
and Medicare managed-care premiums increased by $187.7 million -- 48.3
percent -- over the same period a year ago. The increase is primarily
from Part D premiums and a retroactive rate adjustment of $25.1
million in five states, including California. ? We may expand our
participation in Part D.?


The Emerging Market in Medicare Part D and Sponsor Compliance Strategies  
A Presentation to the Pharmaceutical Compliance Congress 
November 8, 2005


Medicare Drug Program
Three Companies Dominate Medicare Drug Plans


WellPoint Reports Strong First Quarter 2006 Results 

?On a comparable basis, first quarter 2006 operating revenue increased
by $1.3 billion, or 10.4 percent, versus $12.3 billion in the prior
year period. The increase resulted primarily from disciplined pricing
across all business lines, the addition of the New York state
prescription drug contract and new enrollment in the Company's
Medicare Part D products.?


?First quarter 2006 operating gain increased by $18.6 million, or 19.6
percent on a comparable basis, from $95.0 million in the prior year
quarter. The increase resulted primarily from increased prescription
volume and improved contracting at the Company's pharmacy benefit
management ("PBM") operation. Prescription volume reached almost 110
million scripts during the first quarter 2006, a year-over-year
increase of more than 26 million scripts, or 31.2 percent, due
primarily to the impact of Medicare Part D.?

FORM 10-Q 
For the Quarterly Period ended March 31, 2006 


?Certain factors may have a material adverse effect on our business,
financial condition and results of operations and you should carefully
consider them. It is not possible to predict or identify all such
factors. For discussion of our potential risks or uncertainties, refer
to Part I, Item 1A, Risk Factors, included in our 2005 Annual Report
on Form 10-K as filed with the U.S. Securities and Exchange
Commission. Below is an additional risk factor that should be

?We are a contractor with the Centers for Medicare & Medicaid Services
to provide Medicare Part D Prescription Drug benefits.?

?Effective January 1, 2006, we began offering Medicare approved
prescription drug plans to Medicare eligible individuals in all
regions of the country. In addition, we are also providing various
administrative services for other entities offering prescription drug
plans to their employees and retirees through our pharmacy benefit
management and other affiliated companies. We are also the United
States default plan for point of service facilitated enrollment, as
defined by the Centers for Medicare & Medicaid Services.While we
believe we have adequately reviewed our assumptions regarding this
complex and recent program, the actual results may be different than
our assumptions.?


?Risks associated with the Medicare prescription drug plans include
potential uncollectability of receivables resulting from processing
facilitated enrollment, inadequacy of underwriting assumptions,
inability to receive and process information, increased pharmaceutical
costs, and the underlying seasonality of this business.?

WellPoint Company Financials


CIGNA Reports First Quarter 2006 Results  

Earnings Reflect Solid Results in Each of the Health and Related Benefits

Losses in the Medicare Part D program

?Segment earnings reflect strong medical management, solid operating
expense execution, lower than expected guaranteed cost results, and
losses in the Medicare Part D program.?

Losses in the Medicare Part D program

NA Corporation
Quarterly Statistical Supplement
March 31, 2006

Cigna Corporation Company  Financial

Coventry Health Care

 ?Coventry for its part reported net income of $121 mln, or 74 cents
per share, compared to $112.7 mln, or 73 cents in the prior year.
Operating revenues reached a record $1.94 bln. The quarter included a
GAAP loss of $0.06 per share related to Medicare Part D. The company
commented that the prescription drug plan was successfully implemented
in the first quarter, resulting in 529,000 new Coventry members. Total
health plan membership was 2.55 mln, up 102,000 members, or 4.2% over
the prior year. The company stated renewal increases were in excess of
8% and that its medical cost trend expectation is unchanged at 8%.?

MSN Money Briefing

Operating results for the quarter ended March 31, 2006. 

