Part D Reform Information Center
What is Part D?
Part D is the part of Medicare related to drug benefit that aids Medicare beneficiaries in paying for outpatient prescription drugs. This includes drugs purchased at retail, mail order, home infusion, and long-term care pharmacies. Under the current Centers for Medicare & Medicaid Services (CMS) regulations, plans can create networks of "preferred pharmacies" or "cost-sharing" arrangements. In theory, PBMs would negotiate lower prices in return for a higher volume of sales by having a "preferred" status. However, PBMs have been able to exploit the use of preferred networks for exclusionary and anticompetitive measures (e.g., forcing consumers to use a sponsor's own related-party pharmacy that charges higher prices). Little (if any) of the lower price negotiated is passed down on consumers, and costs ultimately increase.
Why Preferred Networks Aren't Working:
The main argument in support of preferred networks are that they reduce costs to Medicare and to patients. Yet, evidence to the contrary continues to accumulate. For example, to put this to the test, NCPA staff recently chose a common prescription drug plan, the AARP Medicare Rx Preferred drug plan, and compared the costs of four of the most-prescribed drugs. The costs of preferred, mail order, and non-preferred pharmacies were compared in nine cities across the country. The analysis found that 89% of the time preferred costs to Medicare (and ultimately taxpayers) were higher than non-preferred, and 100% of the time mail order costs exceeded non-preferred costs. This is the fifth study in the last 12 months where Medicare data has indicated that preferred pharmacies and/or mail order pharmacies are found to be more costly than non-preferred counterparts.
Preferred networks supporters argue that patients give up choice of any pharmacy in exchange for reduced prices of prescription drugs. Yet, as the data has shown, there is little if any patient benefit to these restricted networks. If there are no reduced costs, why are these plans better than traditional plans that offer patients greater choice?
Mail Order Waste:
A separate but significant issue regarding mail order pharmacies that are included in preferred networks is mail order waste. Often a lot of prescription drugs and medical equipment is erroneously sent to patients who have passed away or no longer need the products. Sometimes over $50,000 worth of mail order pharmaceuticals need to be discarded: a waste of Medicare and taxpayer money.
What Reforms are in Progress?
The CMS is currently considering a proposal that would increase the regulation of preferred networks. It would require greater cost savings for beneficiaries by requiring all price concessions from pharmacies to be reflected in the negotiating prices. It would also open up these limited networks to independent pharmacies, increasing competition and therefore increasing choice and access for patients.
If you are want to stop preferred networks from unfairly excluding independent pharmacists, take action by filing comments in support of the CMS proposal by March 7th, 2014. Instructions on how to file comments, and a sample letter, are provided by the NCPA here.
If you are tired of having to travel farther and pay more because you are forced to use certain "preferred" pharmacies, file a complaint here.
Frequently Asked Questions:
What are preferred networks?
Beginning in 2006, preferred networks have been allowed in the Medicare Part D Prescription Drug Benefit Program. When first created, they were supposed to allow pharmacies to participate in preferred networks by accepting lower reimbursements in exchange for a higher volume of patients (and a larger market share). This was intended to lower costs to Medicare and its covered patients, although this has not been true in practice.
How do preferred networks affect my independent/community pharmacy?
Preferred networks drive patients from independent/community/specialty pharmacies to their mandated pharmacies within the preferred networks, even when your pharmacy may be more convenient and specialized for them. This excludes your pharmacy from a substantial portion of business.
How do preferred networks affect me as a patient?
Preferred networks will limit your choice in which pharmacies you can use. This may mean travelling farther (in some cases 20+ miles away) and having to wait in line at big chain pharmacies (sometimes inside large stores like Walmart), even if you are elderly or disabled. You are also limited in your ability to seek out expert medication counseling face-to-face, as provided by many local community and specialty pharmacists. A group of studies have also shown that, in the case of antiretroviral drug therapy, the use of specialty pharmacies lead to increased prescription drug adherence. Yet, if the use of specialty pharmacies is restricted, it may be more difficult for patients to adhere to prescribed drug therapy and their health may be negatively impacted.
Have there been studies that show preferred pharmacies are more expensive than community pharmacies?
An NCPA analysis found that 89% of the time preferred pharmacies costs to Medicare were higher than non-preferred pharmacies. In addition, mail order pharmacies (which often comprise a significant portion of a preferred network) costs to Medicare were higher than non-preferred pharmacies 100% of the time.
A separate, independent 2013 study found that community pharmacies provide 90-day medication supplies at lower cost than mail order pharmacies and will substitute lower-cost generic drugs more often as well.