Vanishing Act: Why Small Pharmacies Exited Medicare Part D Networks for 2025

Abracadabra! Small pharmacies have ghosted Medicare Part D’s preferred networks—no farewell party, no breakup text, just a quiet exit.

A few months ago , DCI highlighted how the largest pharmacy chains are participating as preferred cost sharing pharmacies in the 2025 stand-alone prescription drug plan (PDP) networks. Today, we update our exclusive analysis of how smaller pharmacies are participating via their pharmacy services administrative organizations (PSAOs).

As you will see below, the largest PSAOs have almost fully abandoned PDPs’ preferred networks in 2025. Plans from Humana, WellCare, and UnitedHealthcare will again not have any independent pharmacies participating via PSAOs as preferred pharmacies.

Thanks to the Inflation Reduction Act (IRA), the PDP market is vanishing. Looks like the presence of smaller pharmacies in preferred networks will not be far behind.

PART D IN 2025

This is our third article about the 2025 Medicare Part D market. Here are the first two in the series:

• Medicare Part D in 2025: Preferred Pharmacy Networks Fade in a Collapsing PDP Market

• Large Chains’ Position in 2025’s Part D Pharmacy Networks: Supermarkets Take the Lead in a Shrinking PDP Market

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

MAKE ME AN OFFER

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 Cencora (formerly known as 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: AlignRx APN (the new name for the legacy Arete network); AlignRx RxSelect; and AlignRx 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 Economic Report on Pharmaceutical Wholesalers and Specialty Distributors.

NEVER MIND

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 a change in PSAO members' status as preferred pharmacies in a 2025 network (vs. 2024).

[Click to Enlarge]

Here are highlights of PSAO participation in 2024 Part D preferred networks:

• For 2025, McKesson’s Health Mart Atlas (HMA) is directly participating in only two of Cigna’s three plans. Its members can contract directly with two other plans. Each PSAO member can choose to participate as a preferred vs. a standard cost sharing pharmacy for 2025. (In the table above, this is indicated by the superscript “1.”)
  
  Otherwise, HMA members will not be preferred. Emily Flaugher, Vice President and General Manager, Health Mart Atlas and Atlas Specialty at McKesson, told me: “In 2025, our contracting strategy remains consistent to the last several years, with a focus on participating in the right contracts that balance patient access and economic viability for pharmacies.”
  
  Recall that as recently as 2021, HMA members had preferred status comparable to the participation of the largest chains.

• Cencora’s Elevate continues to believe that patients pick their pharmacy and then pick their Part D plan. For the eighth consecutive year, its members will not be preferred in any major plan for 2025. Elevate has also stated that year-over-year prescription growth (through October 2024) among Elevate PSAO members exceeded the overall market by an unspecified amount.
  
  An Elevate spokesperson told me that “our data continues to validate our approach.” It probably helps that Cencora’s Good Neighbor Pharmacy again scored higher than its peers and large retail chains in the 2024 J.D. Power U.S. Pharmacy Study.
  

• Cardinal’s LeaderNET PSAO continued the change in strategy that began last year. Like its peer PSAOs, Cardinal Health’s PSAO’s have fully disengaged from preferred status in Part D networks for 2025. Last year, its members had preferred status in a now-defunct plan that had been offered by Clear Spring Health.
  
  A Cardinal Health spokesperson told me that its PSAOs are taking a “a calculated approach to all Medicare network participation decisions…to ensure that our PSAO members’ access is equitable and supports a sustainable business model.”

• AlignRx. For 2025, none of AlignRx’s three PSAOs—AlignRx APN, RxSelect, and TriNet—will have preferred status in any major stand-alone Part D plan. For plans from Cigna, Humana, and Wellcare, its members can contract directly with the plans for preferred status.

• For the fifth year, plans from Humana, WellCare, and UnitedHealthcare will not have any independent pharmacies participating via PSAOs as preferred pharmacies. Aetna’s only PDP has an open network.

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

The Inflation Reduction Act expanded eligibility to beneficiaries with incomes up to 150% of the federal poverty limit (FPL). Pre-IRA, beneficiaries qualified for full Part D LIS benefits if they had incomes up to 135% of the FPL, and for partial LIS benefits if they had incomes of 135% to 150% of the FPL.

Alas, the IRA also crushed the availability of premium-free benchmark plans for LIS enrollees. For 2025, a smaller number of stand-alone PDPs will be premium-free to enrollees receiving the low-income subsidy than in any year since Part D started.

Perhaps that’s one reason why beneficiaries continue flocking to Medicare Advantage prescription drug (MA-PD) plans, which have fewer preferred pharmacy networks. Given spiking premiums for the largest stand-alone PDPs, smaller pharmacies should expect further enrollment shifts to MA-PD plans.

Smaller pharmacies' shift away from preferred networks pre-dates the IRA. But the IRA’s destruction of the stand-alone prescription drug plan market ensures that preferred networks will not magically reappear.