?Stand-Alone Medicare Part D(1). As of March 31, 2006, Coventry had
enrolled 529,000 members in Medicare Part D. Total revenue for the
quarter was $180.6 million, including $51.0 million of CMS
risk-sharing revenue and ($14.4) million of revenue ceded to insurance
company distribution partners. Premium yield, excluding CMS
risk-sharing revenue and ceded revenue, was $100.36 PMPM. Total MLR
was 98.0% for the quarter. Medicare Part D cash flow was very strong
for the quarter as a result of the initial building of medical
liabilities and receipt of reinsurance payments from CMS.?

Medicare Part D membership of 600,000 to 800,000 

?Risk revenues of $6.8 billion to $7.0 billion, including $500.0
million to $700.0 million of stand-alone Medicare Part D revenue?

Coventry Health Care
Company Financials

Humana Inc

Humana's first-quarter profit fell 22 percent and the health insurer
raised its earnings forecast after gaining customers from the U.S.
Medicare drug benefit.

Read the complete article here:

Form 10-K for HUMANA INC 
Annual Report

RESULTS OF OPERATIONS ?We expect the Medicare line of business to
continue to grow during 2006 from continued geographic expansions of
our Medicare Advantage offerings and our new PDP plans. As of February
1, 2006, Medicare Advantage membership totaled more than 700,000
members and PDP membership totaled approximately 1.7 million members.
We expect 2006 Medicare premium revenues to more than double from 2005
from sales of our Medicare Advantage and PDP plans and for selling,
general and administrative expenses to continue to increase in 2006.
However, while our creation of the infrastructure related to our
Medicare expansion will be nearly completed by the end of the first
quarter of 2006, we do not believe the resulting expected revenues and
membership will peak until Medicare enrollment is completed on July 1,
2006. We believe this will result in lower earnings and margins in the
first half of 2006 relative to the second half of 2006, when we
believe our consolidated revenues will reach the level contemplated by
our selling, general, and administrative expenses.?

?Our new Medicare stand-alone PDP products added 1,959,000 members
during the first quarter of 2006. Likewise, Medicare premium revenues
have increased 127.4% to $2.2 billion for the first quarter of 2006
from $1.0 billion in the first quarter of 2005. We expect the Medicare
line of business to continue to grow primarily during the enrollment
periods which generally wind up by the end of the second quarter of
2006. We expect full year 2006 Medicare premium revenues to more than
double relative to 2005 as a result of sales of our Medicare Advantage
and PDP products.?


?Earnings in our Government segment are expected to be relatively
lower during the first half of 2006 and considerably higher during the
latter half of the year due to the combination of 1) the earnings
pattern anticipated for our new PDP business and 2) selling, general
and administrative expenses, or SG&A expenses, for our Medicare
Advantage and PDP business. Our earnings pattern is significantly
impacted by the amount of prescription drug costs incurred in the
first half relative to the latter half of the year due to the PDP
benefit designs. These benefit designs result in coverage that varies
as a member's cumulative out-of-pocket costs pass through successive
stages of a member's plan period as specified under the CMS "defined
standard" plan. These plan designs generally result in us sharing a
greater portion of the responsibility for total pharmacy costs in the
early stages of a member's plan period and less in the later stages
for the plans which comprise the majority of our membership, resulting
in a declining medical expense ratio, or MER, for the PDP products as
the year progresses.
With respect to Medicare SG&A expenses, we anticipate spending
significantly more on sales and marketing costs in the first half of
the year relative to the latter half, as the 2006 enrollment period
draws to a close mid-year. Additionally, during the latter half of the
year, we anticipate that our revenues will reach the level ultimately
contemplated by our infrastructure and service capacity build out that
began in late 2005 and continued through the end of the first quarter
of 2006.!?

