Bloomberg News

Aetna Teams With CVS to Sell Medicare Prescription Drug Plan

October 03, 2011

(Updates with closing shares in the seventh paragraph.)

Oct. 3 (Bloomberg) -- Aetna Inc., the third-largest U.S. health insurer, and CVS Caremark Corp. will offer a Medicare prescription drug plan in the first selling season since baby boomers began to turn 65.

Medicare recipients can sign up for the cobranded plan on Oct. 15 in the 43 states with CVS stores. The program will cost $26 a month, offer a $3 copayment for prescriptions of preferred drugs and carry no deductible for generics, Aetna, based in Hartford, Connecticut, said today in a statement.

The partnership mirrors an alliance between Wal-Mart Stores Inc., the world’s largest retailer, and Medicare managed-care provider Humana Inc. that was introduced last October. It will compete against the Wal-Mart product selling for $15.10 a month and Coventry Inc.’s plan with a zero co-payment for most generics, among others with features aimed at attracting the swelling senior population.

“Everyone will be much more aggressive this year and there potentially could be a lot of movement between plans,” said Dave Shove, an analyst with Bank of Montreal in New York. Providing Medicare drugs “is a commoditized generic, over-the- counter world now and it may be a better fit for the Wal-Marts of the world than for the insurers.”

Turning 65

About 3.3 million baby boomers turning 65 this year are signing up with the U.S. health plan for the elderly and disabled. Aetna had more than 430,000 members in its Medicare drug plans at the end of the second quarter, a decrease from 608,000 at the end of 2010, Bloomberg data show.

Aetna wasn’t allowed to market Medicare plans during last year’s selling season because of a dispute over drug coverage with the U.S. Centers for Medicare and Medicaid Services, the Baltimore-based agency that administers the two programs. Medicaid is the U.S. health plan for low-income Americans.

The insurer fell $2.01, or 5.5 percent, to $34.33 at 4:15 p.m. in New York Stock Exchange composite trading. CVS, based in Woonsocket, Rhode Island, declined 62 cents to $32.97.

Aetna’s co-branded product also will be competing against other CVS prescription drug offerings. CVS is the third-largest provider of Medicare Part D drug plans following UnitedHealth Group Inc., the largest, and Humana, which is No. 2, according to the Henry J. Kaiser Family Foundation in Menlo Park, California. Aetna has other plans in states where CVS doesn’t have stores.

Battling Back

“Medicare is a big priority for Aetna on many fronts beyond the Part D plans,” John Chomeau, head of Aetna’s Medicare operations, said in a telephone interview.

Aetna offers managed-care plans under the Medicare Advantage program and focuses on populations like Medicare recipients who suffer multiple chronic conditions. The drug plan with CVS offers one-on-one counseling for participants to discuss how to follow prescriptions and whether there is a chance of harmful drug interactions.

For most Medicare beneficiaries, the monthly premium cost ranks first in a choice of plan, William Fleming, vice president of Humana’s pharmacy division, said in a telephone interview. Next comes brand identification, the size of the co-payment and which drugs are covered.

The plan with Humana and Wal-Mart, which offers a $1 co-pay on most generic drugs this year, has crossed the 1 million mark on enrollment, Fleming said.

Coventry is counting on an evaluation tool from Medicare that compares plans to help its marketing, said Nancy Cocozza, the Bethesda, Maryland-based company’s vice president in charge of Medicare managed care and marketing.

Coventry entered the market with a $25 a month plan that covers most generic prescriptions with no co-pay and a zero deductible, the first time since Part D began in 2006 for co- pays that low, Bank of Montreal’s Shove said.

--Editors: Bruce Rule, Andrew Pollack

To contact the reporter on this story: Pat Wechsler in New York at pwechsler@bloomberg.net

To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net


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