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MedPanel Survey of Managed Care Medical Directors Predicts Smaller Rate of Increase in MCO Medical Costs, Reveals Cost Control Strategies for 2006

According to a MedPanel survey of managed care medical directors representing about 30 million U.S. lives, the growth rate in medical costs to MCOs will decrease marginally in 2006 as compared to 2005 as a result of continued efforts to control costs on the part of MCOs. The majority of medical directors (68%) indicated that managing specialty pharmacy costs is a high priority. Further, MCOs are expected to adopt health plan designs that shift decision-making to consumers, emphasizing increased co-pays and deductibles and consumer-driven products for 2006.

"MedPanel conducted a parallel survey in late 2004. Analyzed together, these two surveys illustrate a trend to limit choice in the area of specialty pharmacy services," said Stephen Bubb, Senior Director of Quantitative Services at MedPanel. "Further, these surveys reveal what we believe will be an enduring change in plan designs. MCOs are focusing on products that place a higher burden on the consumer to understand their needs when purchasing healthcare coverage."

Respondents named increased success and growth of biologicals and other new technologies, as well as an increase in the pharmacy trend relative to 2005, as top drivers of rising medical costs for 2006. In terms of cost components, respondents anticipated slightly higher rates of growth in hospital inpatient and pharmacy costs, while the growth rate for hospital outpatient and physician costs are expected to decline. Benefit buydowns were predicted to have a greater percentage impact on reduction of gross costs in 2006 as compared to 2005, at 7.8% and 5.9% respectively.

The survey showed that MCOs are increasingly turning to pharmacy benefit managers (PBMs) to keep those costs in check. As compared to the 2004 survey, 8% fewer MCOs offer internal specialty pharmacy services in 2006, and among those that don't, respondents reported a 22% rise in use of a PBM. About three quarters of 2006 respondents stated that they will restrict their specialty network to preferred relationships, and they reported a significant increase (12%) in requirement of pre-certification for specialty providers in 2006 as compared to 2004.

While only 31% of MCOs represented in the 2004 survey expected to offer consumer-driven products in the coming year, fully half of current respondents projected that their organizations would offer such plans in 2006.

When asked to name factors influencing cost decreases in the previous year, the majority (68%) of respondents pointed to improved trends in utilization associated with benefit design changes not related to penetration of consumer driven products. Forty percent of medical directors believed that increased penetration of consumer driven plans leading to a beneficial impact on utilization contributed to cost decreases.

MedPanel fielded the survey online in February 2006. Respondents consisted of 38 managed care medical directors from across the United States that represented diverse organization sizes, both in terms of number of lives covered and area of service (local, regional, national).

MedPanel, Inc., a global organization based in Cambridge, MA, offers a powerful online research platform providing clients greater strategic direction for investment decisions, product development, and marketing. By leveraging its proprietary methodology and vast network of medical experts, MedPanel is uniquely positioned to provide fast, accurate, unbiased market data and information to clients in the biotechnology, pharmaceutical, medical device, and financial industries.

Media Contact: Janna Guinen, Spring Communications, Office: (781) 834-7498, Email: jpglive@adelphia.net