?The Government segment's MER for the 2006 quarter was 85.6%, a 50
basis point increase from the 2005 quarter rate of 85.1%. The increase
was primarily attributable to the establishment of the stand-alone
PDPs in January 2006 with an MER of 96.4%. The MER for our PDP
business was impacted by the amount of prescription drug costs
recognized as incurred relative to premium revenue due to PDP benefit
designs. These benefit designs result in us sharing a greater portion
of the responsibility for total pharmacy costs in the early stages of
a member's plan period and less in the later stages for the plans
which comprise the majority of our membership, resulting in a
declining MER for the PDP products as the year progresses. We expect a
MER for the full year 2006 of approximately 85.0% to 88.0% for
aggregate stand-alone PDP plans, with MER improvement in each
sequential quarter throughout the year. Variables that may impact the
quarterly MER for stand-alone PDPs include 1) the timing of member
enrollment, 2) the PDP offering chosen by the member, and 3) the rate
at which the members in our standard plan offering utilize their

HUMANA INC Company Financials


Results of Operations and Financial Condition

?Gross margin as a percent of sales was 6%, approximately 25 basis
points higher than last year. Selling, general and administrative
expenses were $129.6 million, an increase of 13% over the first
quarter of 2005. The majority of the increase is related to increased
share-based compensation expense resulting from the adoption of FAS
123R and costs associated with the Medicare Part D program.?

Financial Guidance 

?There are a number of factors that may affect projected 2006 results,
including the timing of generic launches, the number of initial
suppliers of each new generic drug, and certain aspects of the
Medicare Part D benefit.?

Form 10-Q for CAREMARK RX INC 
Quarterly Report
March 31, 2006 
Critical Accounting Policies and Estimates 

?In addition to the critical accounting policies and estimates
discussed in our Annual Report on Form 10-K, the following critical
accounting estimates were made in the preparation of our financials
statements for the three month period ending March 31, 2006:

Medicare Part D. 

As described elsewhere in this Quarterly Report on Form 10-Q, we began
participating in the federal government's Medicare Part D program as a
Prescription Drug Plan ("PDP") on January 1, 2006. We have recorded
estimates of various assets and liabilities arising from our
participation in this program based on information in our claims
management and enrollment systems. Significant estimates arising from
our participation in the Medicare Part D program include: (i)
estimates of low-income cost subsidy and reinsurance amounts
ultimately payable to or receivable from the Centers for Medicare and
Medicaid Services ("CMS") based on a detailed claims reconciliation
that will occur in 2007 and (ii) estimates of amounts payable to or
receivable from other PDPs for claims costs incurred during the
startup phase of the program where widespread retroactive enrollment
changes were communicated by CMS after such claims had been incurred."

"We have also recorded an estimate of amounts receivable from CMS
under a risk-sharing feature of the CMS program design, referred to as
the risk corridor, under a method set forth by the SEC in a meeting
held with the four largest U.S. independent registered public
accounting firms in March 2006. This method of recording the risk
corridor hypothetically presumes the plan ended on March 31, 2006, for
the purpose of making the risk corridor calculation by analogy to EITF
93-6, Accounting for Multiple-Year Retrospectively Rated Contracts by
Ceding and Assuming Enterprises. Because of the unique nature of the
Part D plan design, this accounting method is expected to result in
our profitability under the plan increasing during the second half of
the year. Actual amounts of Medicare Part D-related assets and
liabilities could differ materially from amounts recorded."

Factors That May Affect Future Results 

"Our future operating results and financial condition are dependent on
our ability to market our services profitably, which is, in turn,
heavily dependent on our ability to successfully negotiate discounts
for pharmaceutical purchases at various points in our supply chain and
to successfully increase market share and manage expense growth
relative to revenue growth. Our future operating results and financial
condition may be affected by a number of additional factors,
including, but not limited to: (i) identification of, and competition
for, growth and expansion opportunities; (ii) our ability to attract
new customers and retain existing customers; (iii) declining
reimbursement levels for, or increases in the costs of, products
dispensed; (iv) the timing and launch of generic pharmaceutical
products into the marketplace; (v) exposure to liabilities in excess
of our insurance; (vi) compliance with, or changes in, government
regulation and legislation, including, but not limited to, pharmacy
licensing requirements and healthcare reform legislation; (vii) our
participation in the federal government's Medicare Part D program;?

