For 2013, Preferred Pharmacy Networks Propagate in Part D

Yesterday, Medicare Part D kicked off its open enrollment period. Between now and December 7, America’s seniors will have the opportunity to keep their existing plan or switch to a new one. In 2010, Medicare Part D paid for about 20% of all retail prescription drugs.

In 2013, preferred networks will make a big splash in Part D. Listed below are the 16 prescription drug plans (PDPs) with preferred pharmacy networks, including five new 2013 plans. In this post, I look at these plans and provide some observations on the plans, the participants, and the economics.

We’ll have to wait until 2013 to know how successful these plans will be, but I stand by my earlier prediction that at least 40% of beneficiaries will be in a PDP with a preferred network. I’ll check back with these plans once CMS publishes the 2013 enrollment data.

PREFERRED NETWORKS IN PART D

For background, see The Narrow Network Revolution for a quick refresher on the three basic alternatives to pharmacy network design—Open Pharmacy Network, Preferred Pharmacy Network, and Limited Pharmacy Network.

Here is how the Centers for Medicare and Medicaid Services (CMS) defines “Preferred Pharmacies” to beneficiaries:

“If your plan has preferred pharmacies, you may save money by using them. Your prescription drug costs (such as a copayment or coinsurance) may be less at a preferred pharmacy because it has agreed with your plan to charge less.” (source)

For more on preferred networks, see the section starting on page 90 of the 2011-12 Economic Report on Retail and Specialty Pharmacies. The report also explains why commercial payers are adopting new network models more slowly.

THE CLASS OF 2013

I identify 16 Medicare Part D prescription drug plans (PDP) with preferred network structures. In all of these plans, a Medicare Part D beneficiary has the option of using other pharmacies, although any copayment or coinsurance will (usually) be higher at a non-preferred pharmacy.

• AARP MedicareRx 
• AARP MedicareRx Preferred 
• AARP MedicareRx Saver Plus 
• Aetna CVS/pharmacy Prescription Drug Plan 
• First Health Part D Essentials 
• First Health Part D Value Plus 
• Humana Enhanced 
• Humana Walmart-Preferred Rx Plan 
• SilverScript Choice 
• SilverScript Plus 
• SmartD Rx Plus 
• SmartD Rx Saver 
• First United American - Preferred 
• First United American - Select 
• United American - Preferred 
• United American - Select 

Let me know if I missed any PDPs with a preferred pharmacy network and I’ll update the list.

QUANTIFYING THE IMPACT

Here’s a summary of 2013’s 16 preferred network PDPs. Five plans are being newly launched in the October 2012 open enrollment period, so there is no data for current enrollment. Note that some of 11 currently-operating PDPs did not have preferred networks in 2012.

Observations:

• The 11 current plans have an impressive 8.1 million beneficiaries—41% of the 2012 total.

• All plans have copayment differentials for generic prescriptions, which makes sense because that’s where pharmacies have the most margin to give away in exchange for store traffic. 

• For preferred brands, the copayment differentials between preferred and non-preferred pharmacies are typically $5 to $10. Unusually, two plans—Aetna/CVS and Humana Enhanced—have no copayment differentials for preferred brands.

• RxAlly, a new pharmacy group which claims to have about 14,000 independent pharmacies plus Walgreens drugstores, is offering the SmartD Rx plans. The SmartD company is currently held by private investors, and over time a controlling interest will migrate to RxAlly. As far as I know, Walgreen is the major investor behind RxAlly and SmartD. Surprise, independent pharmacy owners!

• Walgreen wants to play this year, as evidenced by its decision to be a preferred pharmacy in the Coventry, Humana, UnitedHealthcare, and its own SmartD plan. (See Walgreen’s press release.) Golly, I wonder what possibly could have changed their mind about the value of being in a pharmacy network?

• In 2011, CVS Caremark acquired the Community CCRx PDPs. For 2013, these plans are being consolidated with SilverScript plans. The SilverScript Basic PDP is the only SilverScript plan without a preferred network.

• In case you don’t know, pharmacies typically pay a $1 to $3 per-prescription fee to the PDP to participate in a preferred network. Ouch.

• The Rite Aid EnvisionRxPlus plan, which enrolled only 3,219 people (0.02%), is apparently gone in 2013. RIP.
  

The National Community Pharmacists Association (NCPA), which lobbies on behalf of independent pharmacy owners, remains very unhappy with preferred networks. I suspect NCPA will change its tune if RxAlly’s SmartD plans succeed.