Medicare D: Early windfall, but what’s next?
By Bruce Buckley, Special to GMDC
Since the beginning of the year, pharmacy retailers have been reaping an unexpected windfall.
It’s the result of a big jump in selected health and beauty care sales, and it’s being driven by seniors who have more cash in their wallets now that a good portion of their prescription medicine costs are being covered by the Medicare Part D benefit.
Their savings are substantial. The Centers for Medicare and Medicaid Services estimate that the average Part D enrollee will keep about $1,100 more a year as a result of the new benefit. Part of that bonus is being plowed back into HBC needs, according to Information Resources Inc. The sales lift affects both necessities and discretionary items.
From January to April 2006, IRI reports, sales from consumers 65 and older have surged in home health care kits (+36 percent), eye cosmetics (+25 percent) and adult incontinence products (+18 percent). Other double-digit gainers are moist towelettes (+14 percent) and foot care (+13 percent).
Certain food & beverage categories have also benefited, with sports drinks up 31 percent, pot pies up 12 percent and beer up 11 percent.
Drug stores have been the primary beneficiary of the sales boost, mainly due to their persistent efforts to sign up seniors to Part D plans in the months before the January 1 kickoff. Supermarkets, in contrast, have lagged in both Rx and healthcare categories in the post-Part D period, according to IRI. One reason may be that many food stores don’t have pharmacies.
While the overall sales gains are welcome, they may not last. As many as 7 million seniors are slated to get dunked in the so-called “donut hole” this year when they reach the $2,250 threshold in total prescription spending and their benefit runs out.
Many seniors have already hit this coverage gap and more will follow as the year unfolds. Only a small percentage will spend enough ($2,850 more) to reach the much more generous catastrophic coverage that awaits at the other side of the donut hole.
Discussion Questions: How can retailers and suppliers
maintain this surge in spending by seniors, particularly with benefits running
out for a substantial portion of beneficiaries? What promotional or merchandising
strategies can they employ? What can supermarkets do to protect their share
of sales from this vital population segment?