CAREMARK RX INC  Company Financials


Radio Script about Medicare's Prescription Drug Plan Part D Provided
by UnitedHealth Group

UnitedHealth Group reports record first quarter results driven by
strong growth in each of its businesses.

Earnings Release

UnitedHealth Group Highlights

"UnitedHealth Group revenues, earnings from operations and operating
margins were significantly affected by the acquisition of PacifiCare
and the commencement of Medicare Part D."

"First quarter net earnings per share of $0.63 and Part D normalized
earnings per share of $0.68 increased 15 percent and 24 percent
respectively from $0.55 in the first quarter of 2005, and improved 1
cent and 6 cents respectively from the fourth quarter 2005 result of
$0.62 per share. These first quarter results compare with the
Company?s previous outlook for net earnings of $0.58 per share and
Part D normalized earnings of $0.65 per share."

"First quarter consolidated net earnings increased to $899 million, up
$156 million or 21 percent year-over year. First quarter consolidated
Part D normalized net earnings increased to $967 million, up $224
million or 30 percent year-over-year."

"Cash flows from operations, adjusted to reflect the receipt of three
monthly Medicare payments from the Centers for Medicare & Medicaid
Services (CMS) in the first quarter of 2006, were $1.55 billion for
the first quarter. Cash flows from operations represented 173 percent
of first quarter net earnings, despite bearing $85 million in net
operating cash outflows related to the Part D program. Reported cash
flows from operations of $2.9 billion included a fourth monthly CMS
payment received at the end of March 2006."

Download full text of PDF here:
UnitedHealth Group Inc. Company Financials

Form 10-Q:  Financial Statements

Form 8-K Related to Earnings Release 
Quarterly Financial Performance

Omnicare Files Lawsuit Against UnitedHealth Group and.. 
Thursday May 18, 2006 (09:50 AM)


For the quarterly period ended March 31, 2006
Aetna Inc.

Accounting for the Medicare Part D Prescription Drug Program (?PDP?)

?On December 8, 2003, the Medicare Prescription Drug, Improvement and
Modernization Act of 2003 (the ?Act?) was signed into law. The Act
expanded Medicare, primarily by adding a voluntary prescription drug
benefit for Medicare eligible individuals beginning in 2006. We were
selected by the Centers for Medicare and Medicaid Services (?CMS?) to
be a national provider of PDP in all 50 states to both individuals and
employer groups beginning in 2006. Under these annual contracts, CMS
pays us a portion of the premium, a portion of, or a capitated fee
for, catastrophic drug costs, a portion of the health care costs for
low-income Medicare beneficiaries and provides a risk sharing
arrangement to limit our exposure to unexpected expenses.
Premiums received from, or on behalf of, members or CMS and capitated
fees are recognized as premium revenue ratably over the contract
period. Costs for covered prescription drugs are expensed as incurred.
Low-income costs (deductible, coinsurance, etc.) and the catastrophic
drug costs paid in advance by CMS will be recorded as a liability and
will offset medical costs when incurred. For individual PDP coverage,
the risk sharing arrangement provides a risk corridor whereby the
target amount (what we received in premiums from members and CMS based
on our annual bid amount less administrative expenses) is compared to
our actual drug costs incurred during the contract year. Based on the
risk corridor provision, an estimated risk sharing receivable or
payable is recorded on a quarterly basis as an adjustment to premium
revenue, based on PDP activity to date. A reconciliation of the final
risk sharing, low-income subsidy, and catastrophic amounts is
performed at the end of the contract year.?

Current Webcasts & Presentations

Company Financials


Special Report
February 2006
Expectations Shrinking for Medicare Part D Enrollment

I hope the information provided is helpful!

Best regards,
healthresultsgroup-ga rated this answer:5 out of 5 stars and gave an additional tip of: $50.00
Great!  Very helpful.  Thanks.

Subject: Re: Financial Analyses of Medicare Drug Plan Companies
From: bobbie7-ga on 30 May 2006 06:33 PDT
Dear Healthresultsgroup,

Thanks again for the five stars and very generous tip!


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