Small Pharmacies Walk Away from Medicare Part D’s 2023 Preferred Networks

In yesterday’s post, I highlighted the largest pharmacy chains that will participate in the 2023 Medicare Part D prescription drug plans (PDP).

Today, I update our annual analyses of how smaller pharmacies will participate as preferred cost sharing pharmacies via the pharmacy services administrative organizations (PSAOs) that represent them in negotiations with plans.

As you will see below, the largest PSAOs will move further away from preferred networks in 2023. What's more, plans from Aetna, Humana, WellCare, and UnitedHealthcare will not have any independent pharmacies participating via PSAOs as preferred pharmacies.

Below we provide details about the PSAOs owned by the three major wholesalers—AmerisourceBergen, Cardinal Health, and McKesson—along with information about AlignRx, the largest independent PSAO. There are some differences in strategy, as you will see from our handy scorecard below. However, smaller pharmacies’ near-total rejection of preferred networks shows that the more the PBMs talk, the less independents can take.

What else is ahead for 2023? Find out during my upcoming live video webinar, Drug Channels Outlook 2023, on December 16, 2022, from 12:00 p.m. to 1:30 p.m. ET. Click here to learn more and sign up.

LOOKING FOR ATTENTION

This is our third article about the 2023 Medicare Part D market. Here are the first two in the series:

• Preferred Pharmacy Networks in 2023’s Medicare Part D Plans: Cigna, CVS Health, Humana, UnitedHealthcare, WellCare, and More

• CVS, Walgreens, and Walmart Keep Position in 2023 Part D Preferred Networks—While Kroger Bails Over its Express Scripts Blowup

For a deep dive into the economics and strategies of narrow network models, see Chapter 7 of our Economic Report on U.S. Pharmacies and Pharmacy Benefit Managers.

NOT ANOTHER QUESTION

Large pharmacies interact and negotiate directly with PBMs and other third-party payers. However, nearly all smaller pharmacy owners participate in pharmacy services administrative organizations (PSAOs) to leverage their influence in contract negotiations with PBMs and other third-party payers. The PSAO relationship is crucial for independent pharmacies, because independents generate more than 90% of their total sales from prescription dispensing.

Here are the largest PSAOs:

• Health Mart Atlas (HMA), the largest PSAO, is owned by McKesson.

• Cardinal Health operates three PSAOs that serve different segments of its business. LeaderNET services Cardinal’s drug distribution customers and is the largest of its PSAOs.

• Elevate Provider Network is owned by AmerisourceBergen.

• AlignRx was formed from the 2021 merger of Arete Pharmacy Network (owned by American Associated Pharmacies) with PPOk (owned by Unify Rx). AlignRx is the largest PSAO that is not owned by a wholesaler. Due to the merger, AlignRx now has three separate networks: Align Rx APN (the new name for the legacy Arete network); Align Rx RxSelect; and Align Rx TriNet.

For our latest data on PSAOs and their services (along with a list of the top PSAOs ranked by membership), see Section 2.2.4. of our new 2022-23 Economic Report on Pharmaceutical Wholesalers and Specialty Distributors.

JUST WALK AWAY

To complement our analyses of retail chains, the table below summarizes the preferred network status of pharmacy members that belong to the four largest PSAOs. The green shaded boxes indicate the PSAO members' addition as preferred pharmacies to a 2023 network (vs. 2022). The red shaded boxes indicate the PSAO members' removal as preferred pharmacies from a 2023 network (vs. 2022). Click here to download the table as a PDF.

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Here are highlights of PSAO participation in 2023 Part D preferred networks:

• For 2023, McKesson’s Health Mart Atlas (HMA) will maintain the strategy that it implemented for 2022. HMA will be preferred only in Rite Aid’s small Elixir plans. Prior to 2022, HMA members have had preferred status comparable to the participation of the largest chains. Last year, HMA told me that its decisions “focus on opportunities for our pharmacies that allow participation in the right networks that balance access to lives and economic stability.”

• AmerisourceBergen’s Elevate continues to believe that patients pick their pharmacy and then pick their Part D plan. For the sixth consecutive year, its members will not be preferred in any major plan.
  
  Elevate also stated that year-over-year prescription growth (through September 2022) among Elevate PSAO members was +7.0%, compared with growth of only +3.5% for the total retail market. (I was unable to verify these figures, but they are consistent with Elevate’s previous disclosures.) Elevate also scored higher than its peers in the most recent J.D. Power 2022 U.S. Pharmacy Study.
  

• Cardinal’s LeaderNET PSAO has bucked the trend of its wholesaler peers and maintained its engagement in preferred networks. Its members will have preferred status in the five plans offered by Clear Spring Health and Mutual of Omaha, as well as two of Cigna’s plans. However, the PSAO will not have preferred status in the larger plans offered by Aetna, Humana, UnitedHealthcare, and WellCare.
  

• AlignRx. For 2023, AlignRx APN members will shift to non-preferred status in the six Cigna and SilverScript plans. They will also shift to out-of-network status for the three Wellcare plans. However, pharmacies not under the AlignRx APN PSAO agreement can contract directly with Wellcare for standard or preferred status. For five plans from Elixir and Humana, AlignRx APN members will be in the plans’ networks, but they must contract directly with the plans for preferred status. (In the table above, this is indicated by the superscript “1.”)
  
  Align Rx’s other networks—RxSelect and Trinet—will not have preferred status in any major stand-alone Part D plan. What’s more, its member pharmacies will be out-of-network in Elixir and Wellcare plans for 2023.
  
  For all three PSAOs, AlignRx has negotiated opt-in network arrangements for its members’ participation in the SilverScript SmartSaver plan. Each PSAO member can choose to participate as a preferred vs. a standard cost sharing pharmacy for 2023.
  

Despite the low engagement with preferred plans, smaller pharmacies still benefit from a quirk in Part D. Beneficiaries who qualify for the Low-Income Subsidy (LIS) face low out-of-pocket drug costs regardless of a pharmacy’s preferred status.

Apparently, PSAOs have benefited from the counsel offered by strategist Kelly Clarkson, who asked: “Should you stay or should you go? Well, if you don't have the answer, why you still standin' here?”

EXCLUSIVE VIDEO

Drug Channels has obtained top secret footage showing Ms. Clarkson providing negotiating advice to the management team of an unnamed PSAO. Click here if you can’t see the video.